3.1.2.1.5 Situs taxation

As in the case of the qualification issues, I observed in section 3.1.1.9 that the situs rules of states may differ as regards life insurance proceeds, book debts, mortgages and hypothecs, the interest of a beneficiary in a trust, partnership interests, personal effects of a deceased transient, ships and aircrafts. Due to these differences, not only double or multiple taxation but also double or multiple non-taxation can arise. Inspired by Goodman’s example of section 3.1.1.9, I observe that the shares of a company that form part of a cross-border inheritance may be left untaxed. For example, the deceased was a resident in State A at the time of his death. State A establishes a personal nexus based on the deceased’s nationality. It also applies an objective nexus rule if the share certificates of companies incorporated under its laws are located in its territory. The shares certificates of the company at hand, however, are located in State B. Therefore, State A will not seek to tax. However, State B may also not seek to tax if it establishes an objective nexus based on the law under which the company has been incorporated. As the company at hand has been incorporated under the laws of State A, State B will not seek to tax.