Glossary

44 terms, grouped by pillar. Every definition is sourced and dated.

Residency

centre of vital interests

Rung 2 of the treaty residence tie-breaker: the state with which the person's personal and economic relations are closer, examined as a whole — family and social relations, occupation, political or cultural activities, place of business, where property is administered.

Why it matters: It is the rung most mid-year movers are actually decided on; it is not a points table and no single factor automatically wins.

Varies by country.

Read more: 183-day-rule-is-not-the-rule

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

citizenship

Also: nationality

A person's formal legal membership of a state; nationality is the legal bond between a person and a state, and each state determines under its own law who its nationals are.

Why it matters: It is not the same as immigration status (the right to be somewhere) or tax residency (which country taxes you). The three can point to three different countries.

Varies by country.

Source: Council of Europe, European Convention on Nationality (ETS No. 166), Article 2; Office for National Statistics, Guidance on country of birth, nationality and passports held data

Verified August 31, 2026

credit method

A double-taxation relief method in which tax paid in the source state is credited (as a deduction) against the tax due in the residence state, usually capped at the residence-state tax attributable to the relevant income or capital.

Why it matters: It is one of the two standard relief methods set out in Article 23 of most treaties, and it changes the arithmetic of what the taxpayer ultimately pays versus the exemption method.

Varies by country.

Read more: read-your-tax-treaty

Source: Estonia–Finland income and capital tax convention, synthesised English text incorporating MLI

Verified August 31, 2026

domicile

A legal concept identifying a person's permanent home — a domicile of origin or a domicile of choice — with its exact meaning and tests depending on the jurisdiction.

Why it matters: Domicile can keep one country taxing you long after you leave, and it is one of the inputs that residence tie-breakers weigh (centre of vital interests).

Varies by country.

double taxation

The same income being taxed twice — once where it arose, once where the person is resident.

Why it matters: It is a normal, expected outcome of source taxation and residence taxation both applying, not an error; treaties exist to allocate the taxing right.

Varies by country.

Read more: tax-residency-explained

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

exemption method

A double-taxation relief method in which the foreign-source income is exempt in the residence state; no credit is applied, and the source state's tax is the final one on that income.

Why it matters: It is the other standard relief method set out in Article 23 of most treaties, and it changes the arithmetic of what the taxpayer ultimately pays versus the credit method.

Varies by country.

See also: credit-method , double-taxation

Read more: read-your-tax-treaty

Source: Estonia–Finland income and capital tax convention, synthesised English text incorporating MLI

Verified August 31, 2026

exit tax

A country-specific rule that may charge accrued but unrealised value when residence ends or assets move outside the country's taxing reach.

Why it matters: It is not universal, not the same as a final tax return, and the rules that apply can depend on when the move happened.

Varies by country.

See also: residence-taxation , tax-treaty

Read more: tax-residency-explained

Source: Norwegian Tax Administration, Exit tax; Australian Taxation Office, Foreign and worldwide income; OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary); HM Revenue & Customs, RFIG21010: split-year treatment — what a split year is

Verified August 31, 2026

habitual abode

Rung 3 of the treaty residence tie-breaker: the state in which the person has a customary, settled presence over a longer window than one tax year, looked at by frequency, duration and regularity — not simply "the state with more days".

Why it matters: Even when the treaty reaches this rung, the Commentary does not reduce the inquiry to a single raw day total.

Varies by country.

Read more: 183-day-rule-is-not-the-rule

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

immigration status

Also: visa status, residence permit

The legal basis, conditions and duration under which a person may enter or remain in a country, which may also affect permission to work.

Why it matters: It determines what work you may do in that country, independently of who taxes the income that work generates.

Varies by country.

may be taxed in

Also: \"may be taxed\, non-exclusive taxing right

In the OECD Model, the words "may be taxed in" a Contracting State mean that that State is granted the right to tax the income to which the relevant provision applies, and that these words do not affect the right to tax of the other Contracting State, except through the application of Article 23 A or 23 B when that other State is the State of residence.

Why it matters: The single most consequential misreading in a treaty — reading "may" as "only" — appears in almost every income article; "shall be taxable only in", by contrast, assigns an exclusive right.

Read more: read-your-tax-treaty

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

multilateral instrument (MLI)

Also: MLI, multilateral convention

A multilateral treaty instrument that modifies multiple bilateral tax treatys at once, implementing measures such as those from the OECD/G20 BEPS project; a signed bilateral treaty may carry MLI modifications that alter its operative articles, and the base text alone may not be current.

Why it matters: Reading only the signed base text of a treaty misses later MLI changes — the matching database shows which positions apply to which pair and from which date.

mutual agreement procedure

Also: competent authority procedure, MAP

Rung 5 of the treaty residence tie-breaker: the competent authorities of the two contracting states settle the question between them, by mutual agreement, where no earlier rung resolves it.

Why it matters: It is not a taxpayer choice — it is settlement between two tax authorities, and it is slower and rarer than the internet suggests.

Varies by country.

See also: tie-breaker-rules , tax-treaty

Read more: 183-day-rule-is-not-the-rule

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

OECD Model Tax Convention

Also: OECD model, Model Tax Convention on Income and on Capital

The OECD's model agreement that most bilateral tax treatys follow; it is a model and interpretative reference point, not a substitute for the signed bilateral treaty, its protocols, or applicable MLI changes.

Why it matters: The model is not the reader's treaty — it is the template that explains why article numbers and structure are broadly consistent across treaties, and why knowing the model makes any individual treaty navigable.

Read more: read-your-tax-treaty

Source: OECD, Model Tax Convention on Income and on Capital 2017 (Full Version)

Verified August 31, 2026

permanent home

A home arranged and retained for permanent use and continuously available to the person, in the treaty residence tie-breaker sense — ownership is not decisive; a rented flat you keep counts, a home handed to an unrelated tenant may not be available.

Why it matters: It is rung 1 of the treaty tie-breaker ladder and decides more mid-year cases than day counts do.

Varies by country.

Read more: 183-day-rule-is-not-the-rule

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

protocol

Also: amending instrument, amending protocol

A later instrument that amends or supplements a base tax treaty — a tax treaty can carry one or more amending protocols, and the base text alone may not be current once such an instrument is in force.

Why it matters: The base treaty text and its amending protocols together make up the operative treaty — reading only the signed base text misses later changes, which is a frequent and expensive oversight.

Varies by country.

Read more: read-your-tax-treaty

Source: Estonian Ministry of Finance, Double Taxation Agreements index

Verified August 31, 2026

reference rate

Also: mid-market reference rate, reference exchange rate

A published exchange rate used as a reference point for comparisons — for example, the European Central Bank's euro reference rates — which the ECB states are published for information purposes and strongly discourages using for transaction purposes.

Why it matters: It is the point against which provider fees and spreads are measured, but it is not necessarily the rate available to the user, and it is not an executable quote — a comparison built on a reference rate is arithmetic, not a price.

residence taxation

Also: worldwide taxation

A country taxing a person's worldwide income because the person is treated as resident there, rather than only income arising in that country.

Why it matters: It is the mechanism that makes cross-border income taxable in the country of residence — and it is what most people mean by "I'm taxed on everything I earn."

Varies by country.

Read more: tax-residency-explained

Source: Australian Taxation Office, Foreign and worldwide income

Verified August 31, 2026

source taxation

Also: source-based taxation

A country taxing income that arose there, regardless of where the person lives.

Why it matters: It is the second mechanism that produces double taxation — the same income can be taxed both where it arose and where the person is resident.

Varies by country.

Read more: tax-residency-explained

Source: OECD, Model Tax Convention on Income and on Capital, full version

Verified August 31, 2026

split-year treatment

Also: part-year treatment

A domestic mechanism that divides the moving year into a part under the old rules and a part under the new ones, in defined arrival or departure cases.

Why it matters: Not every system provides it — some treat a person as resident or non-resident for the entire year — and where it exists, conditions vary.

Varies by country.

Read more: tax-residency-explained

Source: HM Revenue & Customs, RFIG21010: split-year treatment — what a split year is

Verified August 31, 2026

tax residency

The status of being treated as a resident by a country's tax system, which can determine whether a country taxes or requires you to declare foreign as well as domestic income.

Why it matters: It is decided by published rule-based tests, not by citizenship, immigration status, or preference — and it is what most people mean when they say "where am I taxable".

Varies by country.

See also: domicile , tax-treaty , immigration-status

Source: Australian Taxation Office, Foreign and worldwide income; Australian Taxation Office, Your tax residency

Verified August 31, 2026

tax treaty

Also: double tax treaty, DTA

An agreement between two countries that allocates taxing rights and contains tie-breaker rules for people or companies resident in both.

Why it matters: Without it, dual residency can mean being taxed twice on the same income; the treaty's tie-breaker sequence settles which country claims the person.

Varies by country.

tax year

The accounting period a tax system uses — a calendar year or another statutory period.

Why it matters: Countries do not share one tax year, so "the year you moved" is often two overlapping periods with two sets of rules.

Varies by country.

Read more: tax-residency-explained

Source: HM Revenue & Customs — RFIG21010: split-year treatment, what a split year is; Spanish Tax Agency — Individual resident in Spain

Verified August 31, 2026

the 183-day employment-income test

A test in OECD Model Article 15(2) about where employment remuneration is taxed, not about residence: the remuneration may be taxed only in the residence state if three cumulative conditions are met, the day condition being "not exceeding in the aggregate 183 days in any twelve month period".

Why it matters: It shares the number 183 with the domestic residence test in some countries, but it answers a different question — income allocation, not residence.

Varies by country.

See also: tie-breaker-rules , tax-treaty

Read more: 183-day-rule-is-not-the-rule

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

tie-breaker rules

A treaty mechanism for assigning residence "for treaty purposes" when both contracting states initially claim the person under their domestic laws.

Why it matters: It is the ordered test a treaty runs when two countries both say you're resident — not a universal domestic-law test.

Varies by country.

Read more: tax-residency-explained

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

UN Model Tax Convention

Also: UN Model

The United Nations' model double taxation convention, on which some bilateral treaties draw instead of, or alongside, the OECD Model; the UN Model generally gives greater weight to source-country taxing rights and retains provisions that differ from the OECD Model, including Article 14.

Why it matters: Not every treaty follows the OECD Model throughout — some are based on the UN Model, which differs in specific articles — so the article number and text in one treaty may not match the OECD model's.

Read more: read-your-tax-treaty

Source: United Nations, Model Double Taxation Convention between Developed and Developing Countries (2021); Estonian Ministry of Finance, Double Taxation Agreements index; Estonia–Finland income and capital tax convention, synthesised English text incorporating MLI; OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary); OECD, Model Tax Convention on Income and on Capital 2017 (Full Version)

Verified August 31, 2026

Money

correspondent bank

A bank that relays a payment on behalf of another bank by holding an account with it, used on the traditional SWIFT route where each intermediary may deduct a charge from the amount in transit.

Why it matters: A payment that passes through several correspondents can lose more than the sending provider's own fee; the deductions happen en route and are not always disclosed to the recipient.

See also: swift , local-rails , value-date

Source: HSBC, UK and Europe Priority Payments charge codes (OUR, BEN, SHA); Revolut, Guide to international transfer fees (US)

Verified August 31, 2026

corridor

Also: currency corridor, transfer corridor, remittance corridor

The specific route over which money is transferred between an origin and destination, typically defined by the sending and receiving countries and the currencies involved (for example, EUR→MYR or EUR→EUR). Costs, exchange rates, speed, limits and available payment methods are often determined on a corridor-by-corridor basis rather than globally.

Why it matters: A provider that performs well on one corridor may perform very differently on another because pricing, liquidity, local payment rails, competition and regulatory requirements differ by corridor.

Varies by country.

See also: local-rails , spread , reference-rate

FX risk

Also: foreign exchange risk, currency risk, exchange-rate risk

The possibility that an exchange-rate movement changes the value of an amount payable or receivable when that amount is denominated in a currency other than a party's relevant home, accounting or operating currency. In a commercial transaction, this exposure can arise between agreeing the price or issuing the invoice and receiving or making payment.

Why it matters: The currency specified for the contractual price and payment helps determine which party is exposed to exchange-rate movements. If a seller invoices in the buyer's currency, the seller may receive more or less in its own currency when the payment is converted. If the seller requires payment in the seller's currency, the buyer normally faces the corresponding conversion exposure. The parties can take this allocation into account when negotiating the price, payment timing, exchange-rate mechanism or hedging arrangements.

local rails

Also: domestic payment rails, local payment networks

The domestic payment systems a provider uses to move funds within a country, instead of a single end-to-end international wire; the provider holds balances in each country and pays out locally.

Why it matters: "Cross-border" is a commercial result, not necessarily one wire travelling intact — the funding leg, conversion and payout leg can be handled separately, which is why the newer providers are structurally different rather than just cheaper.

mid-market rate

Also: interbank rate, spot rate, wholesale rate

A midpoint or average between market buying and selling rates, commonly used as a reference rather than necessarily being the rate available for a customer transaction.

Why it matters: It is the point against which the exchange-rate markup is measured — the difference between the rate offered and the reference rate.

OUR / BEN / SHA

Also: SWIFT charge codes, charge instruction

The charge instruction on a payment that allocates bank charges between sender and beneficiary: OUR — the sender pays all fees applied by banks; BEN — the beneficiary pays all fees; SHA — each party pays the fees applied by their respective banks.

Why it matters: This determines who pays what on a SWIFT route — the instruction allocates categories of charges, not every downstream deduction; a pricing page may disclose the sending provider's fee yet not predict the intermediary or receiving-bank charges.

promotional rate

Also: introductory rate, first-transfer offer, new-customer rate, enhanced FX rate

A preferential exchange rate or reduced fee offered subject to promotional eligibility conditions, commonly to a new customer or for a first qualifying transfer. It may differ from the provider's standard rate and may apply only once, for a limited period or to specified transfer routes.

Why it matters: A promotional first-transfer rate can make a provider appear cheaper than it would be during repeat use. For a fair comparison, the promotion should be identified and its eligibility conditions disclosed, and the result should not be presented as representative of the provider's ordinary pricing.

Varies by country.

spread

Also: exchange rate spread, FX spread, bid-ask spread

In wholesale FX, the difference between a dealer's bid and ask rates; in consumer payments, often used for the markup above the reference rate.

Why it matters: It is where much of the invisible cost of moving money across borders sits — the markup may exceed the separately stated fee.

SWIFT

The messaging network banks use to send cross-border payment instructions to each other. SWIFT carries the message; the funds themselves move across the correspondent accounts those messages instruct. A SWIFT route passes through correspondent banks rather than a direct domestic rail.

Why it matters: On a SWIFT route, each hop can add a day and a charge; the charge instruction (OUR/BEN/SHA) allocates who pays them, but it does not predict every downstream deduction.

See also: correspondent-bank , local-rails

Source: SWIFT, Messaging standards; Revolut, Guide to international transfer fees (US); HSBC, UK and Europe Priority Payments charge codes (OUR, BEN, SHA)

Verified September 9, 2026

tiered fee structure

Also: tiered pricing, stepped fee structure, bracketed fee structure

A pricing structure in which different fees, rates or discounts apply at specified transaction-amount or cumulative-volume thresholds. The fee applicable to one part or level of a transfer may therefore differ from the fee applicable at another level.

Why it matters: A provider's cost at one transfer amount may not predict its cost at another. A test using a single amount therefore cannot be generalised across the provider's full transfer range.

Varies by country.

value date

Also: settlement date, interest date, value-dating date

The reference date used by a payment service provider when calculating interest on funds debited from or credited to a payment account. It may differ from the date on which the payment was initiated, processed or displayed in the account. In foreign-exchange and securities transactions, the term may also refer to the agreed date on which the currencies, funds or assets are to be delivered or the transaction settles.

Why it matters: A transfer can have several relevant dates, including its initiation date, booking or display date, value date and settlement date. These dates should not be assumed to be identical. Using the correct date matters when calculating interest and reconciling when a payment was instructed, recognised in an account and settled.

Structure

CFC rules

Also: controlled foreign company rules

Rules that let a country tax a resident on income earned in a company they control abroad, even if nothing is distributed. Under the EU's Anti-Tax Avoidance Directive, an EU taxpayer may have to include specified income of a controlled foreign company or permanent establishment in its tax base, subject to the Directive's conditions and Member State implementation.

Why it matters: They exist specifically to make "leave it in the foreign company" not work. The Directive establishes a minimum EU framework, not an identical CFC outcome in every Member State — the operational rule comes through national implementation.

Varies by country.

Read more: company-in-another-country

Source: Council Directive (EU) 2016/1164 (Anti-Tax Avoidance Directive), Articles 7 and 8

Verified August 31, 2026

corporate tax residence

Whether a company is treated as tax resident in a country, decided by that country's tax rules — not by where it is registered. Countries use incorporation-based, management-based, or both as the connecting test.

Why it matters: Registration is a fact; corporate tax residence is a conclusion. The two can point to different countries, and the same company can end up resident in more than one under domestic law before a treaty runs.

Varies by country.

Read more: company-in-another-country

Source: Irish Revenue, Company residency rules; Australian Taxation Office, Taxation Ruling TR 2018/5: central management and control test of residency

Verified August 31, 2026

dependent agent

Also: agent creating a permanent establishment

A person who, in the ordinary course of their activities, concludes contracts or negotiates them for a company, and whose activities are not limited to preparatory or auxiliary work, can create a permanent establishment for that company in the country where they operate.

Why it matters: It is one of the ways a company can have a taxable presence in a country without a fixed office — a person working there can, in some circumstances, create the presence.

Varies by country.

Read more: company-in-another-country

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary)

Verified August 31, 2026

legal seat

Also: registered office, place of incorporation

The country where a company is formally registered, where its registered office is located.

Why it matters: Registration is a fact, but it does not automatically determine where the company is treated as tax resident — that can follow incorporation, management, or both, depending on the country's rules.

Varies by country.

Source: UK Corporation Tax Act 2009, explanatory notes on company residence

Verified August 31, 2026

permanent establishment

Also: PE

Broadly, a fixed place of business through which an enterprise's business is wholly or partly carried on.

Why it matters: It is the main way a foreign country can reach a non-resident company's profits without the company being registered there.

Varies by country.

place of effective management

Also: centre of management

The place where a company is actually run and controlled from; for a management-and-control residence test, where its highest-level control is exercised.

Why it matters: A company can be registered in one country and treated as resident in another if it is managed from a different place.

Varies by country.

Source: HM Revenue & Customs, INTM120060: central management and control

Verified August 31, 2026

preparatory or auxiliary activity

Activity of a purely preparatory or auxiliary character, such as maintaining facilities solely for storage or display, which generally does not create a permanent establishment under OECD Model Article 5(4). The line between auxiliary and core activity is drawn case by case, and the exclusions are not unlimited.

Why it matters: This is precisely where disputes happen — the exclusion is the most contested part of the PE analysis, and the actual bilateral treaty may differ from the OECD Model.

Varies by country.

Read more: company-in-another-country

Source: OECD, Model Tax Convention on Income and on Capital: Condensed Version 2017 (Articles and Commentary); Irish Revenue, Company residency rules; Australian Taxation Office, Taxation Ruling TR 2018/5: central management and control test of residency; OECD/G20 Inclusive Framework on BEPS, Resumption of Application of Substantial Activities Factor to No or Only Nominal Tax Jurisdictions (Action 5, 2018); Council Directive (EU) 2016/1164 (Anti-Tax Avoidance Directive), Articles 7 and 8

Verified August 31, 2026

substance

Also: economic substance

The idea that a company should have real activity — people, premises, decision-making, actual functions — where it claims to be. "Substance" is not one universal residence test; its legal role depends on the regime, such as BEPS Action 5, a domestic economic-substance law, a tax treaty, transfer pricing, or anti-abuse rules.

Why it matters: A registered address and periodic board paperwork are not necessarily enough. The specific requirements differ by jurisdiction and by regime.

Varies by country.

Read more: company-in-another-country

Source: OECD/G20 Inclusive Framework on BEPS, Resumption of Application of Substantial Activities Factor to No or Only Nominal Tax Jurisdictions (Action 5, 2018)

Verified August 31, 2026

Glossary

Jump to term:

Residency

centre of vital interests

citizenship

credit method

domicile

double taxation

exemption method

exit tax

habitual abode

immigration status

may be taxed in

multilateral instrument (MLI)

mutual agreement procedure

OECD Model Tax Convention

permanent home

protocol

reference rate

residence taxation

source taxation

split-year treatment

tax residency

tax treaty

tax year

the 183-day employment-income test

tie-breaker rules

UN Model Tax Convention

Money

correspondent bank

corridor

FX risk

local rails

mid-market rate

OUR / BEN / SHA

promotional rate

spread

SWIFT

tiered fee structure

value date

Structure

CFC rules

corporate tax residence

dependent agent

legal seat

permanent establishment

place of effective management

preparatory or auxiliary activity

substance