Tax residency: how countries decide who they tax

What this flag means

The tax residency flag is the country, or countries, that treat a person as a tax resident. A tax resident is usually taxed on worldwide income and has the widest filing duties there, while others are usually taxed only on income from that country. Residence is a legal status worked out year by year from each country's domestic tests. When two countries both claim a person, a tax treaty between them, if there is one, may assign residence to one country for treaty purposes. Citizenship is a separate question, except in the few countries, chiefly the United States, that tax their citizens wherever they live.

Separate citizenship from tax residence

Most countries tax people because they are resident, not because they are citizens. A passport alone rarely makes someone a tax resident, and giving up a passport rarely ends tax residence.

The United States is the main exception. The IRS states that US citizens and resident aliens living abroad are subject to tax on worldwide income from all sources, and the filing rules are largely the same as for people living in the United States. A non-citizen becomes a US tax resident by holding a green card or by meeting the substantial presence test. See Citizenship and passports and United States.

Learn the domestic tests countries use

Domestic tests fall into a few families. Most countries combine several, and meeting any one of them can be enough. Read each country's test in its own words: the same number of days can mean different things.

The table compares the main tests in a few countries, using each tax authority's own description. It is a starting point, not a full statement of any country's rules, and every row has exceptions. Open the country page for detail and sources.

• Day counts: a number of days present in a tax year, a calendar year or a rolling 12-month period. Counting methods differ, for example whether part of a day counts.
• Home or habitual residence: having a home available that suggests you intend to live there.
• Center of interests or life: where family, economic and social ties are strongest.
• Domicile: a legal concept of permanent home that can keep residence alive while you live abroad.
• Status: citizenship or permanent residence status, as in the United States.
• Presumptions: rebuttable assumptions, such as residence presumed from where a spouse and children live.

Use treaty tie-breakers when two countries claim you

A person can be resident in two countries at once under their domestic laws. A tax treaty between those two countries may then decide which one counts as the country of residence for treaty purposes. The treaty only applies once both domestic laws are checked, and only if a treaty is in force between the two countries.

Article 4 of the OECD Model Tax Convention, which many treaties follow, defines a resident as a person liable to tax in a state by reason of domicile, residence, place of management or a similar criterion. For an individual resident in both states, Article 4(2) applies these steps in order, stopping at the first one that gives an answer:

• Permanent home: the state where the person has a permanent home available.
• Centre of vital interests: if there is a permanent home in both states, the state with which personal and economic relations are closer.
• Habitual abode: if the centre of vital interests cannot be determined, or there is no permanent home in either state, the state where the person has a habitual abode.
• Nationality: if there is a habitual abode in both states or in neither, the state of which the person is a national.
• Mutual agreement: if the person is a national of both states or of neither, the competent authorities settle the question by mutual agreement.

Reject the idea of a universal 183-day rule

There is no worldwide rule that staying fewer than 183 days keeps you out of a country's tax net. 183 days appears in many laws, but as one test among several, with different counting periods and methods.

The countries in the table show the range. The UK can make someone resident on fewer days through its home test or sufficient ties test. Spain can treat someone as resident because Spain is the main base of their economic interests, whatever the day count. Portugal can do so through a home. Australia's resides and domicile tests do not depend on a day count, and its 183-day test has its own exception. Israel's day counts are presumptions that can be rebutted in either direction. Thailand uses more than 180 days. The United States uses a weighted formula over three years.

Counting methods also differ. Israel's law counts part of a day as a day. The UAE counts all days or parts of a day of physical presence. Spain adds sporadic absences to days in Spain unless residence elsewhere is proven. The United States excludes certain days, such as some transit days. Count days the way each country's own law counts them.

Do not assume a perpetual traveler has no tax residence

Some promoters say that moving between countries and never staying long enough anywhere means having no tax residence. The tests above do not work that way.

Leaving a country does not automatically end residence there. Australia's domicile test can keep someone resident while they live abroad unless their permanent place of abode is outside Australia. Spain counts sporadic absences as time in Spain unless residence in another country is proven. The UK's ties and home tests look at much more than days. US citizens remain taxable on worldwide income wherever they are. Banks and other financial institutions also ask for a tax residence, and the answer is reported under the automatic exchange rules described in Banking.

Not being resident in any country is a factual and legal conclusion that each relevant country would have to accept. It is a question for a qualified adviser with full facts, not a status you can declare.

Know the reporting that follows residence and citizenship

Residence and citizenship drive reporting duties, not just tax rates. Some duties fall on the person, others on banks and other institutions.

• Arrival and departure years: in the United States, a person can be both resident and not resident in the same year, usually the year of arrival or departure, and a dual-status return is then required. Other countries have their own split-year or part-year rules.
• Foreign accounts and assets: US persons with foreign accounts above 10,000 US dollars in total at any time in the year file an FBAR with FinCEN, and Form 8938 may also be required with the tax return. Both can apply.
• Automatic exchange: under the EU directive that follows the OECD Common Reporting Standard, financial institutions report account holders' names, addresses, tax identification numbers, balances and income to the country of residence.
• Residence certificates: tax authorities issue certificates that a person is resident, often needed to claim treaty benefits. The UAE Federal Tax Authority, for example, issues them for people who meet the Cabinet Decision criteria.
• Treaty positions: some countries require a disclosure when a treaty is used to set residence. In the United States, a long-term resident treated as resident of a treaty country notifies the IRS on Forms 8833 and 8854, and the expatriation tax rules can then apply.

Keep presence and ties records you can prove

Residence disputes are decided on evidence. Keep a record of where you were each day, made as you go, and keep the documents that back it up. Record the ties too, because many tests weigh them as heavily as days.

The Day ledger helps you log days by country and shows how different counting methods change the totals. The Exposure check shows which published tests your pattern of days touches, as questions to take to an adviser, not as a conclusion.

• Travel records: boarding passes, tickets, passport stamps and official entry and exit records where available.
• Home records: leases, deeds, utility bills and evidence of when a home was available to you.
• Ties records: where a spouse or partner and children live, school enrollment, employment contracts and where work was performed.
• Economic records: where income arises, where businesses are run and where main assets are held.
• Official records: residence certificates, registrations and deregistrations with local authorities.

Common misconceptions

Questions to take to a professional

1. Under the domestic law of each country I spend time in or have ties to, which residence tests could apply to me this year, and on what facts?
2. How does each country count days, including part days, transit days and absences, and over which period?
3. If two countries could each treat me as resident, is there a tax treaty in force between them, and how would its tie-breaker apply to my homes, ties and habitual abode?
4. When does my residence start or end in each country, and is there a split-year, part-year or departure rule?
5. What reporting do I face as a citizen or resident, including foreign account and asset forms and treaty disclosures?
6. Which records should I keep to support my position, and for how long?
7. Can I obtain a tax residence certificate, and from which country, for the treaty claims I may need?

Questions people ask

Where this guide stops

Sources

• U.S. citizens and resident aliens abroadOfficial guidance
• Determining an individual's tax residency statusOfficial guidance
• Substantial presence testOfficial guidance
• OECD Model Tax Convention on Income and on Capital: Condensed Version 2017, Article 4 (Resident)Treaty text
• RDR3: Statutory Residence Test (SRT) notesOfficial guidance
• Código do IRS, Artigo 16.º ResidênciaPrimary law
• Agencia Tributaria: Residencia habitual en territorio españolOfficial guidance
• Israel: Information on Residency for tax purposes (jurisdiction sheet published for the CRS)Official guidance
• Cabinet Decision No. 85 of 2022 - Unofficial Translation (Federal Tax Authority)Primary law
• Following Cabinet Decision 85 of 2022Official guidance
• Issuance of a Tax Residency & Commercial Activity CertificateOfficial guidance
• Personal Income Tax | The Revenue Department (English Site)Official guidance
• TR 2023/1 - Income tax: residency tests for individualsOfficial guidance
• Expatriation taxOfficial guidance
• Report of Foreign Bank and Financial Accounts (FBAR)Official guidance
• Comparison of Form 8938 and FBAR requirementsOfficial guidance
• Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxationPrimary law