What is Tax Residency?
Tax residency is a legal status that determines which country has the primary right to tax your income. Unlike immigration residency (which gives you the right to enter and stay), tax residency creates an obligation to pay.
It is possible to be a tax resident of a country without being a permanent resident or citizen. Conversely, it is possible (though difficult) to be a tax resident of nowhere.
How is Tax Residency Determined?
Different countries use different tests. Here are the three most common methods:
1. The Physical Presence Test (Days Test)
This is the simplest and most common rule.
- The Rule: If you spend more than X days in the country, you are a resident.
- Common Threshold: 183 days is the standard (UK, Canada, Australia, most of EU).
- Exceptions: Some countries have shorter periods (e.g., Cyprus is 60 days under certain conditions; Switzerland can be 90 days if you work).
2. The Center of Vital Interests
Even if you spend less than 183 days, you can still be deemed a resident if your "center of life" is there.
Factors include:
- Where your spouse and children live.
- Where your permanent home is available (owned or rented long-term).
- Where your economic interests are (bank accounts, investments, main business).
- Where you belong to social clubs or have health insurance.
Example: You spend 100 days in Spain, but your wife and kids live there, and you own a house there. Spain will likely consider you a tax resident.
3. The Statutory Residence Test (SRT)
Some countries, like the UK, have a complex points-based system. It combines the number of days spent with the number of "ties" you have to the country. The more ties you have (family, work, accommodation), the fewer days you can spend before becoming a resident.
Dual Tax Residency
It is possible to meet the residency criteria for two countries at the same time. For example, you are a US citizen (always a resident) but you live in Germany for 200 days (German resident).
In this case, Double Taxation Treaties come into play. These treaties have "tie-breaker" rules to decide which country claims you as a resident. Usually, it goes in this order:
- Where do you have a permanent home available?
- Where is your center of vital interests?
- Where is your habitual abode (where do you usually live)?
- What is your nationality?
How to Check Your Status
Don't guess. Use our free Tax Residency Checker to get a preliminary assessment of your situation based on your travel patterns.