Decoding Tax Residency: Beyond the Apartment Key
Tax residency isn't as simple as owning a property. Many factors come into play, and misunderstanding these can lead to unintended tax consequences. Let's break down the core concepts that determine your tax residency status.
Key Definitions Explained
Tax authorities worldwide assess several criteria to determine where you owe income tax. Owning an apartment is just one piece of the puzzle. Some key terms to understand include:
Permanent Residence: This refers to where you spend the majority of your time, establishing it as the center of your life. It's more than just a temporary stay.
Center of Life (Lebensmittelpunkt): This is where you predominantly live compared to the rest of the world. Authorities consider factors like credit card usage, consumption costs related to a residence, travel tickets, and car rentals. Family (spouse, dependent children) residing in a country often strongly indicates your center of life is there.
Economic Interests: This involves your income, capital gains, or remote work ties to a particular country. Physical presence isn't always necessary for economic interests to be considered.
The Importance of Physical Presence: The 183-Day Rule
While property ownership matters, physical presence is often a critical factor. The '183-day rule' is a common benchmark: spending more than half a calendar year (or a 12-month period) in a country typically establishes tax residency. However, this can vary! Some countries use shorter periods (180, 120, or even 60 days), and they might calculate the timeframe differently (calendar year versus a 12-month period from your entry date). Always check the specific rules of the country in question.
Actual Use vs. Intention to Use
Some countries consider whether you're actively using a property or merely intending to use it. This 'intention to use' can be subjective and difficult to prove or disprove. Having other residences, or renting out the property can help prove it is not intended to be used.
Key Holding: More Than Just Having a Key!
Don't underestimate this subtle issue! 'Key holding' refers to having the sole and unrestricted access to a property, essentially controlling it even when you're not physically present. This can be problematic if you, as the owner or primary tenant, have the exclusive power over an apartment, meaning you always keep the key, even during absences. This signals to tax authorities that the property is always available for your use.
Ownership via Legal Entities
Ownership via legal entities (Briefkastenfirmen, Stiftungen oder Trusts) will not exclude you from tax liabilities because availability always refers to the natural person.
Key Takeaways
Understand the definitions of 'permanent residence,' 'center of life,' and 'economic interests'.
Recognize that owning property doesn't automatically equal tax residency.
Learn the importance of the '183-day rule' and how it varies by country.
Differentiate between 'actual use' and 'intention to use' a residence for tax purposes.
Understand the complications around 'key holding' and control of a property.
Ownership via legal entities will not exclude you from tax liabilities because availability always refers to the natural person.
Strategic Approaches to Minimize Tax Residency Risks
Navigating the complexities of international tax can feel daunting, but with the right strategies, you can minimize the risk of unintended tax residency. Here are some approaches to consider:
Leveraging Double Tax Agreements (DBAs)
Double Tax Agreements (DBAs) are treaties between countries designed to prevent you from being taxed twice on the same income. Residing for over 183 days in a country that has a DBA with another country (like Germany) can potentially protect you from tax liability in the latter, even if you own a residence there. However, enforcing this may require legal action.
Renting Out Your Property
One of the most effective ways to demonstrate that a property isn't 'permanently available' to you is by renting it out. A long-term rental agreement (typically over six months with a third party) clearly establishes that the property is in someone else's possession and control, negating your ability to use it freely.
Focus on Facts, Not Just Intentions
Tax authorities place significant weight on actual facts rather than simply accepting your stated intentions. Ensure that your actions align with your claims regarding tax residency. For example, If authorities doubt where you actually live, they will compare your consumption costs and travel tickets of different countries.
Be Mindful of Confidentiality (Denunciation)
Exercise caution about who you share your tax-free status with, especially in countries with strict definitions of residency, such as Germany or Sweden. In those countries, there are severe punishments for people helping tax evaders.
Key Takeaways
Leverage Double Tax Agreements (DBAs) to avoid double taxation.
Consider long-term rental agreements (over 6 months) to negate 'availability'.
Be aware that tax authorities prioritize facts over stated intentions.
Be careful who you tell about your tax-free status in countries with a strict definition of residency like Germany or Sweden.
Renting out your appartment in times of absence excludes availability.
50 Countries Where Your Apartment Doesn't Automatically Trigger Tax Residency
Here's a breakdown of 50 countries where owning or having access to an apartment doesn't automatically make you a tax resident. Remember, this is not exhaustive, and specific circumstances always matter. It is still possible to become tax resident through other factors. Consider each country's nuances, especially concerning the 183-day rule, center of life, and economic interests.
Disclaimer: Tax laws are complex and subject to change. This information is for general guidance only and should not be considered professional tax advice. Always consult a qualified tax advisor for personalized guidance.
Argentina: Tax residency requires living in the country for at least thirteen months. Employees sent from abroad and their family members don't pay any taxes for the first five years.
Armenia: You are tax resident if you spend more than 183 days within a calendar year in Armenia or if Armenia is your center of vital interests.
Australia: You are tax resident if your only appartment is in Australia or if you've spent more than 183 days in Australia. People who hold a temporary visa (e.g. for Work and Travel) are tax-free on foreign income as long it was earned outside of Australia.
Bosnia and Herzegovina: The country consists of three tax-autonomous districts which each have a different regulation: Republika Srpska and Distrikt Brcko mean that you are tax resident if you have an available appartment and have spent more than 183 days in the district. This is not the case for the Federation of Bosnia and Herzegovina, so you will only become a tax resident if you hold a residence permit and have spent more than 183 days in Bosnia and Herzegovina.
Brazil: Tax residency is based on the 183-day rule OR permanent residence. Foreign people have to avoid holding a permanent residence permit so they aren't tax resident.
Bulgaria: You are tax resident if you have a permanently available appartment and vital interests. So just a vacation appartment is no problem as long as you stay below 183 days a year and Bulgaria is not your business or family center.
Chile: You are tax resident if you have spent six months within a year (at once) or six months within two years (at once or interrupted time) in Chile - and if you intend to stay longer.
China: An available appartment will not make you a tax resident. Besides that, foreign people are tax-free on their foreign income in the first seven years as residents. Even if you spend just 31 days outside of China within those seven years will reset this ticker to year 1.
Denmark: Owning real estate is okay as long as you don't use for a longer period of time (usually more than 2 months at once) and rent it out for travelers in times you are not in Denmark.
El Salvador: An appartment won't result in becoming tax resident AND you have to spend 200 days in the country to reach tax residency. There is an exception: if your income is mainly earned in El Salvador.
Estonia: As long as an appartment is not available to you for more than 183 days, it will not result in tax residency. You could rent out a vacation appartment when you are not in Estonia.
France: You are tax resident if your usual stay or family lives in France, you are working within France or it is the center of your economic interests. Having a vacation appartment doesn't make you a tax resident as long as you can prove that you have another appartment elsewhere or it is not available to you because you rented it out.
Georgia: Tax residency depends on how long you stay within the country. If you spend more than 183 days in Georgia (interrupted or at once), you are tax resident. Owning a property is not taken into account.
Greece: Having an available appartment is not a main factor for tax residency. But it can be taken into account as a part of your personal assets. You won't have any problems if the majority of your assets are located outside of Greece and if your family lives outside of Greece. It is not even needed that you rent out your appartment during the time you are not in Greece
Ireland: If you spend 183 days in Ireland within a calendar year or 280 days in two calendar years (including 30 days in both years), you are tax resident. Irish tax law doesn't take your appartment into account. So you could buy or rent a property or leave it empty.
Island: If you spend more than 183 days in Island within twelve months (counted from the day you entered the country), you are tax resident. The availability of an appartment also doesn't matter in Island.
Israel: Tax law doesn't consider your appartment. You will get tax resident if you have spent 183 days in Israel or 425 days in 3 years (as long as you have also spent at least 31 days in Israel in the current year).
Italy: Registrating yourself at the registration office or the 183-day-rule will result in tax residency. An appartment can result in tax residency if you are using it as a permanent stay. If you have another appartment worldwide or make sure that you are not able to use your appartment, it is not a tax issue.
Japan: Rent contracts for less than a year will not trigger tax liability. Property ownership will, but foreign people are tax-free on foreign income in the first 5 years.
Kroatien: Besides the 183-day-rule, you also get tax resident if you own or have availability to an appartment. But you may get around it if you also own an appartment somewhere else. You get tax resident if there are secondary factors like the center of your family or economic interests. It shouldn't be a problem as long as you have another appartment somewhere else.
Kolumbien: The state counts a rolling year. So that means that if you are in Kolumbien for 183 days, you are tax resident. One available appartment could already result in tax residency in Kolumbien if it is your only appartment. Besides that, tax residency is also a thing if more than 50% of your real estate, assets or income comes from a kolumbian source. So it shouldn't be a problem if you own a same value appartment in another location. But this location shouldn't be known as a tax heaven in the eyes of the kolumbian government.
Kosovo: The 183-day-rule applies.
Lettland: You get tax resident if you have spent 183 days in Lettland AND have a declared appartment. So if you don't register your appartment for a residence permit, you should be fine.
Liechtenstein: Without a settlement permit or a stay of more than 183 days, a permanent available appartment will not result in local tax liability.
Litauen: If you have spent 183 days within a calendar year in Litauen or if Litauen is your center of life, you have to pay taxes. As long as you have another same value appartment at another location or you rent out your appartment in times you are not in Litauen, owning an appartment is not a determining factor.
Maledives: If you have a permanent residence or have spent 183 days within twelve months in the Maledives, you are tax resident.
Malta: The usual condition is the 183-day-rule. For HNWI-status, you just have to stay for 3 months. If you have met these conditions, being an owner of real estate is not a main factor for tax residency.
Mauritius: Owning or the availability of an appartment doesn't result in tax residency, as long as you have another available appartment. All in all, the usual rule is the 183-day-rule or spending 270 days within 36 months in Mauritius.
Mexico: You are tax resident if you have spent 183 days in Mexico. If you only have one available appartment, you are tax resident. Otherwise, less than 50% of your income has to come from a mexican source in order to not become tax resident.
Mongolei: If you have an available appartment, you are not automatically tax resident. But if you are more than 183 days in the Mongolei or earn more than 50% of your income from a mongolian source, you are tax resident.
Nordmazedonien: Declaring an appartment and 183 days spent in Nordmazedonien will lead to tax residency. So if you just own an appartment without using it for a residence permit, you don't have to pay taxes.
Norwegen: If you have either spent 183 days within twelve months or 270 days within 36 months in Norwegen, you are tax resident. So owning an appartment is not that important in Norwegen.
Peru: If you spent at least 183 days in Peru, you are tax resident.
Philippinen: Spending 180 days within a calendar year in the Philippines, you are tax resident.
Polen: Being in Poland for 183 days or if Poland is your center of life will result in tax residency. But owning a property in Poland is not a problem as long as you rent the appartment out or own more appartments worldwide.
Schweiz: Owning an appartment alone will not lead to tax residency as long as you are not permitted for settlement. But without this permit it is nearly impossible to rent or own a property. You will also get tax resident if you have spent 90 days in the Schweiz, even more so if you were working within the Schweiz for at least 30 days in this time.
Singapur: The 183-day-rule takes effect.
Slowakei: Only having availability to a property doesn't mean that you are tax resident. But if you are really planning to use this appartment for a long and permanent time, you may get tax resident. This is why owning an appartment at another location or renting out yours in times you are not in the Slowakei will keep you away from tax residency.
Spanien: If you spend 183 days in Spanien or if Spanien is your center of life, you are tax resident. The supreme court is currently discussing if owning real estate leads to tax residency. But it is assumable that owning a vacation appartment won't mean that you have to pay taxes in Spanien.
Thailand: If you have spent 180 days in Thailand, you are tax resident.
Tschechien: Only owning a property doesn't result in tax residency in Tschechien. But if you "intend" to permanently live there or stay for 183 days, you are a tax resident. So make sure to exclude the permanent availability by renting it out. You won't be tax resident if you continuously rent it out for more than 183 days.
Tunesien: If you only have one available appartment worldwide and this appartment is in Tunesien, you have to pay taxes. If you have more real estate at your disposal, you only have to pay taxes if you stay longer than 183 days in Tunesien.
Türkei: Owing an appartment doesn't mean that you have to pay taxes in the Türkei if you don't have a permanent residence permit or have stayed for more than 183 days.
Ungarn: If the appartment is your only available home, you have to pay taxes in Ungarn. Otherwise, the 183-day-rule or the center of life apply.
Ukraine: You only have to pay taxes in der Ukraine if you don't have a similar appartment at another location. In this case, the government will review a few other factors to make sure that your center of life is indeed not located in the Ukraine.
Uruguay: If the real estate is worth more than 2,1 million dollar and if you have business relations in Uruguay, you are tax resident. But if you only own real estate that is worth less than 2,1 million dollar, you don't have to pay taxes.
Vietnam: If you stay for 183 days within a calendar year or 12 months in Vietnam, you are tax resident. Having availability to real estate in Vietnam will result in tax residency if you rent or own it for more than 183 days or if your ownership is written on your ID.
Vereinigtes Königreich: Non-UK-citizens can usually stay for up to 182 days in the UK without paying taxes. If a UK-citizen wants to protect himself from tax liability, he should stay below 90 days.
Vereinigte Staaten von Amerika: The 183-day-rule and the Substantial Presence Test are relevant. You always are on the safe side if you stay below 120 days.
Zypern: As long as you don't have a Non-Dom-Status, only being 60 days in Zypern and earning a salary from a zyprian company will lead to tax residency. If you are staying 183 days in Zypern, you are tax resident.
Important Considerations
Tax laws and conditions can change frequently.
This list excludes tax-free countries and those deemed unsuitable for various reasons.
The focus is on countries with residence-based taxation of worldwide income.
The USA is not to be used because many accounts will be denied.
