TLDR: Yes, you can be considered a tax resident in two countries simultaneously if both states' laws classify you as such. International tax treaties intervene to resolve residency conflicts and avoid double taxation.
What does it mean to be a tax resident in two countries?
Being a tax resident in two countries means both states consider you subject to their tax laws. This can happen if:
- You have your primary family residence or main place of stay in both countries.
- You carry out professional activities in both countries.
- You have your center of economic interests in both countries.
How is the tax residency conflict resolved?
Bilateral tax treaties establish hierarchical criteria to determine which of the two countries takes priority. The criteria are:
- Permanent home: The state where you have a home that reflects a lasting connection.
- Center of vital interests: Where you have the strongest ties in terms of professional activity, assets owned, and family and social relationships.
- Habitual abode: The state where you spend most of your time.
- Nationality: Only if all previous criteria fail to determine residency.
What are the consequences of dual tax residency?
Dual residency can create tax asymmetries, such as deducting the same payment or loss in both states. However, not all consequences are negative: in some cases, you may access tax benefits in both countries, provided it complies with the treaties.
Who is most at risk of dual tax residency?
Certain categories of taxpayers are more exposed to the risk of dual tax residency:
- Cross-border workers.
- Inpatriates and expatriates.
- Retirees with transnational income.
What should you do if you are a tax resident in two countries?
If you find yourself in a dual tax residency situation, you should:
- Identify the residency criteria in both states.
- Apply the tie-breaker clauses of the tax treaties.
- File a tax return in both states.
- Request a mutual agreement procedure, if necessary.