TLDR: The country of tax residence is determined by hierarchical criteria established in international tax treaties, which take precedence over domestic laws. These criteria include permanent home, center of vital interests, habitual abode, and nationality. If in doubt, the competent authorities may intervene to resolve the issue.
Precedence of Tax Treaties
International tax treaties take priority over the domestic laws of the signatory countries. According to Article 4 B of the French General Tax Code (CGI), a person considered a resident of another contracting state under a treaty cannot be treated as tax-domiciled in France, even if they meet the criteria set by domestic legislation.
Hierarchical Criteria for Resolving Dual Residence
- Permanent Home: The person is considered a resident of the state where they have a permanent home available to them.
- Center of Vital Interests: If the person has a permanent home in both states, the state where they have the closest personal and economic ties is considered.
- Habitual Abode: If the center of vital interests cannot be determined, the state where the person habitually resides is considered.
- Nationality: If the person habitually resides in both states or neither, the state of which they are a national is considered.
- Agreement Between Competent Authorities: In cases of persistent uncertainty, the tax authorities of the two states may reach an agreement to determine tax residence.
Required Documentation
To benefit from the provisions of tax treaties, specific documents must be submitted, such as Form No. 5000 and the corresponding annexes based on the type of income, such as Annex No. 5002 for interest.
Special Cases
For French residents in Monaco, the France-Monaco treaty provides specific rules. For example, French nationals who transferred their domicile or residence to Monaco after October 13, 1962, without being able to justify five years of habitual residence in Monaco by that date, are considered tax-domiciled in France.
Precedence of Tax Treaties
Tax treaties take precedence over domestic laws in cases of conflict regarding residence or income taxation. This principle is confirmed by the provisions of the BOFIP, which specify that tax treaties always prevail over the territoriality rules of domestic law.
Mutual Agreement Procedure
In cases of dual residence, the competent authorities of the two states may reach an agreement to determine tax residence. This process is known as the mutual agreement procedure and is used when the hierarchical criteria are insufficient to resolve the residence conflict.