The world is increasingly interconnected, and it is not uncommon for individuals to have economic and tax ties with several countries. In these situations, the question of tax residence arises, and more specifically, whether it is possible to be a tax resident in two countries.
This question is important because it has significant tax implications. This article presents the various factors used to determine tax residence and the tax consequences of dual tax residence.
In brief
- Yes, this can happen: a person with economic and family ties to two countries may be considered a tax resident by each of them.
- In France, Article 4 B of the CGI links tax domicile to the home or place of principal stay, to the main professional activity and to the centre of economic interests: in principle, meeting just one of these criteria is enough.
- In the event of dual residence, both countries may claim tax on the same income, with a risk of double taxation.
- Where a tax treaty applies, it generally makes it possible to retain a single country of residence, according to successive criteria (permanent home, centre of vital interests, habitual abode, nationality), and may, depending on the case, avoid double taxation, which needs to be checked by a lawyer.
Contents
Determining Your Tax Residence
In France, tax residence is defined by Article 4 B of the French General Tax Code (Code général des impôts, CGI). A person is in principle considered to be domiciled in France for tax purposes as soon as they meet at least one of the following three criteria: having their home in France (generally where their family habitually lives) or, failing that, their place of principal stay; carrying out their main professional activity there, whether salaried or not; or having the centre of their economic interests there, that is, according to the tax authorities, the place of their main investments, of the seat of their business or from which they derive most of their income. Merely owning real estate or holding an account in France is generally not enough, on its own, to establish a tax domicile in France: everything depends on the situation as a whole.
The Case of Dual Tax Residence
A person may have economic and family ties with two different countries, which can result in dual tax residence. In this case, it is important to know how to determine the country of tax residence and the tax consequences of this situation.
International Tax Treaties
One of the main purposes of international tax treaties is to avoid double taxation. Where a person is considered resident by two States, the tax treaty that may have been concluded between them generally lays down criteria, applied in a set order and presented below, so as to retain only one State of residence. The place of residence of the family often plays an important role.
The treaty criteria, in order
Most treaties signed by France follow the OECD model: when both States consider a person to be resident, the following criteria apply one after the other, each one coming into play only if the previous one does not settle the matter:
- permanent home: the dwelling available to the person on a lasting basis, whether owned or rented;
- centre of vital interests, if the person has a home in both States (or in neither): the State with which their personal and economic ties are closer (family, work, assets);
- habitual abode: the State where the person stays most;
- nationality;
- failing that, the tax authorities of the two States decide by common agreement, through a mutual agreement procedure.
Each treaty nevertheless has its own wording: only the treaty that applies to the situation makes it possible to reach a conclusion, which generally calls for a case-by-case analysis, ideally with a lawyer.
The certificate of tax residence
To assert residence in a State, you produce a certificate of tax residence issued by that State’s tax authorities. In France, the certificate is requested from the tax office, for example through the secure messaging of your personal online account. See how to prove tax residence abroad.
Two examples
- A manager lives in Paris with their spouse and children in the family home, and works in London from Monday to Thursday, where they rent a studio all year round. They have a permanent home in both States; the centre of their vital interests, where their family lives, in principle ties them to France.
- A retiree spends six months in Portugal in seasonal rentals and the rest of the year in her house in France. Having no lasting home in Portugal, her only permanent home is in France, which is in principle her State of residence under the treaty.
Tax Consequences of Dual Tax Residence
In the event of dual tax residence, both countries may claim tax on the person's income.
This can lead to double taxation, which tax treaties are intended to avoid. Where France is the State of residence within the meaning of the treaty, it in principle taxes all of the person’s income, including foreign-source income, and may, in some cases, eliminate double taxation on income that the treaty allows the other State to tax, by means of a tax credit or an exemption with the effective rate rule, depending on the treaty. Where the other State is the State of residence, France could, depending on the case, tax only the French-source income that the treaty allows it to tax; only an analysis of the situation by a lawyer can determine whether and how the treaty applies. Even where double taxation is avoided, the total tax burden may depend on the mechanism used: for example, where the tax paid abroad exceeds the tax credit granted by France, the excess is in principle not refunded by France.
For people with economic and family ties to two countries, the applicable tax treaty therefore plays a central role; a case-by-case analysis, ideally with a lawyer, generally makes it possible to determine the State of residence and the tax consequences in France. For the rules specific to the other country, a local professional may be consulted.
In conclusion, it is possible to have dual tax residence, but this can have significant consequences.
International tax treaties may, depending on the case, avoid double taxation, but how they apply depends on the facts of each situation: it is necessary to have your case analysed by a tax lawyer to find out whether or not the applicable treaty allows this. If you are unsure about your tax residence, this analysis also makes it possible to consider, depending on the case, the most appropriate steps.
What I see in my cases
Dual tax residence is fairly common in my cases. It is generally resolved fairly easily through the tax treaty, provided the situation is properly framed and documented. Contrary to a common misconception, the number of days spent in each country is not the decisive criterion: under French law, in principle, it is enough for the family to live in France, or for the main professional activity to be carried on there, to be resident there, and treaties generally give the home and the centre of vital interests priority over the length of stay.
FAQ
Can one be a tax resident of two countries at the same time?
Yes, under the domestic law of each country: each State applies its own criteria, and the same person may meet those of both. Where a tax treaty applies, it in principle makes it possible to retain only one State of residence for the purposes of the treaty.
Is the 183-day rule enough to determine tax residence in France?
As a general rule, no. Under French law, the main place of stay is only one of the criteria of article 4 B of the French General Tax Code, and it is in principle only examined where there is no home in France. A person who spends fewer than 183 days a year in France may therefore, depending on the case, be a French tax resident, for example if their family lives there or if they carry on their main professional activity there.
What happens if there is no tax treaty between the two countries?
Each State then applies its own rules, and double taxation may remain. In France, a person who meets one of the criteria of article 4 B is in principle taxable on all their income; tax paid abroad does not in principle give entitlement to a tax credit, but may, in some cases, reduce taxable income. A case-by-case analysis is then particularly useful.
Is a tax residence certificate enough to prove one’s residence?
The tax residence certificate is often requested in order to apply a treaty. It is an important piece of evidence, but it is not always sufficient on its own: the tax authorities may examine all the facts (housing, family, activity, assets, length of stays).
What can happen if the French tax authorities consider that a person is a French tax resident?
If the tax authorities consider that a person who regarded themselves as non-resident is in fact domiciled in France, they may, depending on the case, claim tax on all of that person’s income for the years not yet time-barred, with late-payment interest and, where applicable, surcharges. Any applicable treaty and the available evidence then play a decisive role; only an analysis of the situation by a lawyer can determine whether or not the treaty can limit this taxation in France.
Does nationality matter?
Under French law, nationality is not, as a general rule, a criterion of tax residence. In treaties, it in principle only comes into play as a last resort, where the previous criteria (permanent home, centre of vital interests, habitual abode) do not settle the matter.
Official sources
- Service-Public.fr - How is your tax domicile determined? (in French)
- BOFiP - BOI-IR-CHAMP-10: Taxable persons and tax domicile (Article 4 B of the CGI) (in French)
- impots.gouv.fr - I am a non-resident. Do I have to declare income and pay tax in France? (in French)
