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Fiscal Residency and Tax Domicile Determining fiscal residency and tax domicile in country X is essential to define a person's tax obligations
Tax authorities aim to determine your fiscal residency and tax domicile to charge you taxes accordingly. Since there is no “residency meter”, many factors must be interpreted on a case-by-case basis.
Therefore, if you have or want to obtain fiscal residency abroad, expert assistance is indispensable to understand how to act and avoid mistakes. It’s important not to confuse fiscal residency with tax domicile. For example, a foreigner living in country X usually has fiscal residency in that country, while a citizen of that country moving abroad may lose their fiscal residency under certain conditions. Fiscal residency also differs from tax domicile.
Fiscal residency identifies the state where a person must fulfill their tax obligations, while tax domicile refers to the place for tax notifications. For residents, the tax domicile usually coincides with the municipality of their civil registry residence but can vary depending on the main place of activity.
For non-residents, it corresponds to the place where they generate the most income. In the case of relocation to countries with privileged tax regimes, the tax domicile remains in the last municipality of residence in country X. Generally, changes in tax domicile take effect 60 days after they occur. A practical aspect is the need to complete the tax return in country X for fiscal residents who have assets abroad. For example:
A citizen of country Y, residing in country X and registered in the civil registry of a municipality of this country, must complete this section to declare a property in country Y.
A citizen of country X, residing in country Y and registered in the civil registry for residents abroad, who does not have fiscal residency in country X, is not obliged to complete this section for assets in country Y or other countries.
How is fiscal residency determined?
Fiscal residency is not determined solely by citizenship or physical presence in a country. Factors such as where a person has most of their economic and personal interests, or where they have established their tax domicile, are decisive in establishing where they must pay taxes on their global income.
The distinction between fiscal residency and tax domicile is particularly relevant in international mobility contexts. A citizen of country X working temporarily abroad but maintaining strong and continuous ties with country X could still be considered a fiscal resident in country X, illustrating the complexity of the concept of fiscal residency.
Internationally, models of agreements like those of the OECD establish criteria for determining fiscal residency in cases of dual residency. A person with permanent residences in two states will be considered a resident of the state with which they have closer personal and economic relations.
Future changes could alter the criteria for determining fiscal residency in country X, transforming registration in the civil registry into a relative legal presumption, rather than absolute proof of residency. These changes would aim to identify the domicile as the primary place of personal and family relations of the individual, also considering the time spent in the territory.
