What is Tax Residency?

How it works

Every country runs its own residency test, and almost all of them stack the same factors: physical presence first, then economic and family ties, then a fallback rule for ambiguous cases. The 183-day rule is the headline number, but France, Germany and the UK all add a center of vital interests layer — your spouse, kids and primary home can pin you to a country even if you spend 200 days a year somewhere else.

The US is the famous outlier: citizens and green card holders are taxed on worldwide income regardless of where they live, and the only way out is renouncing citizenship plus, sometimes, an exit tax. For everyone else, the real question when moving is not whether you have a new residency — that part is easy — but whether you have actually broken the old one. Home countries are designed to keep you taxable until you prove a clean exit.

Examples

• French entrepreneur moves to Dubai. Spends 220 days in the UAE, leases an apartment, gets the residency permit. Keeps the Paris apartment and his family in Lyon. France still considers him tax resident under article 4B of the CGI (foyer in France) and taxes his worldwide income that year — the UAE days were necessary but not sufficient.
• US citizen relocates to Paraguay. Spends zero days in the US for two years, gets a Paraguayan tax residency certificate. The IRS does not care: he still files Form 1040 on worldwide income every April, plus FBAR and FATCA. The Paraguay move saves nothing on US tax — only renunciation does.

Common mistakes

• Treating 183 days as a universal escape rule. Failing it does not break residency — France, Spain, Germany and the UK can all keep you tax resident on permanent home or vital interests alone, even with under 100 days spent there.
• Forgetting the home country's exit rules. France clawbacks 5 years on capital gains, Germany applies extended limited tax liability for 10 years, Spain has a 4-year shadow rule for moves to low-tax jurisdictions. Documenting the exit cleanly is the hard part.
• Skipping the tax residency certificate. Without one, banks default to your passport country for CRS/FATCA reporting — which often triggers letters from the old tax authority asking why you are still showing up.
• Letting visit days pile up after moving. Border systems share entry/exit data and phone location is increasingly subpoenaed in audits. Two casual months a year visiting family in the old country can rebuild a residency case.