Can a person have double tax residency?duguech
Double tax residence (being considered a fiscal resident of two states) is neither common nor desirable for a person, entrepreneur or company. As we saw in our article on double taxation agreements, states usually reach agreements to regularize double tax residence and use various control mechanisms to decide which state should be considered the legal residence of a person, company or investor who works in two countries.
For example, if a Spanish citizen works on short-term projects in India, the double taxation agreement between the two countries would judge where the payment for those projects should be taxed.
EU states like Spain usually consider any person resident for more than 6 months a year as a tax resident, and will then apply income tax accordingly. Legally, a resident in Spain who is a national of another EU country would not have double tax residency, since the Spanish Treasury would ask him/her to also declare his/her property abroad as if he/she were a native, with the same deductions and rights as a Spanish citizen.
This period of six months (or 183 days) is calculated from the first day on which the taxpayer begins his or her fiscal activity in Spain. If the taxpayer makes sporadic trips abroad, and declares the periods of absence from the country, the Treasury would not take these absences into account, and would continue to consider him or her a tax resident in Spain.
If an individual or company operates in two different countries simultaneously, the fiscal residency would be in the country where the majority of business and investment take place. In the case that the individual is married, then the residency of his or her family would also be considered his or her fiscal residence.
Thus, double tax residency is avoided, in most cases, thanks to double taxation agreements and local tax regulations, which in case of foreign immigrants usually regulate the conditions of tax residency taking into account various factors such as earned income, length of work, family attachment of the foreign resident, etc.
In some cases, double taxation agreements determine as the tax residency the country in which the taxpayer obtains all or most of his income, even he/she does not in fact live there – this is known as fictitious double tax residency.
However, regardless of their tax residency, a country can require a person to pay taxes for owning local property, land, etc. This would not be considered double tax residency: while the person may be paying taxes on the income derived from the property in another country, the local tax authority can demand property rights tax.
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