Dual tax residency: risks and solutions

Dual tax residency: risks and solutions

Living and doing business in multiple countries often leads to situations where two jurisdictions simultaneously consider you their tax resident. Dual tax residency means you are potentially liable to pay taxes in two countries at once.

This is one of the most common problems for entrepreneurs, freelancers, and investors in the EU. Without a strategy, it leads to overpayment of taxes and account freezes due to CRS and AML checks.

Jurisprudential helps determine tax status and build a structure that eliminates dual residency and reduces the tax burden.

Consultation cost from 250 euros

Why does dual tax residency arise?

The problem arises when different countries use different criteria.

Common situations:

1. live in the same country
2. work in another
3. Manage your business from a third party

or

1. There is housing in several countries
2. The family is in one country and the business is in another.

As a result, each country believes that it has the right to tax your income.

The 183-day rule doesn't solve the problem

Many people focus only on the number of days.

But in practice:

1. One country uses 183 days
2. The other one looks at the center of interests

As a result, you can become a resident of two countries at once.

The center of vital interests as a key factor

Tax authorities analyze where your real life is located.

They look:

1. where the family lives
2. where there is housing
3. Where are the assets located?
4. where the business is conducted

If these elements are distributed between countries, a conflict arises.

Business and place of management

For entrepreneurs, the main risk is associated with managing the company.

If:

1. the company is registered in one country
2. and is controlled from another

Both countries can claim taxes.

CRS and Why Everything is Becoming Transparent

The CRS system automatically transfers data between countries.

Tax authorities see

We offer a solution at the level of international standards

1. bank accounts
2. movement of funds
3. sources of income

If the structure does not correspond to reality, this quickly becomes apparent.

Than it threatens

Dual tax residency results in

1. taxes in two countries
2. Fines for failure to declare
3. blocking accounts
4. Difficulties with banks

How to solve the problem legally

There are agreements to avoid double taxation.

They help:

1. identify a priority country
2. distribute tax rights
3. offset the taxes paid

The criteria used are:

1. permanent housing
2. center of vital interests
3. place of residence

Why agreements don't work automatically

Important to understand

agreements do not apply themselves

they need to be properly formatted

and confirm the factual circumstances

Practical strategy

To eliminate double tax residency it is necessary

1. determine the actual place of residence
2. concentrate the center of interests in one country
3. Build your business correctly
4. Put your tax reporting in order

This allows you to reduce the tax burden legally.

Common Mistakes

Most often, entrepreneurs

1. trying to maintain residency in two countries
2. do not change the business structure
3. ignore CRS
4. do not declare income

Consultation on dual tax residency

Dual tax residency is not only a legal problem but also a financial risk.

This is especially important if you:

1. live in several countries
2. Do international business?
3. have assets abroad

Jurisprudential helps eliminate dual residency and build a risk-free tax strategy.