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Inspired by this Reddit thread and other stories of people working remotely from all over the world, apparently without giving too much thought to the legal implications, Working abroad remotely and UK taxes:

I work remotely abroad for most of the year (usually a new country every month). I'm registered as self employed in the UK and pay 40% on tax. I've taken the UK tax residency test on the Gov UK website and it states i'm not a tax resident of the UK. I don't pay tax in any other country and the company i'm contracting for is not registered in the UK (its in the EU).

I'm confused about where / if i should be paying tax.

I am wondering - what is the worst-case scenario? Could one hypothetically end up in a situation in which two (or more) countries all simultaneously consider one to be tax resident for the same year, and each demand their headline rate of income tax on the same income?

Tie-breaker - which combination of simultaneous tax residencies would result in the highest total marginal rate of income tax? Is a figure of over 100% possible?

For full credit, answers should take into account:

  • The tax residency rules of each country (obviously!)
  • All relevant double tax treaties
  • All instances where one country would offer a tax credit/refund based on tax paid in any of the others, based on its own domestic law, in the absence of a treaty.

You may assume any nationality or level of income you like as long as you state it in your answer.

After undertaking a small amount of initial research, it turns out that owning or leasing a private residential property is a very easy way of acquiring tax residency in a large number of countries. On reflection, however, since this question was inspired by digital nomads, let's also assume that the individual in question is reasonably nomadic and owns or leases a private residential property for their personal use in at most one country.

Laurel
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user3490
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    A similar situation arises between US states. For instance, New York has a rule that anyone who has a permanent home in New York and spends 185 days there (where any part of a day counts) is a tax resident. New Jersey has a similar rule. So if you own or rent homes in both states, and commute across the state line on most days, you might be a resident in both. However, each state will allow you to claim a credit for taxes paid to the other, so that you don't end up being fully double taxed. – Nate Eldredge Mar 20 '23 at 17:01
  • @NateEldredge - Substitute California for one or the other and then you've got real troubles as California is even more rapacious hard though that is to believe. – davidbak Mar 21 '23 at 22:24

1 Answers1

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Sample answer:

  • Be a US citizen - automatic US tax residency
  • Own a UK property and live there for 91 days to gain UK tax residency
  • Spend 60 days in India plus a total of 365 days over the previous 4 years
  • Spend 62 days in Norway, having been tax resident there the previous year. If I understand correctly, this status can be maintained indefinitely by spending 62 days there per year once first gained.
  • Spend 120 days in Paraguay
  • On the last day of the tax year, start working in the Philippines on an indefinite contract
  • Spend 183 days or more in Singapore during the prior tax year
  • Spend a total of 270 days in Mauritius over the current tax year and the previous two years (our calendar is getting pretty constrained at this point but I think this is still all technically possible)
  • Have access to a spare room that a friend informally keeps available for you in Germany
  • Be a member of the crew of a vessel registered in Mozambique
  • Have at least one essential connection to Sweden, having been tax resident there less than 5 years previously
  • Have a spouse who lives as a permanent resident in Spain and is somehow a contributing member of the Commonwealth Superannuation Scheme (triggering Australian tax residency)

Total tax residencies: 13

Total marginal income tax rate after double tax treaties and reliefs for the tie break: no idea

user3490
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    You’ve only used 151 of 365 days - surely you can get residency in other places too? – Dale M Mar 20 '23 at 20:51
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    This is very much a work in progress. There are quite a lot of countries that I haven't looked at yet. – user3490 Mar 20 '23 at 21:14
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    @DaleM I have squeezed in two more and now I'm down to my last 31 days in the current tax year. The question now is how to arrange my calendar for the previous 5 years... – user3490 Mar 20 '23 at 21:50
  • Norway seems to have a problem of infinite regress. If you need to have been tax resident last year, to be tax resident this year, then doesn't that apply to the previous year's tax residency, ad infinitum? How do you establish tax residency for the first year, whenever that is? – Malady Mar 21 '23 at 03:22
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    @Malady the first year, you need 183 days in 12 months (or 270 in 36). But you need less to "maintain" it, so presumably the answer does it that way to fit more days in. – mbrig Mar 21 '23 at 04:12
  • @DaleM Probably after some additions, they have now used 604 of the 365 days in a year ;-). – Peter - Reinstate Monica Mar 21 '23 at 09:37
  • The German spare room thing is a bit ambiguous. Boris Becker not only had a key to the room but was actually present more than occasionally, as witnessed by his cleaning lady and others. The key is (perhaps a strong) part of the evidence but not sufficient. – Peter - Reinstate Monica Mar 21 '23 at 09:46
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    @Peter-ReinstateMonica only 334 days are allocated within the tax year of interest. Allocating the days within the 5 previous tax years to meet all the requirements is left as an exercise for the reader. – user3490 Mar 21 '23 at 09:54
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    Jamaica: you or your spouse maintain a home there, which you visit for at least one day in the calendar year. – alexg Mar 21 '23 at 11:00
  • We can get Mexico if you lived there five years ago, but then moved to a country Mexico considers a tax haven. And working for the governments of Jordan, Argentina, and Pakistan (probably others too) will get those respectively. – alexg Mar 21 '23 at 11:16
  • What exactly is “one essential connection” to Sweden? That’s a type of phrasing I’m used to hearing in relation to immigration than taxes, but logically, it cannot mean the same here – if it did, anyone born and raised in Sweden who moves away from Sweden while their family stays would be a Swedish tax citizen indefinitely. – Janus Bahs Jacquet Mar 21 '23 at 12:52
  • @Janus Bahs Jacquet - This is true, as long as you stay married to someone living in Sweden (as an example of essential connection). Source: https://taxsummaries.pwc.com/sweden/individual/residence – Magnus Wittstrom Mar 21 '23 at 13:16
  • @Peter-ReinstateMonica You could travel back and forth between Norway and the UK a lot, stopping in Germany on the way, you could be seen in Germany a lot but still spend enough of each day in Norway or the UK to count for tax purposes (especially if you use the same method of counting days as the people who sell vacation packages). – user3067860 Mar 21 '23 at 14:17
  • @MagnusWittstrom Given that ‘essential connection’ in immigration contexts tends to be quite broad (e.g., if you have more family in Sweden than in your country of residence), I assume it is at least more narrowly defined here. Most Swedes who settle permanently in a different country will have more extended family back home than where they settle for many years. – Janus Bahs Jacquet Mar 21 '23 at 14:19
  • Regarding your final "no idea" comment, I wonder what happens if that total marginal income tax rate exceeds 100% ... – Lee Mosher Mar 21 '23 at 17:11
  • Canada's rules were similar to Sweden's (at least as they were explained to me when I emigrated from there 30+ years ago). All the tax folks had to do was claim you had residential ties for you to be deemed a resident. Since we were to be former residents, we sold everything (like a boat we kept at my parents' place on a lake), closed every bank account, and chased down a few more things. The only thing we kept was our retirement savings, since there were tax implications if we cashed them out – Flydog57 Mar 22 '23 at 04:47
  • @LeeMosher that could happen quite easily in the past, as Sweden alone had an income tax rate over over 100% for some income categories. I doubt any of the countries care whether you are left without any income or even a negative income as long as they get their money from you. – jwenting Mar 22 '23 at 10:09