Get Non-Residency Status for the Current Tax Year
In this weeks live Wednesday Webinar we took a deep dive into how expats can get non-residency tax status this year.
You are tax resident until you are not tax resident
Residence, tax residence and domicile are different things to consider, being connected and separate.
Domicile and residence have a bearing on tax residence.
You have to be a resident before becoming a tax resident.
Your domicile will always tie you to your home country allowing them first call on your tax residency.
To be granted a non resident tax status there must be a double taxation treaty (DTA) between your country of domicile and your expat country of tax residence.
If there is no DTA, then your home country will continue to be your country of tax residence, and could be dual tax residence in both countries.
Steps to non-tax-residence
To change your tax residence you must first have a permanent home in that new country,
Next a right to remain Living and Working Abroad beyond a 90 day business or holiday trips with a resident permit or visa.
Finally that you intend to or do stay more than 183 days in the country you could register to become a tax resident there.
Once tax residence is confirmed under the DTA you can then validate non tax residence to your home country.
Excess Complicates
Non resident expats with no ties to the UK over the last 3 years you could spend 182 days in the UK.
That done, complicates matters.
Zone out complications
Within the Schengen zone, if not resident or tax resident, you can only visit for 90 days in any 6 months.
This is not the case in 2022 with UK, Ireland, Romania and Cyprus, although those EU countries have applied to join in with the Schengen zone.
Expats could be ‘resident’ in any country, without being ‘tax resident’, for example if you have a holiday home.
Post Brexit UK citizens will need a residency visa/permit to stay more than 3 months at a time in an EU Schengen zone country.
For example if a UK citizen’s lifestyle is to spend 5 months of the summer each year in Spain, Cyprus or Portugal, post Brexit, they will need a ‘resident visa/permit’ to spend more than 90 days in 6 months in that country
(unless they obtained, and retain, an EU Residency permit before the end of Brexit in 2020.
Resident not Tax resident
The resident permit and 5 month stay does not qualify as a tax residence unless the UK expat is undertaking an economic activity to work as a company, sole trader or employee.
Such people remain tax resident in their home country indefinitely.
This situation is valid in any country except one…… your home country of domicile.
Limitations
UK Expats, for example, may find themselves with UK ties that can limit the days they can spend in the UK.
With no ties a UK expat can spend up to 182 days in the UK, but that then gives them 1 tie under the 90 day rule for the next year.
Plus you have to then spend the remaining 183 days in that other country, to avoid the country tie or possibly your domicile determining home country tax residence for the expat.
5 thing to tie you to the UK
There are 5 factors that are used to determine if you have a tie to any country:
Family
Accommodation
Work
Country
90 Day Rule
The ties you have determine how many days you could spend in your home country in any tax year.
Any short trip under 90 days Living and Working Abroad for business and holiday typically won’t impact on tax residency, but it could depending upon ties.
Any new expat has to pass 3 full tax years as a non resident to loosen the 90 Day rule tie.
New expats always start with one tie to home, effectively limiting them to a maximum 120 days in the UK the following tax year.
With 2 ties, days in the UK are limited to 90 that year.
With 3 ties this drops to a 45 day maximum
With 4 or more ties the only way to ensure non tax residency is to spend less than 16 days in the UK.
Freedom with 3 Year Relief
This is irrespective whether you have spent the last 3 tax years as non resident outside the uk or not.
The difference though is that if a UK expat spends routinely less than 90 days in the UK for any of the last 3 tax years, then they finally gain freedom and independence from the 90 Day rule tie.
ProACT Know How
The definition of family, accommodation and work has some variations depending upon your circumstance.
There are ways for expats to manage each to ensure they do or do not become ties.
ProACT Retained Client services offers online consultations and advice service for expats Living and Working Abroad and relocating overseas to prepare residency and tax registrations. This service is for family and business with the expertise to guide remote working for consultants and personal service companies.
4 things that settle the doubt of non tax residence
Non tax residence can only be ensured if a UK Expats spends less than 16 days in the UK in any UK tax year.
If there is any doubt under the double taxation treaty of tax residency or liability there is a standard form of resolution for dual tax residency cases.
The assessment process asks in order where the expat has:
Your Main Home
The Source of you Family & Business Interests - Income, Property, Business
Where you Habitually spend time
Your Citizenship
We see again citizenship or domicile pull the strings and retain ties with an expat’s tax residency to their home country.
We covered this assessment in more detail in our dual Residency episode last week.
ProACT offer a free review all new enquiries from expats living and working abroad or relocating overseas.
July’s Webinars
Watch all of July’s Webinars now on YouTube (subscribe!)
6 July - Tax Residency After 183 Days
13 July - Dual Residency Tax Implications
20 July - Get Non-Residency Tax Status THIS Year
27 July - Split Year Tax Benefits
Retained Clients Service
Retained clients get a more in depth Q&A in the private expat community on Facebook after the public live stream.