The Myth Of The 183 Days

Tax residence can be a difficult concept, especially if you have a residence in different countries. This is something Belgian singer Angèle discovered the hard way.

The singer is in the news because she lost a court case in which she attempted to recover the documents and personal items seized by the French tax authorities in her apartment in the 18th arrondissement of Paris overturned.

The press notes that she had said in an interview with Vogue magazine : "It's true that at some point, you sometimes have to leave where you come from. My brother chose to stay with my parents, and I spend half the year in Paris."

It is reported that this is what alerted the tax inspectors, who are now trying to prove that she is a tax resident of France. The case is likely part of a broader investigation targeting Belgian artists who earn their living in France. Angèle had the disadvantage of owning an apartment in Paris and having been in a relationship with a French woman.

It is a common misunderstanding, a myth, that you become a tax resident in a country when you live there for more than 183 days or more, and that you avoid taking up tax residence by keeping your stay to under 183 days. But even if Angèle spends more than 183 days in France, she can still retain her Belgian tax residence.

Nevertheless, it is not because Angèle and her lawyer say that she pays all her taxes in Belgium that she is a Belgian resident and that she has to pay tax in Belgium.

It is not a choice, but the rules are a little more complex.

There simply is no 183 days' rule in Belgium or in France to determine tax residence.

It is true that some countries take the position that you are a resident for tax purposes if you live there for more than 183 days a year. That is a residence test to catch out taxpayers who say they are not resident. And some countries even go further. E.g. in the UK, the 183 days spent in the country are just the first automatic residence test. Even if you spend 91 days in the UK, you can be deemed to be a UK resident.

Nonetheless, it is not because you pass the residence test that you stop being a resident in the country you are leaving. It is not because the UK considers that you are a tax resident that you stop being a tax resident in Belgium.

Belgium does not have a 183 days' residence test. Under Belgian tax law, your residence is where you have your principal place of residence or the centre of your social and/or economic interests. Your principal residence is your home, it's where you come home to. In the old days, we used to say "it's where you have your dog, your slippers and where you get your newspaper". It's the centre of your interests in life (as opposed to your economic interests) and the seat of your fortune.

What is more, if you are registered with the commune and have an identity card, the Belgian tax authorities can assume that you are resident in Belgium. This is only a first indication of your residence. You can still prove that you do not have your residence in Belgium but in another country.

For married people and registered partners, things are a bit more complicated. The income tax code clearly says that their residence is where the close family (parents and children) is established. And there is nothing you can do to contradict that. However long a spouse may be living abroad, if his family stays behind, he remains a Belgian resident, unless the double tax treaty says otherwise.

What this means is that you may try to live somewhere for 183 days or more per year, but that you still have your tax residence in Belgium. And that can be a recipe for disaster ; if you have two tax residences, you have to declare your worldwide income in both countries and you risk double taxation.

Double tax treaties

Fortunately, there are double tax treaties that determine where a person is resident if they are deemed to be resident in two countries.

There are a number of criteria to determine that and 183 days is never one of them. This is what we call the "tie breaker rule".

E.g. in the double tax treaty between Belgium and the United Kingdom, article 4 says how you determine where you have your residence :

ARTICLE 4 Residence

• For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature ; it also means, in the case of Belgium, companies (other than companies with share capital) which have elected to have their profits subjected to individual income tax. However, this term does not include any person who is liable to tax in a Contracting State in respect only of income from sources in that State.
• Where by reason of the provision of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined as follows :
  • he shall be deemed to be a resident of the State in which he has a permanent home available to him ; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests)
  • if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode ;
  • if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national ;
  • if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

There is a fixed set of criteria in the tie breaker rule that are - in order of importance - :

• a permanent home in a state ;
• a centre of vital interests (i.e. closer personal and economic relations with one state) ;
• a habitual abode in one state ;
• the nationality of one state ;
• if all else fails, the tax authorities have to come to an agreement.

That Angèle had told Vogue that she spends half of the year in Paris triggered the attention of the tax people, but 183 days is not a criterion in France.

They know she owned her apartment there, and that is a criterion in French tax law, but they have to take account of the double tax treaty between Belgium and France.

If she has a permanent home in Paris and a permanent home in Brussels, rented or not, they have to pass to the second criterion. They probably questioned her about the centre of her vital interests. Indications of her vital interests can be where she has her bank and savings accounts, her family or a partner, a car registration, a mobile phone or landline, where she has her doctor, dentist or vet, membership of clubs, ...

They must not have been satisfied by her answer. They requested her gas and electricity bills from the utility providers and calculated that these showed consumption levels similar to those of other apartments. They deducted that it is used on a regular basis and assumed that she had closer personal and economic relations with France.

This is why they visited her apartment and seized documents and video files, photos and audio recordings of her private WhatsApp conversations. They had to release the latter presumably for privacy reasons, but not the documents.

No 183 days' rule ?

Why are people convinced that there is a 183 days' rule ?

In part that is because some countries have a 183 days' residence test.

It is also because there is a 183 days' rule somewhere else in the double tax treaty. That is in the provision that determines where you pay income tax on your remuneration if you live in one country and work in another.

In principle, you pay tax at home, in your country of residence, and not in the country where you work, except :

• if you worked there for 183 days or more in a year, or
• if you were paid by a local company, or
• if you were paid by the local branch of a company.

It is only if you meet one of these conditions that you pay tax in the country where you work, and then only for the days you work in that country.

If you live in Belgium and work in France for a French company, you pay tax in France but only for the days you work in France. If you work at home on Fridays, or if you have to take a business trip to the UK, your income for those days is not taxable in France but in Belgium.

But that is a story for another day.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.