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The myth of the 183 days

Tax residence can be a difficult concept, in particular if one has many residences.

Johnny Hallyday is a French rock star, who died at the end of last year. In fact, he was Belgian but became the French rocker of all rockers, made millions and moved to Switzerland for tax reasons.  In 2013, he took up residence in Santa Monica, California. When he died, it came to light that he had opted for the law of California in his will. By doing so, he could give his entire estate to his wife and disinherit his children but that is another story.

During his lifetime, questions were asked about where he had his real tax residence. He moved between his properties in Gstaad (in the Swiss Alps), Saint-Barthélemy in the Antilles, Marnes-la-Coquette (to the east of Paris) and Santa Monica. He said he was a US tax resident because he lived there for more than 183 days a year … And when he died in France, his wife returned to Santa Monica to make sure she was there more than 183 days a year.

It is a common misunderstanding that you are a tax resident in a country because you live there for at least 183 days. It is not because you live 183 days or more in one country that you have your tax residence there. And it is not because you live more than 183 days outside Belgium that you do not have your tax residence in Belgium.

There simply is no 183 days’ rule to determine tax residence

It is true that some countries take the position that you are resident for tax purposes if you live there for more than 183 days per 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.

Nevertheless, 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.

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.

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

For married people things are a bit more complicated. The law clearly says that they are living with their family. 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.

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.

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.

E.g. in the double tax treaty between Belgium and the United Kingdom, article 4 deals with residence:

ARTICLE 4 Residence

(1) 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.

(2) 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:

(a) 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)

(b) 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;

(c) 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;

(d) 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.

The criteria are – in order of importance – :

  • a permanent home in one 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.
Why are people convinced that there is a 183 days’ rule?

In part that is because other 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 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 in your country of residence, not in the country where you work, except:

  • if you worked there 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.

Author: Marc Quaghebeur

Marc Quaghebeur is a Belgian tax lawyer with Cabinet DAVID specialising in international tax issues and cross border estate planning. He is a member of the Brussels Bar and the Society of Trust and Estate Practitioners. He

Comments 13

  1. I am a UK residence with US citizen ship, I own and operate my UK limited company and wish to do work for a company in Belgium. Does the fact that a UK limited company can send its employees to any EU company it has a contract with to carry out work allow me as a UK residence working for my limited company, to work for a Belgium company?

    1. Post
      Author

      refer to your message of a few days ago on taxation.be

      You are a US citizen and you are living in the United Kingdom.
      You have your own UK limited company and you wish to do work for a company in Belgium.

      The free movement of workers, (i.e. the right to move to another EU country to work without a work permit) is a right for EU nationals. As a non-EU national, you may have the right to work in an EU country (Belgium)
      – if you are married to an EU national or
      – if there is a special agreement between your country of nationality (the US) and the EU to give you equal rights – there isn’t;
      – if you are a long-term resident of the EU (i.e. if you have been (legally) living in the UK for at least five years without interruption.

      I do not know if you would qualify under the first or third condition.

      Moreover, after 29 March 2019 (hard Brexit – which in my view is unavoidable now) you could not rely on the EU rules (unless you are married to an EU national who is not a UK national).

      This means that to come and work in Belgium, your company would need to apply for a work permit and a residence permit like any US citizen to come and work in Belgium.

    1. Post
      Author

      Dear Mr Pujdak,

      Thank you for your comment on the website.
      We are talking about two different 183 days rule.

      The topic of the post relates to a 183 days rule to determine whether someone is a Belgian resident rather than a German, Dutch or French resident.

      The page of the Dutch belastingdienst does not refer to residence; to the contrary it relates to someone who is without a Dutch resident working in Belgium. That 183 days rule (in the double tax treaty between Belgium and the Netherlands) determines whether he has to pay tax on his remuneration for work in Belgium or in the Netherlands. That is addressed in this post as well under “double tax treaties”.

      I trust this clarifies the situation.

      Best regards,

      Marc Quaghebeur

  2. Hi there!

    Thank you for writing this article, it was incredibly insightful. Information on these matters is limited and what is available can be difficult for a layman to understand.

    I have a few of questions that I’m hoping to get some answers to…

    Hypothetically….

    1. You have a UK, US and now Belgian citizen after living in Belgium for the last 5+ years. The last 1/2 years they worked as a self-employed person who got all their work from a UK company (involved travel to the UK about 3-4 times a month usually, and all invoices were made in £ and paid in £ to a UK account)… Would that have any impact on where the tax should be paid? I.e. Live in belgium, pay social security in Belgium and been filing taxes in belgium but work/payment comes from a UK company.

    2. Said person also owns an apartment in Belgium which is currently rented out. They move to the UK for work and give up Belgian residency for over 1 year (becoming a UK resident). They then move back to Belgium for 6 months to work on secondment in the Belgian office. During these 6 months they live and are registered at their apartment in Belgium (it is no longer rented out) but still have a lease on an apartment in the UK at the same time. What are the tax implications… Is it UK or Belgian taxes that are paid? Is there any way to ensure it is UK taxes not Belgian? e.g. spend more time in the uk.

    3. If said person moves back to the UK for 6 months or so after those 6 months in Belgium, but stays registered at their apartment in Belgium as they come back a weekend a month or so but living predominantly and working in the UK during those 6+ months… Where is the tax paid?

    I hope that makes sense. Many thanks in advance for your help!

    1. Post
      Author

      Dear Mr / Mrs Waite,

      Thank you for your comment on my article and I apologise for the delay in replying.

      Let me answer your questions, but I must admit that the questions are a bit leading.

      1. You have a UK, US and now Belgian citizen after living in Belgium for the last 5+ years. The last 1/2 years they worked as a self-employed person who got all their work from a UK company (involved travel to the UK about 3-4 times a month usually, and all invoices were made in £ and paid in £ to a UK account)… Would that have any impact on where the tax should be paid? I.e. Live in Belgium, pay social security in Belgium and been filing taxes in Belgium but work/payment comes from a UK company.

        Said person lives and work in Belgium, pays his social security in Belgium and works part time for a UK company.
        He is a Belgian resident.

        He is not an employee, so the special rules to determine where an employee is liable to income tax (the so-called 183 days’ rule) do not apply.

        Working as a self-employed for a UK company with invoices in £ and being paid in £ does not make a self-employed Belgian resident liable to UK income tax. Under the double tax treaty between Belgium and the UK, one is only liable to income tax in the UK if one has a permanent establishment in the United Kingdom.

        A permanent establishment usually means one’s own office (with the name above the door) or even a dedicated office within the client’s premises, but even hot-desking within the client’s premises can be a permanent establishment. However, the situation is not always very clear.

        This may mean that tax is due in the UK for the days worked in the UK.

      2. Said person also owns an apartment in Belgium which is currently rented out. They move to the UK for work and give up Belgian residency for over 1 year (becoming a UK resident).

        This is clear: upon deregistering with the commune said person has become a UK resident and as such is fully liable to tax in the United Kingdom even for work in Belgium.

        The question is where is he staying : what is the UK accommodation : an apartment he rents in the UK (see below)?

        Another question is: what is the family situation?

        And moving to the UK means opting out of Belgian social security and into the NHS.

      They then move back to Belgium for 6 months to work on secondment in the Belgian office. During these 6 months they live and are registered at their apartment in Belgium (it is no longer rented out) but still have a lease on an apartment in the UK at the same time.

        What do you mean with “move back for six months”:

        – what happens to the UK accommodation? It is still leased but nobody lives there? Is that not expensive?

        – who are “they” : just the “said person” or also the family ? You have not mentioned the family situation?

        – what is “move” back: register with the commune as is obligatory under Belgian law?

        – and why would they “move back” if they want to be resident and work in the UK? Why do they need a Belgian residence?

      What are the tax implications … Is it UK or Belgian taxes that are paid? Is there any way to ensure it is UK taxes not Belgian? e.g. spend more time in the UK.

        Is the question not rather: “how can said person be deemed to be resident in the UK and be considered resident in the UK rather than in Belgium”?

        This is what I explained in the article: you must make sure that you keep meeting the criteria for residence in the UK rather than in Belgium.

      3. If said person moves back to the UK for 6 months or so after those 6 months in Belgium, but stays registered at their apartment in Belgium as they come back a weekend a month or so but living predominantly and working in the UK during those 6+ months… Where is the tax paid?

        This moving residence between both countries can only confuse the Belgian and the UK tax authorities, and it is a recipe for disaster. If said person remains registered with the commune in Belgium, the Belgian tax authorities may consider he is registered here, and they may even disregard the 12 months in the United Kingdom.

        The question is really: what does “said person” really want: be considered resident in the UK, work there and work a bit in Belgium and pay social security and tax in the United Kingdom. This is possible but that raises quite a few questions:

        – what is the benefit? How much tax and social security does said person save?

        – moving to the UK means opting out of Belgian social security and into the NHS. Post Brexit, this means that there may be no social security benefits in the EU …

      I trust that this answers all your questions and that you will not hesitate to contact me should you have any further questions.

      Please note that this does not replace legal advice that takes account of the complete situation of “said person”

      Best regards,

      Marc Quaghebeur

  3. I’m considering going freelance and opening up a Limited Company. I’m a UK citizen but my clients would be Belgian. Where is best to open my company? *I have no obligation to reside in either country.

    1. Post
      Author

      Dear Elizabeth,

      Thank you for your message on this post.

      If you live in the UK, it would make most sense that you use a UK company, you can invoice clients from the UK, you have accountants there who can do your accounting there, file VAT and income tax returns and help you through the entire process. The company income tax rate is 19%, and when the company pays you a dividend, the net dividend would be liable to income tax at your ordinary income tax rates com are starting at 20%. The company can pay you a salary and you would pay social security / national insurance contributions as well as income tax on that salary.

      If you live in Belgium, it would make most sense that you use a Belgian company rather than a UK company or you would waste a lot of time / effort to run a company from the UK with UK accountants. Moreover, the Belgian tax authorities could always say that your company is actually a Belgian resident company.

      The advantage is that he situation (post Brexit) is clear, you invoice your clients from Belgium, you have Belgian accountants here who can do your accounting here, file VAT and income tax returns, etc… The company income tax rate in Belgium is 25% (but 20% on the first €100,000), and when the company pays you a dividend, that dividend would be liable to income tax at a flat rate of 30% (the company would have to withhold the tax when paying the dividend at a flat rate of 30% – you do not have to declare that dividend in your personal income tax return any more. The company can, however, reserve the profit of the year in a liquidation reserve – with a view to winding up the company – and pay a lower tax rate (10%), but that also allows you to reduce the 30% to about 14-15% (after 4-5 years).

      The company can pay you a salary and you would pay social security contributions as well as income tax on that salary.

      The situation with a UK company is more difficult:

      • the UK has a VAT threshold of £85,000 which means that you only charge VAT when you invoice more than £85,000 per year, but your EU clients will want a VAT number to reverse charge the VAT;
      • a UK company must invoice Belgian clients with 20% VAT except if the client has a VAT number;
      • in Belgium, the VAT is 21%, but your professional clients can recover the VAT;
      • after the Brexit transition period, the UK will be outside the EU and then you do not charge VAT anymore outside the UK but we do not know how this would work for the UK. The UK may impose that you charge UK VAT anyway.
      • we also do not know what trade agreement the UK will have with the EU : the government want a free trade agreement which is good for sales but not for services. We do not know how this may affect you.

      I hope this answers some of your questions and that you will not hesitate to contact me should you have any further questions.

      Best regards,

      Marc Quaghebeur

  4. Hi Marc,

    thank you for the insightful article. May I run another hypothetical case by you.
    in a dutch BV we are about to win a contract with a company in Brussels. The actual work will be performed by a Spanish national and citizen, whom I will hire via the company he works for in Spain. He regularly returns home (avg once a month) as this is his “home”. He will stay in a leased apt in Brussels and he will be working for more than 183 in Belgium. Where is this person tax liable? In Belgium, as that is where he will perform his job, in Netherlands as the BV hires him for the work or in Spain as a spanish national?
    And how can he prevent double (triple?) taxation?

    Many thanks

    1. Post
      Author

      Dear Frank,

      You are welcome.

      This raises a number of questions

      Is this his own company ? if so, he as the company director would be a permanent establishment of the company in Belgium and the company would be liable to corporate income tax in Belgium. (art 5 § 5 double tax treaty between Belgium and Spain :

      Indien een persoon niet zijnde een onafhankelijke vertegenwoordiger op wie paragraaf 6 van toepassing is voor een onderneming werkzaam is en in een overeenkomst­sluitende Staat een machtiging bezit om namens de onderneming overeenkomsten af te sluiten en dit recht aldaar gewoonlijk uitoefent, wordt die onderneming, niettegenstaande de bepalingen van de paragrafen 1 en 2, geacht een vaste inrichting in die Staat te hebben voor alle werkzaamheden welke deze persoon voor de onderneming verricht, tenzij de werkzaamheden van die persoon beperkt blijven tot de in paragraaf 4 vermelde werkzaamheden die, indien zij met behulp van een vaste bedrijfsinrichting zouden worden verricht, die vaste bedrijfsinrichting niet tot een vaste inrichting zouden stempelen ingevolge de bepalingen van die paragraaf.

      If he is an employee who cannot sign contracts on behalf of the Spanish company, then we need to look at which of the two countries, his state of residence (Spain) or the state where he works (Belgium) can tax.

      Art 15 § 1 says : if he works in Belgium, only Belgium can tax for the days worked in Belgium

      Onder voorbehoud van de bepalingen van de artikelen 16, 18, 19 en 20 zijn lonen, salarissen en andere soortgelijke beloningen verkregen door een inwoner van een overeenkomstsluitende Staat ter zake van een dienstbetrekking slechts in die Staat belastbaar, tenzij de dienstbetrekking in de andere overeenkomstsluitende Staat wordt uitgeoefend. Indien de dienstbetrekking aldaar wordt uitgeoefend, mogen de ter zake daarvan verkregen beloningen in die andere Staat worden belast.

      Art 15 § 2 says Spain can tax if the following three conditions are met

      Niettegenstaande de bepalingen van paragraaf 1 zijn beloningen verkregen door een inwoner van een overeenkomstsluitende Staat ter zake van een in de andere overeenkomstsluitende Staat uitgeoefende dienstbetrekking slechts in de eerstbedoelde Staat belastbaar, indien:

      a) de verkrijger in de andere Staat verblijft gedurende een tijdvak of tijdvakken die in enig tijdperk van twaalf maanden een totaal van 183 dagen niet te boven gaan, en
      b) de beloningen worden betaald door of namens een werkgever die geen inwoner van de andere Staat is, en
      c) de beloningen niet ten laste komen van een vaste inrichting of een vaste basis, die de werkgever in de andere Staat heeft.

      This means that he is taxable in Spain if

      a. he works less than 183 days in Belgium ; AND
      b. he is paid by a non Belgian employer ; AND
      c. his pay is not a tax deductible cost of a permanent establishment the employer has in Belgium.

      If you turn that upside down this means that he is liable to tax in Belgium if:

      a. he works more than 183 days in Belgium over any period of 183 days ;
      b. he is paid by a Belgian employer ; OR
      c. his pay is a tax deductible cost of a permanent establishment the employer has in Belgium.

      If you say he will work more than 183 days in Belgium, he will pay tax in Belgium as a non-resident. The Spanish company will have to pay withholding tax in Belgium (social security will be due in Spain).

       Double taxation is prevented because in Spain he will declare his total remuneration and he can deduct the Belgian tax from the Spanish tax (article 23 & a double tax treaty between Belgium and Spain)

      The Netherlands cannot tax his income.

      I trust that this is self-explanatory and that you will not hesitate to contact me should you have any further questions.  

      Best regards, 

      Marc Quaghebeur

  5. Hi Marc,
    I am a Belgian/UK citizen and Belgian tax resident . If I sign a contract with a UK employment agency to work less than 183 days for example in France for a French end client should I pay tax in Belgium or France as I am paid by the UK agency and return home each weekend . I am registered as an independent in Belgium

    1. Post
      Author

      Hello Andrew,

       You are a Belgian resident working in France as a self-employed.

      The UK is irrelevant here. Having UK citizenship or having a UK “employment” agency does not mean that tax is due in the UK – you will invoice the UK employment agency I assume which in turn will invoice the French client.

      The 183 days’ rule is only for employees.

      You will have to declare your income in Belgium.

      However, your income is taxable in France if you have a permanent establishment there (see art 5.1 of the double tax treaty between Belgium and France.

      What constitutes a permanent establishment is to be found under article 4.3.

      Generally speaking, it is the office that you set up in France to provide services to French clients, which you will not do. However, it can also be the office your French end client puts at your disposal. And even if you are hotdesking, the tax authorities can take the point of view that that is a permanent establishment.

      Keep in mind that if you work through a permanent establishment, you will pay tax in France on a half year’s income (at the lower tax rates) and in Belgium on a half year’s income at the tax rates on a full year’s income. The effect may be to average down your taxes in Belgium.

      I trust that this is self-explanatory and that you will not hesitate to contact me should you have any further questions.  

      Best regards,

      Marc Quaghebeur

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