Consequences of incorrect recording of tax residence days


Tax residence regulations can be complex, particularly for people who travel frequently or live in many countries. It is critical to accurately record your tax residence days, as errors can have far-reaching negative repercussions. Let’s look at the potential consequences of having your tax residence days wrong.

Double taxation

One of the most serious consequences of miscounting tax residence days is being designated a tax resident in numerous countries in the same year. This can result in double taxation on the same revenue sources across multiple jurisdictions. While double tax treaties exist to prevent this, they generally require an accurate calculation of tax residency based on the number of days spent present.

Penalties and interest charges

If tax residence is not legally established, people may risk penalties, interest charges, and even criminal prosecution for failing to submit tax returns and pay taxes owed to a country where they are considered a tax resident. In some areas, the consequences are harsh.

Disallowed deductions and credits

Taxpayers who are not deemed tax residents may be ineligible for certain deductions, credits, and other tax benefits available to residents.

Headaches from compliance

Keeping track of days in several jurisdictions and comprehending the complexities of each country’s tax residence regulations is quite difficult. Improper record keeping can lead to a compliance nightmare if residence status needs to be recreated or audited years later.

How to avoid trouble

  • Maintain detailed records. Keep detailed details of your travel dates and time in each country. Boarding cards, invoices, and itineraries might be useful documentation.
  • Understand tax treaties. Learn about the tax treaties between your countries of residency. This will assist you in determining the residency test and the particular number of days that constitute residency.
  • Seek professional advice. If your residence situation is complex, you should speak with a tax professional who specializes in foreign taxation. They can help you navigate the complexities of tax residence requirements and verify you’re filing properly.

Don’t wait until tax season to address any difficulties with your tax residency days. By being proactive and keeping precise documents, you can avoid a tax problem and guarantee that your tax responsibilities are met in the correct country.

Track your tax residency days with Tax Resident app.

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