How to Establish Tax Residency as a Remote Worker

Tax residency determines which country has the primary right to tax your worldwide income. Unlike citizenship or visa status, tax residency is based on factual criteria like physical presence, permanent home, and center of vital interests. Establishing tax residency in a low-tax country while legally severing ties with your high-tax home country is the foundation of international tax planning. However, this must be done correctly ??half-measures can leave you liable for taxes in both countries.

1. Research target country's residency rules: Every country has different criteria
2. Prepare exit from current country: Cancel registrations, sell/rent property, close local business
3. Document your departure: Keep flight records, moving receipts, utility terminations
4. Establish presence in new country: Rent/buy housing, register locally, get utilities in your name
5. Register with tax authorities: Get local tax ID, file entry paperwork
6. File departure tax return in old country: Final return declaring departure date
7. Update all financial accounts: Bank addresses, brokerage accounts, insurance
8. Build substance: Open bank accounts, join local organizations, register with consulate

Several countries impose an exit tax when you leave, treating unrealized capital gains as if sold on departure date. Countries with exit taxes include: Germany (for shareholdings >1% held within last 5 years), Canada (deemed disposition of all assets), Australia (for certain assets), Norway, Netherlands, and France. The US has a comprehensive exit tax for citizens renouncing citizenship. Understanding exit tax implications is crucial before making the move, as they can result in significant unexpected tax bills.

Tax authorities may challenge your claimed residency. Keep thorough documentation: rental agreement/property deed, utility bills in your name, bank statements showing local activity, local phone contract, health insurance enrollment, gym/club memberships, flight records showing presence, local employment/business registration, children's school enrollment (if applicable), and driver's license. The more ties you can demonstrate to your new country ??and fewer to your old one ??the stronger your position.

1. Dual residency: Not cleanly breaking ties with home country, resulting in taxes in both
2. 183-day miscalculation: Some countries count partial days, arrival/departure days differently
3. Maintaining a 'home' in the old country: Even a furnished apartment can create residency
4. Family ties: Spouse and children remaining can establish tax residency
5. Not notifying home country: Failure to file departure can keep you on their radar
6. Social media evidence: Tax authorities have used social media posts to dispute residency claims
7. Banking and mail: Keeping primary bank accounts and receiving mail in old country