How can tax residency be proven within the EU?

Question

I am aware of tax residency 183 days rule which in theory obliges you to pay taxes to a country where you reside 183 days or more.

The thing that I do not get is how can this be applied to EU Schengen countries? Considering there is no border in a schengen zone, how could someone have a valid proof that you have to pay taxes to a specific country?

Taking that in a consideration, isn't it the same if you spend 365 days in Germany, and if you spend 100 days in France, 100 days in Germany, and the rest of the days in Spain?

So wouldn't that result that you can live in one of those countries and pay taxes to another country (One of EU Schengen countries) without any problems? There is really no proof of your residence (You could be travelling all year long within those countries).

Answer 1

As far as I recall, each European country has its own definition of tax residency. For instance, in Germany, you are considered subject to full income taxation if you:

• have at least one home in Germany, even if it's just your second home
• have your habitual abode in Germany
• are a German out-of-country official who is being paid by a public treasury or a family member thereof or
• you have opted for unrestricted income taxation (this may make sense in certain cases)

People who are not subject to full income taxation may be subject to limited income taxation; People who moved to a low-tax jurisdiction or a tax haven may also be subject to extended limited income taxation.

I don't see any mention of the number 183 here; § 9 AO (which defines the concept of habitual abode) mentions 6 months which is close to 183 days but it's not the same; On top of that, if you look at § 9 as a whole, it doesn't look like the definition of habitual abode is the same as the 183-day rule you're citing.

I don't know where you found that info about the 183-day rule; At least here in Germany, tax residency tends to be much broader than that. If you live in 3 countries, be prepared to familiarize yourself with the various double taxation treaties.

If you compare the situation in Germany to other countries, you will find that each country has a slightly different definition of tax residency.

Answer 2

How can tax residency be proven within the EU?

There is no unique way of proving residence for tax purposes. The matter boils down to who is able to prove where the person's economic activity takes place.

Citizens of the EU as well as non-residents staying for longer than 90 days in the EU have to obtain a census certificate which reflects their "habitual residence", and thus the EU country, province, and tax administration(s). That certificate may serve as primary proof of residence for tax purposes, although it might be outweighed by evidence that the certificate does not reflect the person's tax jurisdiction.

wouldn't that result that you can live in one of those countries and pay taxes to another country (One of EU Schengen countries) without any problems?

Yes, but there can certainly be problems. The tax ministry of a member of the EU will try hard to scrutinize the certificate accuracy if it suspects tax evasion.

One renown case was that of singer Montserrat Caballé, who was convicted for tax fraud by purporting to live in Andorra notwithstanding that she was living in Spain at that time.

The fact that Andorra is neither a member of the EU nor of the Schengen area is irrelevant, since Andorra and Spain have signed a treaty of cooperation and information exchange on tax matters. That is in fact one of the conditions Andorra accepted so as to be removed from EU's/Spain's list of tax havens.

Because of a ministry's interest and ability to disprove the taxpayer's allegation of habitual residence, taxpayers need to devise more thoughtful approaches to fiscal planning that do not violate the law.