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In the model OECD tax convention, which is a base for many European double taxation agreements, article 15. 2a) states a condition under which a person living in country A but working for a company based in country B doesn't have to pay taxes in country A

the recipient is present in the other State (A) for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

  1. How are the days counted? If I arrive on 24. February and leave on 25th, is this one or two days?
  2. Should "present" be interpreted literally, eg. if I go for a short holidays away from country A, am I not "present" for purposes of this article even though I may receive salary / be registered / have a house available, etc. during this time?
  3. If so, how to prove this practically, in particular in case of Schengen countries where countries don't keep exact records on when people move around? In a case of disagreement, whose responsibility is to prove the state of things (eg. I am registered in country A for 200 days, but claim I was away in country C for 20 days, do I have to prove so or does the tax authority need to prove it's not true)?
  • Note that this question is not a duplicate of this one. The other one is about establishing the tax residency (which is done with article 4), in the situation above we assume a person is a tax resident of the country B. – sygi Aug 15 at 10:06
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The model tax treaty comes with detailed commentary. The Commentary on Article 15 (https://doi.org/10.1787/mtc_cond-2017-18-en) clears up these issues: for the 183 day exemption, all days with a physical presence in that country count, including days of arrival and departure. However, that country must be the destination of the trip, merely transiting through the country to another destination does not count as presence. Similarly, there can be an exception if sickness prevents you from leaving the country. This 183 day exemption also only considers presence without residence, which matters if you work and live in one country, but then move to another country.

So the decision tree for Art 15 para 1–2 is:

  • person is resident in a state
    → income from employment by default only taxable in state of residency
    • except if employment is exercised in other state
      → that income may be taxed in that other state
      • except if physical presence in other state ≤ 183 days in any 12-month period
        AND employer not resident in other state
        → only taxable in state of residency

So to summarize, the goal of Art 15(2) is to exempt short-term exercise of employment in another country from taxation in that other country if neither the employer nor employee are linked to that other country.

On the matter of burden of proof, this will depend on the local tax laws. In general, the taxpayer has burden of proof for correctly reporting their tax information. The commentary remarks: “The presence could also be relatively easily be documented by the taxpayer when evidence is required by the tax authorities.” Such proof could be collected by hotel bills, train tickets, or a driver's logbook.

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  • thank you for the answer and the link. To clarify your answer, the second dot should state "that income taxable also in that other state" (as art. 15 says "may be taxed in that other State"). Could you give a comment on where "Thus, Art 15(2) exempts short-term exercise of employment in another country where neither the employer nor employee are linked to that other country." comes from? do you mean short-term holidays elsewhere doesn't count? – sygi Aug 15 at 13:20
  • @sygi Corrected. I added a summary of the intent because understanding the intent simplifies understanding. The summary is based on point 6.2 of the Commentary which relates to subparagraphs b) and c) which must be fulfilled in addition to a). Per para 1) the default is that income from employment is taxed at the location of exercise of employment, so the 183 day rule must be understood as an exception, not as a rule for gaining tax residence (which is sorted out in Art 4). I am not sure how holidays matter in this context? They would contribute to "presence". – amon Aug 15 at 13:42
  • Makes sense, thank you for clarification. I wasn't clear whether the sentence I quoted was meant to mean "for the purpose of art 15(2), short-term presence in yet another country (from A and B) doesn't count)" or "as a summary, art. 15(2) is meant to exempt from taxation in B, as both employer and employee are not linked to it". Now I understand you meant the second one. – sygi Aug 16 at 10:36
  • @sygi Ah ok, you're right, I've tried to edit the answer to be less ambiguous. – amon Aug 16 at 12:39
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How are the days counted? If I arrive on 24. February and leave on 25th, is this one or two days

Each country will have its own definition of “day” and how to count them. In most jurisdictions, you don’t count the “starting” day, so what you describe would be 1 day.

Should "present" be interpreted literally, eg. if I go for a short holidays away from country A, am I not "present" for purposes of this article even though I may receive salary / be registered / have a house available, etc. during this time?

Yes. You are present in the country when you are physically there.

If so, how to prove this practically, in particular in case of Schengen countries where countries don't keep exact records on when people move around? In a case of disagreement, whose responsibility is to prove the state of things (eg. I am registered in country A for 200 days, but claim I was away in country C for 20 days, do I have to prove so or does the tax authority need to prove it's not true)?

Specifics matter but in most tax matters, the onus is on the taxpayer if they want to claim an exemption or reduction from tax.

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