Horn
If you split your time between two countries for work and earn income in both, determining your tax residency can become quite complex. Tax residency typically depends on several factors, including how many days you spend in each country. Many countries use the 183-day rule, meaning if you spend more than half the year in one country, you're considered a tax resident there. However, this isn’t the only factor. Authorities also consider where your "center of vital interests" lies—this refers to where your family, property, and economic or social ties are strongest. Even if you spend less than 183 days in a country, if your personal or economic ties are stronger there, you could be considered a resident for tax purposes.
Earning income in multiple countries raises the risk of being taxed twice, but most countries have Double Taxation Agreements (DTAs) to prevent this. Switzerland, for example, has DTAs with many countries to clarify which country has the right to tax your income. These agreements typically ensure that you don’t end up paying tax on the same income in both countries. Usually, the DTA will outline that your income is taxed in one country, and the other country provides a foreign tax credit to reduce your tax bill by the amount already paid abroad.
In some cases, countries allow for what is called split-year treatment. This means if you move between countries during the year, each country will only tax you for the part of the year when you were a resident there. This could be beneficial if you spend significant time in both places.
Alternatively, you can claim foreign tax credits when no DTA applies, meaning if you pay tax in one country, you can deduct that from what you owe in the other country to avoid being taxed twice on the same income. Certain types of income, such as foreign pensions or investment earnings, may also have special rules depending on the DTA, so it’s important to review how these specific income types are taxed.
It’s important to keep detailed records of the time you spend in each country, as well as any income earned and taxes paid. Consulting a tax professional who specializes in cross-border taxation is advisable to ensure you’re compliant with both countries’ tax laws while minimizing any potential liabilities.
