Confused about the 183 days rule?

2 September 2016

If you are working and living in more than one country you probably have heard about the 183 days rule. This ruling is used in the standard OESO double taxation treaty and thus is applicable in the tax treaties of most countries. The rule is used to define in what country a salary should be taxed. In most cases this is in the ‘resident’ country and not in the ‘work’ country if the 183 day rule regulation is complied with.

In fact the 183 day factor is only one part of the rule. The two other factors are whether the employee is paid by or on behalf of an employer that is not established in the work country and the employee does not work in a permanent establishment of the employer in the state where the employee works.

The application of this ruling often turns out to be quite complicated and the ruling is often misinterpreted. For example people think their salary is not taxable in the resident country if they are not more than 183 days in the resident country. In actual fact, if you spend more than 183 days in your work country you will be taxed there but your income is also still taxable in your resident country. Your country of residence will then grant a double taxation deduction based on local rules. This is often not an entire exemption.

It really depends on your specific circumstances what is financially most beneficial for you. For sure it is wise to seek tax advice in an as early as possible stage. This may prevent you from paying too much tax.