Tax Residency

Dr. Priscilla Mifsud Parker co-authored with Dr. Anna Sultana | 22 Mar 2023

International Tax Advice

What is a tax residency status?

Tax Residency refers to the individual's tax connection in a particular country or tax jurisdiction, and forms the basis on which a person's income is taxed. Tax residency determines in which country one would be liable to pay tax and hence brings with it significant implications for both individuals and companies. Tax residency determines which taxes must be paid, in which jurisdiction as well as which deductions and exemptions apply. 

The rules to determine tax residency vary from one country to another and despite this, it may still be the case that an individual satisfies the criteria of multiple jurisdictions. This highlights the importance of understanding the regulations of the jurisdictions in which one is present.

Tax Residency Criteria around the World

The domestic tax laws and criteria that determine tax residency vary from country to country.  However, the primary governing principle adopted by most nations is the 183 days rule for tax residency. This rule incorporates a threshold of spending 183 days in a particular country, in a given year.

This rule has been adopted in Malta. Malta tax residency is determined either by the amount of time one spends, or by an individual’s intention to reside in Malta ordinarily. As Malta’s legal system is based on common law, the UK tax system is very similar.

The UK also utilize the 183 days rule. For individuals who do not meet such criteria, they have three other tests which would help determine whether one is tax resident of the UK or not. These are the sufficient ties test, the overseas test and also the automatic UK test. 

Cyprus and Spain also apply the 183 days rule among other criteria. The physical presence test applied by South Africa has the threshold set at 91 days during the year of assessment. 

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Dr Priscilla Mifsud Parker

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