Nationality and double taxation: common misconceptions

In almost every State, income tax is based on tax residency, not nationality. A French national resident in Portugal is taxed in Portugal; a Portuguese national resident in France is taxed in France.

The United States is the notable exception: it taxes its citizens on their worldwide income wherever they live, which makes its nationality significant for tax purposes.

Acquiring a second nationality — Caribbean, Turkish, Vanuatuan — therefore changes nothing in the tax position of someone who does not move their residence.

In France, tax domicile is assessed under Article 4 B of the French General Tax Code (code général des impôts), which sets out four alternative criteria: the household, the place of principal stay, professional activity and the centre of economic interests.

Just one is enough. Nationality does not feature among them, except as a last-resort criterion in tax treaties, when all the others have failed to break the tie.

A variant of this misconception deserves correcting: renouncing French nationality does not change tax domicile either. Domicile follows residence, and a former French national who has remained in France stays taxable there exactly as before.

The reverse is also true: keeping French nationality while living abroad on a long-term basis does not give rise to any French taxation, as long as none of the four criteria of Article 4 B is met.

The very purpose of tax treaties is to avoid it. They allocate the right to tax to one of the two States according to the type of income, and provide a mechanism for eliminating double taxation when both retain a right.

They must still be invocable, which requires a certificate of tax residency issued by the host State. A residence permit, even a ten-year one, is no substitute.

This is the point that Gulf expatriates most often discover too late. The Emirates require presence of from 183 days¹ over twelve months, and Qatar presence of more than 183 days² — but the certificate must be applied for separately.

Some destinations also have no tax treaty with France: this is the case for Vanuatu, the Bahamas, the Cayman Islands and Paraguay. No treaty mechanism is then available to settle a dual residence.

The most widespread reasoning is to count one's days and conclude that by spending less than half the year in France, one is no longer domiciled there. This reasoning is wrong.

The place of principal stay is only the second criterion of Article 4 B, and it is examined only if the household cannot be determined. A spouse and children who remain in France are enough to establish the household.

Foreign thresholds also vary considerably: more than 183 days³ in Portugal, 180 days⁴ in Thailand, 182 days⁵ in Malaysia, 90 days⁶ in Switzerland without gainful activity.

Cyprus even allows tax residency with from 60 days⁷ of presence, subject to four cumulative conditions, including having no tax residency elsewhere.

Crossing one of these thresholds creates a dual residence; it does not remove French tax domicile, which only the treaty can override.

1. Nationality does not determine tax, except for US citizens.
2. Tax treaties prevent double taxation, but require a certificate of tax residency.
3. Counting days is only one criterion out of four, and not the first.
4. Several destinations have no tax treaty with France.
5. A second passport is a mobility tool, never a tax arrangement.

A fourth misconception deserves mention: the idea that the tax authorities would not find out. Automatic exchange of information now covers almost all the jurisdictions discussed on this site, and it is gradually being extended to crypto-asset service providers. The practical discretion some destinations used to enjoy has disappeared, and this is probably the most important change of the last decade.