One of the most complex — and most consequential — situations in international tax law arises when two countries simultaneously consider an individual to be their tax resident. Known as dual residency, this conflict can result in double taxation on the same income, penalties for non-compliance in one or both jurisdictions, and a protracted and expensive resolution process. For internationally mobile entrepreneurs, consultants, and investors, understanding how dual residency arises, how it is resolved, and how it can be prevented is essential to the integrity of their international arrangements.

How dual residency arises

Dual residency occurs when the domestic tax laws of two countries each classify the same individual as a tax resident. This can happen because different countries use different criteria — and the criteria are not mutually exclusive. France, as we have discussed in previous analyses, uses the four criteria of Article 4B: foyer, professional activity, centre of economic interests, and government employment.

Meeting any one criterion is sufficient for French tax residency. A French national who has relocated to the UAE but maintains a property in France where their spouse resides may be considered a French tax resident under the foyer criterion — while simultaneously being a UAE tax resident under UAE domestic law. The UK uses the Statutory Residence Test, which evaluates physical presence and ties to the UK.

An individual who spends fewer than 183 days in the UK but maintains a family home, a spouse, minor children, and substantive work connections may still be classified as UK resident. If the same individual has established residency in another country under that country's domestic law, dual residency results. The situation is particularly acute for nationals of countries with citizenship-based taxation.

The United States and Eritrea are the only two countries in the world that tax their citizens on worldwide income regardless of where they reside. A US citizen who establishes genuine tax residency in another country remains a US taxpayer — creating a permanent dual residency situation that can only be resolved through renunciation of citizenship.

Treaty tie-breaker rules

Most bilateral tax treaties contain tie-breaker provisions — typically found in Article 4 of treaties based on the OECD Model Convention — that resolve dual residency by assigning the individual to one country for treaty purposes. The tie- breaker criteria are applied in sequence: permanent home, centre of vital interests, habitual abode, nationality, and, as a last resort, mutual agreement between the competent authorities.

The permanent home criterion looks at where the individual has a dwelling available on a permanent basis. If the individual has a permanent home in only one country, they are resident in that country for treaty purposes. If they have permanent homes in both countries, the analysis moves to the centre of vital interests — which considers personal and economic relationships, including family, social connections, occupations, political and cultural activities, and place of business.

These criteria work reasonably well for straightforward cases. They work less well for internationally mobile individuals whose personal and economic lives are genuinely split between two countries — which is precisely the situation that many of our clients face.

The France-UAE special case

The France-UAE tax convention deserves special attention because it departs significantly from the standard OECD model. As we have discussed in previous publications, Article 19.2 of the France-UAE convention contains an anti-abuse provision that allows France to tax its residents on worldwide income if they meet any of the Article 4B criteria — even if they are also tax resident in the UAE under UAE domestic law and even if the treaty's tie-breaker provisions would otherwise assign residency to the UAE.

The practical effect is that the treaty provides limited protection for French nationals in the UAE. Unlike treaties with most other countries — where the tie- breaker provisions in Article 4 definitively resolve dual residency — the France- UAE convention allows France to reach through the treaty and reassert its taxing rights. This makes the conventional protection weaker, and it makes the quality of the evidence supporting UAE residency more important, not less.

For clients subject to the France-UAE convention, the only reliable defence is substance. A certified employment contract, a traceable salary, institutional integration, and a comprehensive evidentiary package demonstrating genuine professional and personal establishment in the UAE are not merely helpful — they are essential. Without them, the risk of requalification is real and the financial consequences are severe.

Prevention through structuring

The best approach to dual residency is prevention. This requires a deliberate, documented, and comprehensive transition — one that addresses each criterion that the departing country may invoke. The professional criterion is typically the most controllable. An individual who establishes a genuine employment relationship in their new country of residence — with a government-certified contract, a regulated salary, and institutional recognition — has strong evidence that their principal professional activity is in the new jurisdiction.

This directly addresses the professional activity criterion in France and the substantive work tie in the UK. The personal criteria — family, home, social connections — are more complex but equally important. An individual whose spouse and children have also relocated, who has disposed of or rented out their home in the departing country, and who has established genuine social and community ties in the new country is in a much stronger position than one who has merely changed their postal address.

The economic criteria — investments, bank accounts, business participations, income sources — must also be managed. An individual whose principal investments, principal bank accounts, and principal income sources are in the new country has addressed the centre of economic interests criterion. One who retains the majority of their financial life in the departing country has not.

Conclusion

At Fidelys Partners, we structure international relocations with the specific objective of preventing dual residency conflicts. Every element of the transition — professional, personal, financial, administrative — is planned and documented to create the strongest possible evidentiary package in the new jurisdiction while cleanly addressing the departure criteria of the old one. Dual residency is not inevitable. With proper planning, it is preventable.

— Fidelys Partners —