Digital Nomad Tax

Tax Terminology: Citizenship vs Residence vs Tax Residence

The concepts of citizenship vs residence vs tax residence are a lot of time intermingled and therefore, lead to a lot of confusion and misunderstanding. For that reason, I want to clarify this and help any misunderstandings out of the world.


Citizenship refers to the country you are a citizen of. Or, in other words, from which country you hold a passport and the nationality.

Citizenship is important as it will determine where you can easily travel or even settle yourself. For example, if you hold citizenship of a country of the Schengen Area you can freely move around in all the countries of the Schengen Area without the need for a visa. Moreover, you can even settle in any of these countries without the need for a visa. Yet, you will need to register yourself with the local authorities if you plan on staying longer than three months but that is basically just a formality.

citizenship vs residence vs tax residence


Your residence is the place where your are living, where you have your residency. For a lot of people, their country of residency will be the same as the country of which they are a citizen. Let’s say you are German and at the same time also live in Germany then you will have your residence there. Residency mainly refers to the place where you have your official address.

However, your residency should not necessarily align with your citizenship. If you are, for example, German you can easily go and live in Bulgaria and have your residency there. You will still be a German citizen but a Bulgarian resident.

In principle, you will only have one main residency, the place where you have your official address. On the contrary, you could have different nationalities at the same time. Yet, some countries don’t allow you to have more than one nationality.

Nevertheless, this doesn’t mean that you can’t have multiple residence permits. A country can grant you a residence permit which allow you to live in the country. However, some residence permits come with the condition that you need to spend a certain amount of time within the country.

Tax residence

Another mistake is often made by mixing residence with tax residence. Your tax residence is the place where you pay your taxes. This is not necessarily the place where you have your residence. Nevertheless, in practice they will most of the time align.

An example of a situation when your residence and tax residence don’t align would be in the following case. You have your residence in the country that only deems you a tax resident if you spend 183 days there and you don’t actually spend that much time in the country. As a consequence, you will have your residence in that place but not your tax residence.

On the contrary, you could also be deemed to be a tax resident by the local tax authorities in a country where you don’t have your residence. For example, because you spend a lot of time in that country while your official address is still in another country.

This could potentially lead to you being a tax resident in different countries which could lead to double taxation. For this reason, countries sign double tax treaties in order to resolve which country can tax which income.  Yet, not all countries have double tax treaties with each other so be careful with this.

Conclusion: citizenship vs residence vs tax residence

Thus, it is important to distinguish citizenship vs residence vs tax residence. Although they can be the same for some people, this isn’t necessarily the case if you are living an international life as a digital nomad.

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