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The contrasts between citizenship, residency and tax residency aren’t always obvious. However, they can make a profound difference to your living costs and security as an expat.

Citizenship, for example, is normally a lifelong entitlement and means you carry a passport verifying your status as a citizen of the country in question. It can only be revoked in unusual circumstances. Residency, on the other hand, can be short or long-term and subject to meeting ongoing eligibility criteria.

Let’s clarify each status and the associated rights they afford to determine why understanding your position as a resident, tax resident or citizen is so important.

Defining Citizenship Rights

As a UK national, you’ll normally have automatic British citizenship, granted at birth and recorded on your birth certificate. In essence, you are assumed to have an automatic allegiance to your country of birth, which comes with several rights (and an obligation or two).

British citizens can:

  • Leave and re-enter the country whenever they wish, without needing a permit.
  • Vote and hold positions in public office.
  • Claim rights to things like social security benefits and healthcare.

We mentioned obligations, and as a citizen, you can be called on to serve on a jury as part of your civil duty. Aside from the need to comply with laws and national regulations, there aren’t any other fundamental requirements.

Citizenship by Naturalisation

You can hold a passport for a country other than from the one you were born in by applying for citizenship through naturalisation or by using an alternative visa route that offers citizenship through investment. Many high-demand citizenship by investment schemes have closed in recent years, making this scenario much less common.

A foreign national might be granted citizenship of another country because they have:

  • Lived in the country for a minimum number of years.
  • Been a permanent resident for a requisite period.
  • Family members who hold citizenship.
  • Been granted citizenship through an investment programme.

Many countries require citizenship applicants to take a language test or pass local history or customs examinations. You can also be asked to attend an oath-swearing ceremony.

Once you have become a citizen, it’s improbable that status could ever be taken away – unless you renounce your citizenship or commit a serious crime that gives the government a reason to strip your rights.

The Primary Differences Between Residency and Citizenship for Expatriates

The most significant contrast between residency and citizenship is that residents don’t have a second passport, and they are limited by the terms of their permit. For example, a resident cannot vote or hold public office positions, but a citizen can.

However, an expat living in another country as a permanent resident has many of the same freedoms as citizens and can work, live, start a business, and use all public services. Permanent residency is often available after five to seven years of living in the country. You’re still a resident, instead of a citizen, but you won’t need to renew your permit.

If you wanted full citizenship rights, including a domestic passport, you’d need to apply for citizenship after a minimum number of years.

It’s worth pointing out that not all countries recognise dual citizenship. Some governments will only consider granting citizenship if you commit to renouncing your original citizenship and surrendering your passport from your country of origin – this process can be complex.

The Difference Between Being a Resident and a Tax Resident

To complicate matters, you can be a tax resident in two countries or hold a residence permit without being considered a tax resident. Tax residency is a technical definition that establishes which country you must file returns and pay taxes in.

As a rule of thumb, you become a tax resident if:

  • You live in a country for 183 days (six months) or more annually.
  • Your primary residence or business is in the country.
  • Your income derives from work of trade within the same country.

Clarity around tax residency is vital because an expat can be categorised as a tax resident in two countries simultaneously. Say you have a primary home in two places and spend an equal six months in each; you could potentially fit the criteria for tax residency in both.

In that situation, your tax position will depend on factors such as:

  • Double tax treaties – Many countries have bilateral agreements not to tax the same individual twice on the same income or activities.
  • Tiebreaker rules – These look closely at your activities and income structure to decide which country you are a tax resident of if you meet the criteria for both.

Understanding your Tax Residency Status is Crucial for Expat Financial Planning.

If you intend to live in a country most of the time and wish to take advantage of beneficial tax regimes, it’s worth seeking guidance to ensure you fit soundly within the rules. You may also have to continue filing returns with HMRC in the UK and can be liable for British taxes on some income, depending on the nature of the revenue and where it originates.

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Residency in Multiple Countries

Just as expats can be dual tax residents, they can also be dual residents and dual citizens – although not all at once.

  • Dual citizenship means you hold two passports. Most countries recognise dual citizenship, although some don’t permit foreign nationals to enter with two passports.
  • Dual tax residency means you meet the rules for tax residency in two countries and, therefore, need to apply double tax treaty rules to establish the right place to declare and pay your taxes.
  • Dual residency means you hold two simultaneous resident permits for two different countries.

Understanding tax treaties can become highly complex, so you should seek professional tax planning advice to ensure your affairs are properly managed.

The Rules on EU Travel as a UK Citizen

One of the common questions the Chase Buchanan team deals with is confusion over travel permits, tourist visas, residency rights and long-term citizenship eligibility for EU countries.

The good news is that if you were lawfully resident in a European country before Brexit, your rights will likely have been protected by the Withdrawal Agreement and should have been verified some time ago.

However, if you have doubts about your position or were previously an EU resident and have since relocated to the UK, you may need to apply for a new visa since the rules have been widely reformed.

The Schengen area continues to offer UK citizens short-term travel access with the same rules across the bloc. You can travel to an EU member country for up to 90 days of any 180 without a visa or tourist permit.

Changes are due to be introduced in 2025, where British nationals will not require a visa but will have to comply with a visa waiver process through a new system called the European Travel Information and Authorisation System (ETIAS).

If you intend to move to the EU or stay for longer than 90 days, you will need a visa, work permit, or other permission to travel to and remain in your selected destination.

Securing Citizenship Rights as an Expat

The typical system to progress from residency through to citizenship works as follows, albeit with variations in the rules between countries:

  • An expat applies for a residency permit to live in another country for a fixed number of years.
  • That permit is often renewable and can be transferred to a permanent residency permit after a set period.
  • Normally, after five years or more, a permanent resident can apply for full citizenship.

Long-term citizenship rights are the most secure, but if you aren’t sure whether you intend to live permanently in another country, permanent residency affords most of the rights and entitlements available.

If you are keen to apply for citizenship status, a final option is to look at citizenship by immigration programmes. You can obtain a second passport by donating a value to the government or investing in real estate or business over a threshold – depending on where you wish to live, and recognising that these schemes are limited, currently available in Malta, Turkey, Vanuatu and some Caribbean countries.

Understanding your position as a tax resident, resident, or citizen can be crucial when considering factors such as inheritance planning. If you’re in any doubt, it’s essential to review your current visa or permit and look at the available options.

For more details about any information discussed here, please contact the Chase Buchanan Wealth Management team for personalised guidance.

*  Updated June 2024