09. March 2026 To ensure that an expatriate (“expat”) is taxed correctly, the first step is to determine in which country he or she is considered tax resident. But what does “expat” actually mean – and what is meant by “tax residence”?
Who is considered an expat?
An expat is generally understood to be a person who works across borders – for example, employees who work abroad for a fixed or indefinite period of time.
Tax residence – the basics
A person is considered resident in the country in which he or she either
- has a place of residence, or
- has his or her habitual abode.
Place of residence:
Under the Austrian Federal Fiscal Code (Bundesabgabenordnung – BAO), a place of residence is a location that is available at any time and is equipped in such a way that it is suitable for permanent living, combined with the intention to retain it.
Does a derived place of residence with one’s parents also qualify as a place of residence under the BAO?
- Minor taxpayers or those still in education may have a derived place of residence with their parents.
- However, the Federal Fiscal Court (Bundesfinanzgericht – BFG) recently held that sporadic visits by adult children to their parents do not constitute a derived place of residence, particularly where no separate key exists, visits take place only with consent, the former children’s room is also used by siblings, and personal belongings have been removed.
Habitual abode:
Irrespective of a place of residence, a person is deemed to have his or her habitual abode in the place where he or she stays for more than 183 days per year.
As a result, it is possible for someone to be considered resident in several states at the same time – for example, if places of residence exist in two countries. Anyone who is resident in a country is subject there to unlimited tax liability. To avoid double taxation, Austria has concluded double taxation agreements (DTAs) with around 90 countries.
Dual residence and the “tie-breaker” rule
If dual residence exists, the so-called tie-breaker rule determines which state has the right to tax worldwide income. The criteria are applied in the following order:
- Permanent home
- Centre of vital interests
- Habitual abode
- Nationality
- Mutual agreement procedure between the two states
In practice, particular importance is attached to the centre of vital interests. This involves examining the closer personal and economic ties, with greater weight given to personal relationships. Relevant factors include family ties, social, religious or cultural engagement, as well as private activities (club memberships, collections, etc.). The place where the family lives on a permanent basis is generally decisive, whereas the main source of income or a mere registration of residence has only indicative value.
Foreign assignment: when does residence shift?
In the case of temporary foreign assignments, the tax authorities assess a shift in residence based on the duration of the work performed abroad as follows:
- less than 2 years: generally no change of residence – even if the family relocates,
- more than 5 years: regular shift of the centre of vital interests if the family relocates as well,
- 2 to 5 years: case-by-case assessment.
In a 2023 decision, the Federal Fiscal Court stated that even an unplanned shortened stay abroad (in the specific case, 23 months in the USA) may lead to a shift in residence, even if the domestic place of residence is retained.
- Factors in favors of the USA included: relocation of the entire family including pets, an originally planned three-year stay with an extension option, children attending school in the USA, job and training activities of the spouse in the USA, and a US salary account.
- Factors in favors of Austria included: continued Austrian social security coverage, donations to Austrian recipients, transactions via Austrian bank/savings accounts, and planned reintegration of the children into the Austrian school system.
Due to the absence of a clear centre of vital interests, the Federal Fiscal Court (Bundesfinanzgericht – BFG) ultimately based its decision on the habitual abode in the USA. However, the Administrative Supreme Court (Verwaltungsgerichtshof – VwGH) overturned this decision and considered the continuing ties to Austria – in particular the ongoing Austrian employment contract and the school planning for the children – to be stronger, with the result that tax residence remained in Austria.
Conclusion
In practice, we increasingly encounter cases in which taxpayers attempt to avoid Austrian unlimited tax liability by establishing a place of residence in a low-tax country. However, this does not always succeed, particularly if an Austrian place of residence is maintained.
In this context, the recent case law of the Federal Fiscal Court regarding derived places of residence with parents is welcome, as it does not recognize mere “visits” by adult children as constituting a place of residence.
Anyone seeking to change their tax residence while retaining their Austrian place of residence during a stay abroad may consider, as a risk-minimizing measure, renting out the property for the duration of the foreign assignment.
Your ARTUS advisors will be happy to support you with advice and assistance (info@artus.at).
