Navigating Tax Residency: Solving the Challenge of Counting Days

We don’t think the old way of counting days is working. Tax advisors are pushing clients to improve record-keeping, while clients are trying to keep up with the different rules. There is too much margin for error, inaccuracies and frustration out there.

Let’s solve day counting by looking closely at some of the main pain points to navigate. By the end of this article, we’ll show you how to solve the problem with day counting with Daysium. 

Let’s look at the following topics:

What is Tax Residency?

The Organisation for Economic Cooperation and Development’s (OECD) definition says tax residency is determined under the domestic tax laws of each jurisdiction”.

Its two main functionalities are:

Tax residence is crucial because it will decide where and when to pay tax. In a global world, and as a global citizen, determining residency can be trickier. If you spend significant time abroad, you may expose yourself to different jurisdictions. You must know the rules in different jurisdictions to ensure proper tax planning.

Your residence matters because:

Is Domicile the Same Thing as Residence?

No, but your domicile can impact your taxation. Domicile is a historical legal concept still used. You’re domiciled in the country to which you are most closely connected. For many, it is where you were born or have a permanent home. You could think of it as the place you intend to return to, even if you’ll spend time somewhere else in between.

Your domicile can impact your tax status and determine where and how much you pay. It’s important to note that your domicile status might make it so that you don’t pay tax on certain assets to your tax residency country.

You can acquire a domicile of choice. However, the process can vary between jurisdictions. We always advise contacting tax experts if you’re interested in learning more.

What are The Different Conditions to Determine Residency?

Jurisdictions use different criteria to determine residency, ranging from your time in the country to your ties to it. The rules introduce the first layer of complexity to your day counting.

The amount of time you spend in different jurisdictions can change yearly. Since tax residency is evaluated annually, you must know how many days you spend in different countries.

Let’s look at the two critical conditions:

Days Spent in the Country

The critical factor for most jurisdictions is how many days you spend in the country. You are a tax resident if you pass certain days – no matter your reasons. Many countries use the 183-day threshold. For example, in the UK, one condition of the residency test is that you spend 183 days in the country during a tax year.

But countries add a layer of complexity to day counting. You may need to meet several other conditions in the UK and elsewhere, aside from time spent.

Substantial Presence or Ties

Jurisdictions also look at your presence and ties within a country to determine tax residency. The criteria don’t count only the days you spend in the country but other factors. These can include things:

For example, the UK has a condition where you’re likely treated as a UK citizen if you own a home in the UK and no home overseas.

Double Taxation Rules

You might be considered a ‘treaty resident’ if you’re a resident in one or two double-taxation signatory countries. Tax treaties are in place to prevent double taxation. Your tax advisor can help you understand how double taxation rules may apply to you.

What is the Main Challenge With Day Counting?

The main challenge in day counting is the different methods jurisdictions use to determine a ‘present’ day. Countries vary widely in their methodology, meaning that you need to be aware of the intricacies of the rule to get your day count right.

Let’s take the example of Ireland and the UK. In Ireland, you are considered to have been ‘present’ for a day if you were in the country at any point.

Suppose you are in Ireland on the 12th. The day would count as a day for residency calculations, even if you flew in or out of the country at any time during the day.

But UK’s legislation considers ‘present’ differently. A day only counts towards your tax residency days if you were in the UK at midnight. If you fly out on the 12th before midnight, the day won’t count.

Therefore, you can’t solely count days when considering your tax residency. You must know the specifics of what determines your status for each day.

You should also be aware of exceptional circumstances. For example, you’re not ‘present’ if you spend time in Ireland in transit – meaning you don’t leave the airport or port. Most jurisdictions consider exceptional circumstances when counting days. A day might not count as ‘present’ due to unforeseen circumstances such as an illness or natural disaster preventing you from leaving.  

Solving Day Counting With Daysium

All this complexity shows that counting days can be difficult. We also believe the traditional solutions of day counting aren’t sufficient. Holding on to boarding passes, hotel receipts, and counting days in Excel can introduce risk to your accuracy.

There is a better way to navigate tax residency and day counting.

Daysium can help you with the following:

Set up Automated Systems Based on Your Personal Needs

Most tools might help you count days, but do they understand your situation? With Daysium, you and your tax advisor can set up parameters that matter to you. Your tax advisor can set the rules to make counting days accurate and designed around your needs.

Monitor Your Day Count Fast and Efficiently

Our platform’s app allows you to see your current day count in the palm of your hand. If you’re considering travel but are worried about overstaying, you can check your situation within seconds. You’ll have the confidence and freedom to make those travel decisions for business or leisure.

Prepare Your Records for Tax Inquiries

Jurisdictions employ different tests to check your residency status. Authorities also monitor whether day counting is accurate, especially for high-wealth, mobile individuals. Traditional record-keeping has its problems that we at Daysium want to change.

We log your data securely, creating a trail of proof to prepare your records for tax inquiries. The corroborating evidence is for your eyes only unless you want to share it with your tax advisor. The data can help when you need to prove you’ve counted the days correctly and spent time where you said you did.

Complexities can be solved, and we’re committed to helping you do that. We understand the intricacies of navigating the different jurisdictions. But we also know that clients and advisors are the experts in their situations. We want to empower you to make informed decisions and stay prepared for whatever the future brings – dealing with a tax inquiry or a change in residence.

We’d love to have you join this revolution in day counting. You can’t buy our app on the App Store, but you can join the waitlist. We are onboarding our Founding Partners, but the sooner you join, the quicker we can get you started!

Revolutionising Record-Keeping: How Technology is Transforming Tax Compliance for Individuals

Picture the scene: your tax advisor calls and informs you of a coming tax inquiry. You’re required to gather your records – flight itinerary, hotel receipts, photos. Documents showing your residency days at a given jurisdiction.

The scenario is not uncommon. An HMRC spokesperson said their investigative team secured £4bn from the wealthy, an increase of 60% from the previous year. You’ll need accurate records to prepare yourself for the investigation.

The good news is that technology is revolutionising record-keeping. Let’s take a look at how by discussing the following topics:

Three Reasons for Accurate Record-Keeping for Tax Purposes

Let’s start by considering why you should have record-keeping on your radar for tax compliance purposes. 

Accurate record-keeping is more than about saving time. It can be vital for financial planning and keeping the taxman happy.

A pristine set of records will help you with:

1. Compliance with Tax Laws

The dynamic nature of global residency calls for discerning your movements across jurisdictions. Consider the complexities: the definition of tax residency varies from country to country. For example, counting residency days in Ireland differs from that in the UK. Knowing one jurisdiction inside out can lead to misinterpretation in another.

For example, the UK and Ireland count a residency day slightly differently. In Ireland, you are considered ‘present’ if you’re in the county at any time during the day. However, in the UK, you’re considered ‘present’ if you were in the UK at midnight at the end of the day.

Depending on what jurisdictions matter to you, the intricacies of understanding the rules are vital for compliance.

Documenting your days in different jurisdictions is one thing. But as local governments are increasingly interested in the tax affairs of the wealthy, you often need to go further. Tax compliance requires documenting your travel itineraries, including precise arrival and departure times. The proof can safeguard you against inadvertent errors that could lead to legal complications.

2. Tax Inquiry Preparedness 

The scrutiny and regulatory oversight are increasingly focused on high net worth individuals ( HNWIs). The UK even has a Wealthy Team examining the country’s wealthiest taxpayers. In 2022, they opened 25 criminal investigations.

Meticulous records prepare you for an inquiry that could happen. Suppose you have corroborating evidence to show things like your location data. In that case, you have irrefutable proof of adhering to tax laws. Access to the information can give you peace of mind before and during an inquiry, moving things along swiftly.

3. Freedom to Choose

Accurate data enhances your freedom, whether you travel to another business meeting or spend time with family abroad.

Imagine a scenario where you receive an invitation to an exciting new business opportunity. But you’ve already spent time in the UK and you’re worried you might overstay. If you’re guessing your current day count, you may end up with one of two bad scenarios. You might travel to the meeting, overstay and pay more tax. Alternatively, you don’t risk it; stay home and miss out on the opportunity.

Meticulous records give you more freedom to make informed decisions and spend time how you want.

The Problem with Traditional Record-Keeping

Record-keeping makes sense, but not all methods are the same. We’re talking about traditional record-keeping – your Excel spreadsheets and cabinet full of binders, if you will. 

The core problems for traditional, manual methods are:

Your reliance on traditional record-keeping doesn’t cut it for one more reason: the authorities aren’t relying on it. Jurisdictions worldwide are using digital tools to combat things like tax evasion. Different agencies are communicating with each other, making it vital to have good evidence on your part.

For example, the tax authority might look into your residency records. They’ll communicate with other local authorities and notice there’s a parking ticket to a vehicle registered to your name on a day you weren’t supposed to be in the country. You need to prove you weren’t there; for this, you require solid evidence.

The good news is that technology can help you with the conundrum.

Three Technologies to Improve Record-Keeping for Tax Compliance

As tax jurisdictions are improving their use of technology to investigate and close loopholes, you should also add the right technology to your toolkit. These innovations can make controlling your time and data easier, leading to more peace of mind.

1. Mobile Apps 

A wealth of mobile apps is on the market to help gather and log data. In general, many platforms can connect different accounts under one central view. These traditional finance apps can make monitoring your accounts easier. Tax jurisdictions, like HMRC, also have apps to let you study your tax data.

The market also has a few record-keeping apps for counting your days in different tax jurisdictions. While these can help you get an overview of days spent abroad, they don’t go far enough. Our app facilitates logging your residency days, creating a trail of records to help in the case of an audit.

You can log in any data that you find valuable to show and prove your location. You’ll not only get a record of your days in a specific country and jurisdiction, but also evidence to support the claim.

2. Cloud-Based Platforms

Cloud solutions are another big technology revolutionising tax compliance and record-keeping. The cloud enables you to:

Take our Daysium app as an example. The app travels with you wherever you go. You can also share reports with your accountant, whether in the same country or not. But these reports are never automated. We believe you should be in charge of what and when you share.

3. Automated Record-Keeping

When your tax advisor asks for specific records, knowing where to start can seem daunting. Finding corroborating evidence after an event took place months ago is time away from family or work.

Combining the cloud with artificial intelligence and machine learning transforms the process. You can automate many record-keeping processes for tax purposes. When you add AI to the mix, you can also process vast amounts of data, receiving in-depth analysis of what’s happening.

We have our AI assistant, Daysi, who we describe as an extension of your tax advisor. The always-present assistant you can turn to if your tax advisor isn’t available. Daysi can answer your questions and help give you an idea how to solve a problem – and tell you to reach out for your advisor when needed. You’ll get extra support to navigate your record-keeping issues.

The Benefits of Using Technology

All of the above three technological solutions come with benefits. Adopting them to your tax record-keeping can help you:

The above technologies and their benefits ultimately lead to cost savings. You empower yourself to make the most of your tax code and leave room for other things in life – business or family. 

Best Practices to Overcome the Risks of Digitalising Your Record-Keeping

In a UK Government survey, 45% of UK adults disagreed with the statement that they feel safe and secure online. Cyber-attacks and scams are still a big issue when using technology and digital platforms.

Dread of digital safety isn’t unreasonable. AON’s survey from 2023 shows one in five businesses in Ireland experienced a cyber attack in 2022.

However, awareness of the possible risks shouldn’t be a reason to stop using technology. The perception can aid you in being smarter with your digital choices.

HOW CAN YOU GUARANTEE YOU’RE SAFE?

The three best practices to digitise record-keeping the right way are:

A Case Study: Using Daysium to Revolutionise Your Tax Record-Keeping

We at Daysium are confident technology can revolutionise tax compliance. Our platform offers HNWIs a way to monitor how many days they spend in or out of jurisdictions relevant to their tax residency. With our app, you can:

We use automation and cloud solutions to smoothen the above steps for you. You don’t need to spend hours adding information to our app. The automated process enables you to view your day count accurately and in the palm of your hand.

Did you get a call to attend a meeting on the other side of the world? With Daysium, you don’t have to fear missing out on this opportunity. You can look at your profile and see if you can accept it or schedule it for another time.

And you don’t need to worry about security. Daysium doesn’t sell your data or share it with anyone. You can control who gets access to the reports you generate. You are at the helm of this technological revolution, not a bystander. We like to think we are the guardians of your data.

Conclusion

Meticulous record-keeping for tax purposes ensures compliance with increasingly complex tax laws across jurisdictions. Technology can help you prepare for tax inquiries, providing irrefutable evidence to support your adherence to tax laws. The process will be smoother, and your mind will be at ease.

As authorities rely more on digital toolkits, adopting technology also becomes vital for you. Knowing things like your location data optimises your time.

At Daysium, we aim to empower you to control your data better and help you navigate record-keeping efficiently. If you want to know more about our platform, contact us and join our waiting list today.