Dual Residency: How to Legally Maintain Ties to Two Countries

For many high-net-worth individuals, relocating to Italy is not about cutting ties with one country and moving permanently to another. It’s about expanding options—tax-wise, lifestyle-wise, and personally. Yet with this flexibility comes complexity, especially when it comes to residency.

You may want to enjoy the benefits of Italy’s flat tax regime while maintaining a foothold elsewhere: in London, in Dubai, in the U.S., in Switzerland. Maybe your business is still incorporated abroad. Maybe your children go to school in one country while you spend your weekends in another. Perhaps you don’t want to give up your medical insurance, voting rights, or real estate portfolio at home. And yet you’re drawn to Italy’s warm climate, strategic location, and compelling tax incentives.

This is where the concept of dual residency comes in—a status that can be highly advantageous if handled correctly, or deeply problematic if mismanaged.

What Dual Residency Really Means

At its core, dual residency refers to a situation where a person is considered a tax resident by more than one country at the same time. This can happen because different countries apply different criteria to determine tax residency. Italy, for example, considers you tax resident if you meet any of the following conditions for more than 183 days in a calendar year: you are registered as a resident (anagrafe), your “center of vital interests” is in Italy, or your habitual abode is in the country.

Other countries may use different standards—physical presence, domicile, citizenship, or even intention. The result? You may find yourself legally and simultaneously resident in two (or more) jurisdictions.

The problem is not the legal status itself—dual residency is not illegal—but how each country treats your income, assets, and obligations under that status. If not planned correctly, it can lead to double taxation, disclosure issues, penalties, or even accusations of tax evasion.

The Role of Double Tax Treaties

Fortunately, most developed countries have signed Double Taxation Agreements (DTAs) with each other, including Italy. These treaties provide a legal mechanism to resolve conflicts when two countries claim the same person as a tax resident.

DTAs typically include “tie-breaker rules” to determine your effective tax residency by looking at:

• where your permanent home is located,

• where your personal and economic relationships are stronger (known as “centre of vital interests”),

• where you habitually reside,

• and, if all else fails, your nationality.

In practical terms, this means that even if you technically qualify as resident in both countries, only one of them—usually the one where your centre of life is—will have primary taxing rights on your worldwide income. The other country must then provide relief through exemption or foreign tax credits.

But here's the catch: the DTA doesn’t apply automatically. You need to proactively claim benefits, usually by submitting documentation to the local tax authorities, both in Italy and in the other country involved.

Why Dual Residency Appeals to HNWIs

The ability to maintain dual residency is particularly attractive for individuals with complex lives and global footprints. You may have business operations in one country, a family office in another, and a summer villa in Italy. Dual residency, if structured well, can allow you to enjoy mobility, privacy, asset protection, and tax optimization—especially if one of the two countries has a territorial tax system, no wealth tax, or a lump-sum alternative like Italy’s flat tax regime.

Italy’s €100,000 (now €200,000 for family) flat tax is precisely designed for these global individuals. It allows you to become tax resident in Italy, while excluding foreign income from taxation altogether. In practice, this means you can be tax resident in Italy, claim the flat tax, and still retain economic ties—and even tax residency—in another jurisdiction, as long as the treaty is respected and there's no conflict in reporting.

Practical Considerations: How to Make It Work

So how do you structure your life to benefit from dual residency, without triggering red flags?

It starts with clarity and consistency. If you claim to be tax resident in Italy, but you spend most of your time in the UK and still have a main home there, Italian authorities (or British HMRC) may challenge your residency claim. You’ll need to be able to document where you live, where you work, where your family lives, where you bank, and where you spend your time. Your tax filings, travel history, and utility bills can all become part of the evidence.

Moreover, you’ll need cross-border tax advice to avoid pitfalls. Some expats have unknowingly triggered double taxation by failing to submit the right forms, misreporting their assets, or assuming that one country would automatically recognize the status granted by the other.

In other cases, individuals have lost access to public health services, pension rights, or social security benefits due to incorrect assumptions about their residency.

Finally, if you're under the flat tax regime, make sure you understand how foreign-sourced income is defined, and how to deal with controlled foreign corporations (CFC rules), trusts, and inheritance law, which might still apply even under the lump-sum system.

When Dual Residency Becomes Risky

While dual residency can be a powerful tool, it’s not a license to stay in a legal grey zone. If your situation lacks substance, or if your financial life is opaque, you may attract scrutiny from both countries. This is particularly true for citizens of countries like the United States, where tax liability is based on citizenship and cannot be waived, or for those under increased reporting regimes (like FATCA or CRS).

Another issue is reputational. Wealthy individuals who play fast and loose with residency rules may be flagged by compliance departments at private banks, insurers, or even visa authorities.

Final Thoughts

The era of “digital nomads” and hyper-mobile entrepreneurs has made traditional notions of residency obsolete. But the law hasn't entirely caught up. Dual residency, when approached intelligently, can be a key component of your global strategy—but it requires precision, transparency, and strategic planning.

If you're relocating to Italy but don’t want to lose your global presence, or if you're already a dual resident and need clarity, it’s worth having a proper international tax roadmap.

✉️ Curious about how dual residency can work in your specific case?

Let our team at Knotted help you navigate cross-border residency and tax structures.

📩 Contact us at info@knotted.ch

📱 Or message us on WhatsApp: +41 76 771 30 22