Tiebreaker rule

A tiebreaker rule is a provision in a tax treaty designed to resolve cases where an individual is considered a tax resident of two countries simultaneously. The rule provides a multi-step procedure to determine a single country of residence for tax purposes, often considering factors such as the location of a permanent home, center of vital interests, habitual abode, and nationality.

Example: An individual has a permanent home in Germany but works in France for most of the year. Both countries claim the individual as a resident for tax purposes. Under the tiebreaker rule in the Germany–France tax treaty, the individual would be considered a tax resident of Germany (where the permanent home is located) and taxed accordingly, avoiding dual residency taxation.