What is the Schengen Area?

The Schengen area is an area consisting of 27 European countries that have essentially eliminated passport and other types of border control at their mutual borders. It takes its name from the Schengen Agreement, signed in 1985 in the village of Schengen in Luxembourg. The primary objective of the agreement was to facilitate the free movement of people, goods, and services within the participating countries. Croatia is the most recent country to participate, joining in January 2023.

What countries are part of the Schengen Area? 

As of January 2023, the complete list of the countries that are in the Schengen region is:  Austria, Belgium, Czech Republic, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland. (Update - in 2024 Bulgaria and Romania alsojoined the Schengen Area)

What is a Schengen Visa? 

A Schengen visa is a visa that permits visitors from outside of the Schengen area to travel and reside (note: not study or work) within the Schengen member countries for up to 90 days in a 180 day period.

Not every non-European needs a Schengen Visa, however. Citizens of the United States, Canada, Mexico, Australia, New Zealand and other countries, for example, are not required to obtain one. The EU provides a map on their site which provides an easy reference to see which countries do and do not require this visa. 

How does the Schengen Area affect tax residency? 

Tax residency is typically determined by the length of time spent in a particular country. In general, for example, if an individual spends more than 183 days in a country, they may be considered a tax resident of that country and are subject to its tax laws. The Schengen Agreement allows people to spend time and reside in other countries, which can have implications on taxes and tax residency, but the Agreement is not related to tax residency directly.

For Europeans who are citizens of Schengen countries, the region does not directly impact tax residency status.  Citizens can typically move freely and reside in other Schengen countries however they will always be subject to the tax rules of their country of residence. If a person spends more than six months of a year in another EU country, they may become considered a tax resident and may face taxes there. If they live in one EU country and work in other Schengen countries, they may also be subject to taxes in the other country unless the countries have a double taxation agreement. 

For non-Europeans, the Schengen visa imposes restrictions on the duration of stay. The Schengen visa allows non-EU citizens to enter and stay in the Schengen area for a maximum of 90 days within any 180-day period. This rule applies collectively to all Schengen countries, meaning that the total number of days spent in the region should not exceed 90 days in a 180-day period. This would likely prevent them becoming a tax resident, however if they perform work while on a Schengen visa there may be additional considerations. 

What Is Important to Know About A Schengen Visa? 

That last point is critically important and not always understood. The 90 day rule applies collectively to all Schengen countries, meaning that the total number of days spent in the total Schengen region should not exceed 90 days in a 180-day period. The rule is not 90 days per country. 

It's important to note that exceeding the 90-day limit within the Schengen region can have legal consequences and may affect future visa applications.

If non-Europeans wish to stay longer or establish tax residency in a specific Schengen country, they would need to meet the requirements for a long-term visa or a residence permit in that country. These requirements typically involve having a specific purpose for staying, such as work, study, or family reunification, and complying with the country's immigration and tax laws. 

As always, consider using Chrono as your solution to tracking and reporting your time in the area and please consult a tax professional for specific recommendations about your travel and tax residency.