The bona fide residence test, one of the two tests that can be used to qualify for the foreign earned income exclusion.

Bona Fide Residence Test Can Only Be Applies to U.S. Citizen Or Resident Alien

To see if you meet the bona fide residence test in a foreign country, you must find out if you have established such a residence in a foreign country. Bonafide residence is not same as your domicile. Domicile is your permanent home, the place to which you always return or intend to return.

Uninterrupted Period Including Entire Tax Year

You meet the bona fide residence test if you are a bona fide resident of a foreign country (or countries) for an uninterrupted period of time that includes an entire tax year (January 1 – December 31).You can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country.

Determination

You have to show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. The IRS decides whether you qualify as a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555, Foreign Earned Income . The IRS cannot make this determination until you file Form 2555.

11-factors considered by U.S. tax court are :

1) Intention of the taxpayer, 2) establishment of home temporarily in the foreign country for an indefinite period; 3) participation in the activities of the chosen community on social and cultural levels, identification with the daily lives of the people and, in general, assimilation into the foreign environment; 4) physical presence in the foreign country consistent with the employment; 5) nature, extent and reasons for temporary absences from the temporary foreign home;6) assumption of economic burdens and payment of taxes to the foreign country;7) status of resident contrasted to that of transient or sojourner; 8) treatment accorded income tax status by one’s employer; 9) marital status and residence of family; 8) nature and duration of employment; 10) whether assignment abroad could be promptly accomplished within a definite or specified time; 11) good faith in making the trip abroad; whether for purpose of tax evasion.

Paying Income Tax To The Country Where You Claim Bona Fide Residence

It’s also important to note that if you claim to be a non-resident of the foreign country to the foreign country’s government and therefore do not pay income taxes to such government, you would not be able to qualify for the foreign earned income exclusion under the bona fide residence test.

The bona fide residence test, like the physical presence test, comprises one way that an individual can qualify for the foreign earned income exclusion . You may still qualify under the physical presence test if you do not qualify for the bona fide residence test.