---
title: "Tax residency"
description: "Tax residency is the country whose tax rules Fincanva applies to your simulated trades, and it decides which tax rates and which rate structure a backtest uses."
canonical_url: "https://fincanva.com/glossary/tax-residency"
last_updated: "2026-10-07"
md_url: "https://fincanva.com/glossary/tax-residency.md"
---

# Tax residency

Tax residency is the country whose tax rules Fincanva applies to your simulated trades — **United States**, **Italy** or **Other**. It decides which tax rates a [backtest](/glossary/backtest) uses and what shape they take: whether short-term and long-term gains are taxed differently at all. It is the "Tax residency" field, "Country whose tax rules apply to your simulated trades".

**Also seen as:** fiscal residency, country of residence

## Does the holding period change the tax rate?

Only where your residency has two rates. Under **United States** and **Other** both rates exist and the holding period decides between them: a position held **more than one year — more than 365 days** between opening and closing — meets the long-term rate, and one held exactly 365 days is still short-term. Under **Italy** there is no short/long split: the app hides the short-term field and a single rate applies however long the position was held. [Capital-gains tax](/glossary/capital-gains-tax) says how the rate is then applied, to your net result for the year.

## How does Fincanva handle it?

- Choosing a residency re-seeds the [tax regime](/glossary/tax-regime) and every rate, marking each changed field "Auto-updated"; residency and rates are saved together under **Fiscal profile** — [what each residency starts on](/docs/backtesting/set-the-tax-rules-your-backtests-use#what-does-changing-tax-residency-change).
- A residency you have never saved follows your interface language: **United States** in English, **Italy** in Italian. A saved one that does not fit your language and results currency is flagged, with a button that switches it — [why](/docs/backtesting/set-the-tax-rules-your-backtests-use#why-does-fincanva-suggest-another-tax-residency).
- Under **United States** the regime field is hidden; under **Other** it is shown, but the simulation taxes as under United States whichever regime you pick.
- Residency changes a result only when the [Taxes assumption](/glossary/taxes-toggle) is on, and a change flips your strategies to **Needs re-run**: the new rates apply after each runs again.
- Dividends can also be reduced by [withholding tax](/glossary/withholding-tax) at source, which has no rate field.
- Earlier versions of the app also labelled this setting "Country"; that name now belongs only to the geographic filter for selecting instruments.

## What does it look like in practice?

The same [strategy](/glossary/strategy) realizes a **5,000 gain on a briefly held position**, and only the residency differs.

- **United States** — held less than a year, the gain is short-term and meets the 35% rate: 35% × 5,000 = **1,750 of tax**.
- **Italy** — the single 26% rate applies whatever the hold: 26% × 5,000 = **1,300 of tax**.

Hold the position more than a year and the US answer drops to the 20% long-term rate, 20% × 5,000 = **1,000**, while the Italian answer does not move: the holding period is only a lever where the residency makes it one.

Add a **2,000 realized loss** in the same year. It is set against the gain first, so the taxable gain becomes **3,000** under both — on Italy's default Declarative regime — and the short-held US case pays 35% × 3,000 = **1,050**, the Italian one 26% × 3,000 = **780**. Had the gain been on an **ETF**, the Italian answer would stay at **1,300**: an ETF gain cannot be reduced by a loss, so the 2,000 waits for a non-ETF gain — and under Italy an unused loss expires after five years.

Fincanva is for education and illustration only. It is not personalised financial advice, and past or simulated results do not predict future ones. [Read the Terms Addendum](https://fincanva.com/terms/addendum#section-3)