How do digital nomads pay tax?

Hello everyone! I’m new here and probably this is a very newbie question, but it doesn’t leave my head.

How do you, nomads, pay your taxes? I mean, if you’re constantly traveling, how are you going to pay taxes for a certain country if you are going to stay there a short period of time?
Or do you return to your “original country” and then pay them?

By the way, this forum has very nice cool formatting features! :smile:

depends on where you’re traveling, how long you’re there and where you’re from originally. I’m a US citizen. the US is one of the only countries in the world that requires its citizens to pay taxes no matter where they’re living. However, if you meet certain requirements you can get an exemption. I am generally traveling on a tourist visa and not in one country long enough to be considered a resident, therefore I don’t pay taxes anywhere.

Well, that’s very interesting! So if you travel only with tourist visa, you don’t need to pay taxes?
Also, if you eventually became a citizen of another country, do you still need to pay your US taxes?

I live at Brazil, so it’d be nice if someone from Brazil clarify this for me! :smiley:

depends on the country you’re traveling in. yes, as long as I am a US citizen, I am required to pay US taxes.

When asking questions like this which are completely country specific, telling us what country you’re from will help a lot, especially if you put it in the title so people know. :slight_smile:

Yes - Same boat Mandy! You have to be gone out of the US for 330 days I think before you are exempt from what I read.

yes, 330 days out of 365, but they don’t have to be in a single calendar year.

Hej Rodrigo,

Here this is also discussed.

Brazilians are taxed based on their worldwide income based on residency. So it is the same as Europeans. The trick is to no longer be considered tax resident in Brazil.

Giving the fact how difficult Brazil is becoming for doing business and insane regulations it is a good idea to start looking abroad to set-up your business.

Cheers.

Mandy, curious if you happen to know anything about telecommuting on a tourist stay for various countries in Europe? On Wikipedia, it says most countries don’t require a work permit for telecommuting during the 90 days you’re granted as a tourist, but some do (of course they don’t list which ones). And what about the UK and Ireland? From what I’ve read, they don’t allow it but I’m not entirely sure.

The main reason I care is that I’m a US citizen, planning to claim the foreign earned income exclusion and I’m sure I’ll need documentation if I ever get audited. In case the IRS is hip to foreign work permit laws, want to make sure I understand all that and have proof. Any advice appreciated.

Honestly, no. I don’t. I haven’t really worried about it though I guess it should be on my radar. The UK absolutely does NOT allow you to work while on a tourist visa. If asked, never tell them you’re working. It would be difficult to prove that you performed work while in a specific country, IMO.

As for proving the 330, I’ve note seen much mentioned about that. I did find this from here:

"If I am audited, how do I prove my travel dates to the IRS?

The IRS is not specific about what documentation is required, leaving that largely to the auditor’s better judgement. It is wise to keep a travel log in addition to plane ticket stubs and any other documents that might support your claims. Sales and credit card receipts can also be helpful. If your travel is related to business, your employer may be contacted for additional documentation."

so that’s something to keep in mind.

I am also interested in this topic as a self-employed freelancer.

FYI for fellow Americans: Living outside the US (even 365 days a year) doesn’t absolve you of tax responsibilities if you haven’t established a tax home somewhere else. Americans are always expected to pay taxes somewhere. https://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion-Can-I-Claim-the-Exclusion-or-Deduction

That is not strictly correct. A better statement would be that we are assumed to pay taxes somewhere.

“If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work.

Most nomads will fall under the highlighted part. So, for the USA, legally, our tax homes are wherever we are working, which for most of us changes multiple times a year. However, since most of us are not in one place long enough for that country to consider us a tax resident under their laws they don’t require us to actually file taxes.

We meet the US requirement of having a tax residency outside the USA. That is what matters. What happens after that is between us and whatever country/ies we have been working in.

What it comes down to is that the tax system isn’t set up for nomads so this is a legal loophole. One that could possibly be closed in the future if they required proof of a tax liability elsewhere, but which is open at the moment.

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Food for thought. Thanks. I have a family member who is a tax guy. After the holidays die down, I’ll have to pick his brain about this. :slight_smile:

Make sure he is a tax guy who specializes in expat taxes and the feie otherwise his knowledge will likely be lacking. I tried to talk to a regular CPA about it first and they had no idea so I spoke with someone who specializes in expat taxes and that is what I was told.

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Also, keep in mind that the Foreign Earned Income Exclusion only applies to the first $100,800 in income (for 2015) and does not apply to Self Employment Tax. You’ll still owe Self Employment tax for all income plus income tax for all income in excess of the limit.

yeah, just live somewhere on non-worker visa and make sure you are not resident for tax purposes in your country and you’re good - not paying anywhere :smile:

A bit late to the convo, but I want to look at this from another point of view - ok, let’s say you can be a non resident anywhere and consequently not pay taxes anywhere. BUT. You still receive your earnings somewhere. That account has been opened in a particular country. Are you saying that you can have an account in a random country, not be their resident and still receive your income?

I am from Croatia and am struggling with how to fit in travelings as business expenses, plus all of this what you are talking about. I am always learning about new options. But, for now, I don’t see a way how can I legally receive earnings on my bank account and not be liable to any taxes. In Croatia, there is a special account for business earnings and your private account is separate (you get your salary on this account). This way, tax people can see how much you have earned and know how much taxes you need to pay. If I receive earnings on my personal account, I can do that, but that is not legal. Any thoughts?

Yes. Absolutely. That’s one of the pillars of flag theory. Although, I wouldn’t suggest any “random” country, but rather a stable banking jurisdiction.

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Can one setup a pass through entity, such as an llc, that has the worker (foreign non/never resident in any tax jurisdiction to qualify for the feie) as an employee who draws a salary so the entity has no profits. Or will the entity still need to withhold taxes from that salary?
Is that how people use the FEIE if self employed, by creating a tax entity to receive the income first?

Hey Mandy-

thank you for sharing your knowledge here. i know this is an old topic but i just wanted to see if the rules you played by in 2015 still is in effect.

i am a US citizen, about to leave the US to India on a tourist visa. I will likely stay in many other countries throughout the next 2 years or so, all if not most on tourist visa. I am currently employed by an american company as a full time employee, but this will change to independent contracting status as I leave the country.

I am trying to see 2 things here:

  1. will i qualify for FEIE (foreign earned income exclusion) next year
  2. do i need to pay self employment tax regardless of whether i qualify for FEIE

ideally, i qualify for FEIE, and i don’t need to pay self employment tax somehow-- then my tax will be close to 0. but even just having FEIE, 15% self employment tax is not terrible…

it’s been several years since this discussion came up, and ive seen in different places about IRS auditors targeting digital nomads and Trump potentially removing the 330 / 365 rule, so i am a bit anxious. last thing i want is to think i owe no tax and have to scramble for a fat tax bill.

sorry for reviving this thread, and thanks for your help!