How to best set up your taxes, residency and and business as a digital nomad?


#1

The purpose of this post is to discuss the benefits, downsides, and challenges of setting up an international business.

Comment with what you want to know, or with what knowledge you can offer others based on your experience.

  • Do you want to set up an offshore company but don’t know
    where to start?
  • Do you have questions with setting up legal entities or bank accounts?
  • Do you have questions with regards to paying taxes and residency.

Before becoming a DN I worked in Dubai as a corporate service provider. I helped 100s of international entrepreneurs to set up their companies, engage in tax planning and obtaining residency. Most of them in Dubai, but also in other jurisdictions like Panama, Hong Kong & Seychelles.

Share your biggest struggles or tips!


#2

I’m from Panama and for some reason I don’t want to set up my business there (maybe I’m overacting?). What is the average cost for opening/registering a business in another country? (lawyer fees, permit fees, etc.)


#3

How’s the quality of life in Dubai? I’ve been thinking of setting up a freezone company there for a while and getting the residency permit but I have no idea if I’d like living there.


#4

Hi Elena,

Actually, being from Panama, it makes a lot of sense to setup an offshore company. Because Panama has territorial taxation. So you could have significant tax savings if your income comes from abroad. You will have to remember “substance” though. As I explained here:

Having said that, a question like this is impossible to answer. Because there are to much options.
You also have to look at what you want in terms of banking and some banks require minimal deposits as well.
Another major difference is if you are doing business locally, or not.


#5

Hi Freedomsufer,
First of all I like your website and what you are doing (for what that’s worth).

Live in Dubai is not bad at all.

But it is a bit of a country of extremes and not for everyone.

Benefits:

  • The country is made for business owners: low regulations and no taxes. No taxes on income or for your business. Often no audits. No tax reporting. Nothing.
  • It is not just glamour. 90% expats make that it is the place is filled with young people trying to make something of their life’s.
    It will be one of the most international places and you can find nice people you hang out with. There is a disproportional amount of materialism and shallowness though.
  • There is a lot of money switching hands and the economy is booming again. Opportunities everyhwere.
  • Labour is cheap and you can basically outsource everything.
  • Crime is non existent, and as long as you bother no-one, there is no one telling you what to do.
  • It is one of the easiest places to obtain residency. And this is not just for Westerners. People from everywhere can come here and start a business.

Downsided:

  • The summer is terrible. There are 4 months that you have to stay inside because it is to hot.
  • In some cases starting out requires some investments not all digital nomads will be willing/able to make.
    Also, rents are really rising, and if you want your own place to rent, you have to pay one year in advance (in the form of post dated checks, but if a check bounces you have a month to fix it or go to jail)
  • There is sharia law. They are liberal compared to other places, but it creates uncertainty because judgements are completely arbitrary. Government control is strong and big brother is watching. You have to especially be careful not to offend something or someone (like posting on facebook, being loud and drunk, and kissing in public). Now, in the three years I have been there I have never knew someone who has gotten into trouble (the only time when I spoke to a police officer is when he was bored and wanted someone to talk to). But once you cross the line you will be found, thrown in jail for a few months and send back where you came from.
    And do NOT get into a dispute with a local.

Let me know when you have more questions.

P.s. resident permit stays valid for three years as long as you visit the country once every 6 months.


#6

Thanks for the reply Julius, it’s much appreciated.

I’ll go to Dubai later this year (after the summer, probably in October) and try it for a month or two to see if I like it there. If you’re in the area at that time it would be fun to meet for tea (have to get used to saying that instead of beer hehe).


#7

Hi Julius,
Nice to meet you.
I’m a French young digital entrepreneur and I earn revenue on the Internet.
I’m really interested about offshoring in Dubaï and I have also family there (they are Emirati and have the nationality so maybe they can help me with my project ?).
Could you give me some advice on where to start ? And I would also know if I can create a company there without living there, and earn money directly on my bank account ?

Thank you very much for your help Julius,

:smile:


#9

Hello Don Lee ! Wow, your government seems to be great ^^ Where are you from ?
And where do you receive your money from your work ? Have you got any company in a given country ?
Thank you for your help, it could be very helpful :wink:
:smiley:


#11

Nice to meet you. It seems to be great :slight_smile: So, you can earn money without declaring it ? Here, in France, after all things done and fixed charges paid, the government took me a bit more than 30%…


#13

Don_Lee, to be on the safe side you could open a bank account in another country and leave your money there (use a debit card to access it in Vietnam). That way you would leave fewer traces and could benefit from the stability of your banking country (Hong Kong for example).


#15

Big banks in Hong Kong open foreigner accounts (even on a tourist visa). You need a passport, a proof of address and around 10000HKD (around 1250$US) for the opening deposit. The easiest banks to work with are HSBC, Standard Chartered and Citibank.

In the ASEAN region there’s Singapore where it’s relatively easy to open a US dollar account on a tourist visa (same requirements as HK along with a recommendation letter from your current bank showing 2 years of history). The most important thing in Singapore is the reason why you want the account. Find a legitimate reason why you need the account and explain it to the bank (show supporting documents, invoices, proof of your work…).


#17

Tea and dates ;). I will keep it in mind. But likely will be hanging around Asia.

Most countries get a tourist visa for a month. You can go to Oman to do a visa run, and get a new month.


#18

Hi Don Lee,

Well done on the location independent lifestyle!

One remark:

"Nobody is asking me for any tax or has an intention to do that, it means I’m legal to not pay taxes in my situation. "
This is not a logical conclusion. The fact that no-one is asking does not make it “legal”. No-one from the government ever knocked on your door to tell you that you are not allowed to rob your neighbours. Yet, you can safely assume that when you do, you break the law.

In most countries the burden of reporting your income is simply on you.

Like most of the world, Vietnam taxes on worldwide income for residents (which you are). I found the following document that seems accurate:

http://www.expat.hsbc.com/1/PA_ES_Content_Mgmt/content/hsbc_expat/pdf/en/global_tax_navigator/vietnam.pdf

Clearly showing that there is a progressive income tax that goes north of 30%, on “as well as income from independent practice”…

I understand that there are a lot of countries that do not have the mechanics in place to collect taxes in non standard situations. But this is not something that I would advice someone from the high taxed Western world should try in this day and age…


#20

I also read about the VAT.
Sounds great.
Wish you all the best!


#21

Hi digital,
Nice to meet you to.
There are a number of ways to set up in the UAE and become full owner yourself. Internet based businesses are particularly fit to set up in the UAE. You can setup a company without living there or even visiting the UAE. But if you want to have a bank accout you HAVE to visit to meet the banker in person.

You can earn funds directly in your company bank account in an USD of EUR account. You can take the funds out with an ATM card, but these are always in AED, so there will be conversion charges.

Depending on the turnover you can use something like a prepaid debit in Euros to access your funds.

Keep in mind that if you remain living in France and receive income from this company in normal circumstances this income is taxed. Even when you manage the company from France the case could be made that it is a French company for tax purposes because it has its permanent establishment (PE) in France.

You could reduce this problem by having a local family member be the director of this company and having the rest of PE offshore. But knowing Emiratis, it will cost you… :wink:

In any case, everything is possible and I helped quite a number of French people. I especially saw an increase after that rediculous statement about 75% income tax…

If you have more specific questions let me know…

Good luck!


#22

Hey Julius (and other awesomely helpful nomads),

my plan is to begin travelling through South America after the upcoming summer and I would like to work while doing so. Currently I am based in London, so I have my bank account in the UK, and will hopefully have some remote work from here while I am travelling. I read that as long as I’m not the UK for more than 180 days I will not have to declare my taxes (is this true?), however if I pick up some work from say a Colombian client am I required to declare that payment anywhere?

Thanks for any advice


#23

Thank you very much for your answer Julius, it’s always helpful :smiley:

According to your experience, how is the average cost of conversion charges from AED to USD or EUR ?

I do not really understand what you meant here, I’m not bilingual yet ^^, I did research on the internet but what is a “prepaid debit in euros” and why will it be great to access my funds ?

But, if all my money stay in Dubai and in other countries except France, my government will know nothing about my foreign activities, no ? Or is there any contract between the governments of UAE and France to share informations ?

Family is family man :slight_smile:

Thank you so much for your help, I will see with my family there, and I send you a PM for further details about my aim :smiley:
D.


#24

You make sure that you become resident in a jurisdiction with no taxes (like Dubai or Cayman Islands) or with a territorial based tax system (like Panama, Costa Rica, Philippines, Malaysia, Hong Kong, Nicaragua) and you work while you are on the road.

I still can’t see the right solution for a nomad. Which country to choose without investing too much and spending 6 month there ? I check all of those countries plus some other and it seems a lot of hassles and money for any of them.


#25

Hi,
That is true. But think about the rewards. As a simple exampe: in Europe you pay up to 50% of income tax. That means 6 months of hassle right there. Every year. For the rest of your life.

Yes, if you plan on making a few thousand Euro while traveling Asia it might not be a reward to do this. But if you are serious about building your life, the costs and hassle are a fraction of what you will earn in the long run.


#26

Hej Vasilis,
It is not always as easy as just not being 180 days somewhere. As a UK resident you are forced to pay taxes on worldwide income. If you want to get away from that you will likely have to first proof that you are no longer considered resident for tax purposes. I have once read the exact requirements for the UK, but could not find them quickly and do not want to give half information. But look into that direction.

In case you simpy go away for 180 days without making arrangements and have funds wired to your UK bank account is in most cases not enough to get away from your tax obligation.