If you don't have a residence, where do you pay taxes as a European citizen?

It’s really difficult and I haven’t figured out my set up yet either as a European.

The issue is that a lot of the laws make it hard for you to escape taxation, even if you’re not living there. For example, many European countries will require you to give proof of residence in a new country by that government or municipality. Then they share the data with that new country and then the new country will start taxing you. Which is fine, but what if you don’t HAVE a new residency, they don’t allow that.

The Estonian e-residency might work out for you: https://e-estonia.com/e-residents/about/

It means you can for example personal residency in Estonia (and you don’t need to be there physically). Then you register your company in another place like HK, SG, UK. You pay corporate tax in that place and personal tax in Estonia. Done!

Then you have the issue that you won’t have the benefits you get in many (Western) European countries, like building up retirement, welfare, even cheap healthcare coverage.

So it’s not all that great.

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@albsen: Thanks for the info! The “unlimited tax liability” was a good hint. I did some research on the German “erweiterte beschränkte Steuerpflicht” (§§ 2 to 5 AStG) and by the looks of it digital nomads that don’t do any business in Germany are not subject to this.

@levelsio: Thanks for the reply! The Estonian e-residency was new to me. But by the looks of it it’s not a residency by European law, more a form of digital ID. Seems like there is no way around staying 183 days per year in a country like Estonia or Malta for it to be regarded as your residence. At least I can’t find a country where you can be regarded as a resident with staying a shorter amount of time (without investing a lot of capital that is).

In most cases you will be considered a resident of the last country in which you held an official residency in. Basically as long as you do not establish an official residency in another country you are still a German resident. As far as taxes are concerned you should speak to a tax attorney.

@freedomsurfer: That’s interesting as I currently reside in the UK. Will consult a tax attorney.

@levelsio
I have been thinking about this and it will warrant a separate thread. Is there a movement (or should there be) to have the position of location independent people recognised worldwide?
I think globally we are moving towards that but obviously someone has to work at it. Being recognised as such could potentially make it easier for people in our situation to have visas, longer visa etc, it could help with your taxation position.

Sorry I am digressing but I think it merits some thinking.

Other than that, as a european I don’t want to lose my welfare support of any kind, and that is without entering into the issue of trying not to pay taxes or to pay less taxes (I believe in fair taxation for all).

It’s thorny to say the least!

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Hi, let me answer your questions:

(Where) Do I pay taxes when I technically don’t have a residence?

It is as silver surfer says. The most important aspect is to not longer be considered tax resident in your home country.
If you are no longer considered resident for tax reasons anywhere, you don’t have to pay taxes anywhere.
I am also a non resident non tax payer. Read the following:

Reduce Taxes As Digital Nomad

Is it allowed by European/German law to not have a residence?

The only country that taxes its citizens regardless of where they life are the US and Eritrea.
In the rest of the world youare taxed based on residence.
So once you are out of the picture there is no incentive of getting

As it was mentioned somewhere, a lot of tax authorities demand proof that you are no longer resident, even going as far as asking for a utilitybill of your new home. But… Not all. In my case it took about 10 minutes. In any case, this is something you REALLY have to get clear.

For example, the Finish tax authorities consider you tax resident for another three years, even if you have stopped being an actual resident.

Are there countries where you can get a residence w/o staying 6 month/year or large investments,

UAE / Dubai. You can get a residence permit and you only have to be there once every six months. You can get a visa based on employment.

  • Set up a company that hires you
  • get a job
  • get someone to put you on the payroll

And there are many others.

that do not tax non-remitted foreign-sourced income?

There are a lot of countries. Look at the following list at the first two categories.

Can you recommend a good European/German tax advisor who could give a professional opinion?

Contact me if you have more questions. I have helped 100s of clients this matter in my last pre-nomad job.

Do I need to start a company to invoice an US company for consultancy work?

You can also invoice as an individual. But there are a number of other reasons why it is wise to set up a company.
I wrote about that here: https://theglobalcitizen.co/set-up-a-company/

Other points raised:

Social security:
I personally would not value the paper promises of highly indepted Western governments that much.
My father did that and already lost about 10% of his entire pension plan the last couple of year because they are no longer indexing.
You yourself can have a health insurance and save for your pension.
You do not need a bureaucrat to tell you how to do it.

Have a good day, all.

Julius

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Good summary Julius, that’s the way I’ve come to understand the issue as well. My home country (Norway) has similar rules to Finland. I’m on my third year now where I don’t spend >61 days in Norway and have proved tax residency elsewhere.

It’s interesting that you split the third question in two (Are there countries where you can get a residence w/o staying 6 month/year or large investments, that do not tax non-remitted foreign-sourced income?). I know the list on Wikipedia, but most of those countries require huge investments or that you stay for quite some time every year. I’ll look into UAE though.

In general I would feel safer being a tax resident somewhere rather than nowhere (although that’s easy enough to achieve too).

Same feeling ! I’m looking forward to finding the right country.

Any other suggestion after UAE ?

Paraguay is an easy one. You can become a permanent resident in less than 6 months and the requirements are easy: a clean criminal record and >5000$ in the bank. Paraguay has a territorial tax system meaning income generated outside of the country isn’t taxed there so in effect it’s a tax haven.

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Hi Thomas.
Yes indeed. The UAE also requires an investment. A couple of thousand Euro a year minimum. After all, the reason countries have tax benefits is to generate foreign investment.

But not all countries this is big. Freedomsurfer mentions Paraguay. You could also look at Panama.

The main problem with not being tax resident I think are practical. Things like opening bank accounts (no proof of address) and in some cases renewing your passport.

Hej Philippe,

For starters, check the list provided in my post above.

Category: taxes foreign income of “resident foreigners” = No

Then you can look at the individual places and see if there is a way you can become resident. In some case you can get a resident permit as a volunteer for example. It just depends on your situation, type of business and country of exit.

Panama, Philippines, Nicaragua…

Sebastian of WirelessLife.com wrote 2 excellent articles about this. He is from Germany and did extensive research into this:

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My main concern is that I may spend a very short time per year in that place. Any tips on that specific problem ?

I do not really see a problem.
For example in the UAE, you only have to visit once every 6 months in order for your residency to remain valit.

But don’t we have to invest a serious amount in the country to obtain that residency ? And/Or spend the first 6 month there ?

Hi Philippe,
There are a couple of ways for getting a residence permit. UAE residence permits (and other parts of the Middle East) are based on sponsorship.

  • set up a company that sponsors your visa. This way you immediatly have a tax- and audit free company as well.
  • Invest in a property (Min. 1.5 million AED = serious amount)
  • Get a job
  • Or pay someone to hire you and put you on the payroll. This is the cheapest and will cost you 2-3k Euro a year.

You do not have to spend 6 months there. If you are serious about it you could have a residence permit three weeks from now. You need to stay in the county at least two weeks for all the paperwork. And be on your way.

Have a wonderful day and good luch with everything.

Thank you for being specific :smile:

It’s not like in Hong Kong where it’s not ideal to have the residence and business in the same country, right ?

And last thing : you should hop on the country every 6 month, right ?

I only have a partial answer to your questions but maybe it helps for orientation.

  1. if you are German citizen, you are obliged to pay taxes in Germany regardless of where you generate your income

  2. an exception is the case when you generate an income in another country, in which you live more than 183 days per year. Then you might have to pay taxes in that particular country. This is governed by what is called “Doppelbesteuerungsabkommen” and it varies from country to country. This usually goes along with giving up residency in Germany and paying taxes in your current country of residence (in which you live more than 183 days per year).

  3. If you move around betwenn countries nobody really knows how this is going to work. I asked 3 tax preparers (in Germany) but they all stepped from this issue because it was too complicated for them. I am in a very similar situation right now since I live on sailing boat in which I travel around between Turkey and the European countries in the Mediterranean seas. German law DOES aplly here as long as I keep my residency in Germany (which I wont) and as long as I dont have to pay taxes in any other country according to the “Doppelbesteuerungsabkommen”.

If you find out more, please let me know. I dont want to get into trouble either.

Yes. Hong Kong has territorial taxation. Tax on income generated inside hong kong. When you live there, it gets difficult to proof that you generated that income somewhere else.

In the UAE, there are no corporate and income taxes.

In case of the UAE, you have to get there once every 180 days. Your residency permit is valid for three years or three years, depending on which emirate you set up your company.

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“1) if you are German citizen, you are obliged to pay taxes in Germany regardless of where you generate your income”

That’s false, only the US and Erithrea demand taxes based on citizenship. If you don’t generate income in Germany, you don’t have a flat there and you don’t live there for more than 182 days a year, you won’t be taxed in Germany, even if you are a German citizen.

Here’s a little primer on the different types of taxation:
http://www.financialfreedomindex.com/international-taxation.html