Not a resident in any country - What are your experiences?

Hi nomads!

Is there anyone here who’s a perpetual traveller and therefore not a resident in any country? I know that many nomads have a home base somewhere, remaining either residents in their country of origin or choosing another country.

I was a resident in Portugal for about a year but for the last 4 months, I’ve been a perpetual traveller without residence. I have an Estonian e-residency card but at the moment, my whole income derives from teaching German online and it would be senseless to open a company for this.

I’d love to hear from people who’ve been living like this for a longer time already. What are your greatest challenges? Have you ever run into problems?

I know about all these offshore possibilities, flag theory etc but honestly, I’ve always had the impression that this is not a solution for people like me who just earn enough to live comfortably but don’t have huge savings. Sure, you can and should aim for more but at the moment, the situation is like this.

Daniela

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imho there’s no such thing as a perpetual traveler when it comes to tax residence.

You can often read “since I’m not a resident anywhere I don’t pay taxes anywhere!” These are just people who will have a long discussion with the taxman, they just don’t know it yet.

From the point of view of any tax authority the story is imho: unless you can prove that you paid taxes in another country with whom we have a tax agreement, you’re still taxable here! Show me the money! :moneybag:

If you’re on nobody’s turf it doesn’t mean that you can get away for free. It just means that no one will protect you ( and everyone can ask from you) the day you’re asked a question.

So to answer your question, either you still file in Portugal or you need to find the best place to declare tax residency, given your effective presence there, your income etc.

I’m not an expert and I’d love to hear other opinions!

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As far as taxes are concerned, your information is wrong, wimgz (unless you’re American). When you don’t live anywhere, you’re not liable to pay (personal) taxes and that’s perfectly legal. It’s not only about being a resident in a certain country, there are more criteria which can result in you being liable to pay taxes. Anyway, I’d rather be interested in hearing from people who actually live like this. I recently was in touch with a Dutch girl, for example, who had a problem to renew her passport because she couldn’t prove any residency.

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Let’s assume that not being a tax resident anywhere is an option (I doubt most countries will be ok with it, but please prove me wrong).

With which bank account will you do business and where is it registered (who will they provide your account information to according to the CRS?).

Will you get caught? Probably not, but just for the fun of it, try to deposit a large sum of money in your account and your home country and see what happens.

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Somehow, I had thought that the people were better informed but that doesn’t seem to be the case. Why is this tax thing so interesting? If I had a large sum of money, I’d become a resident or even citizen in Peru or another South American country and run my business from there. At the moment, I’m just a poor travelling language teacher who’s doing nothing illegal. Well, apart from working although I’m officially a tourist. That’s what most digital nomads do, don’t we?

I do not claim to know the tax regulations for every country, but after extensive research and advice from professionals I’m pretty sure being a perpetual traveller is very much a grey area for my home country. This is why I pay a lot of money to get tax residence elsewhere.

I’m not saying you are wrong about your country, but to claim that the people on this forum are uninformed seems wrong to me.

To come back to your situation, yes it’s not completely fair that people with the means to set up offshore corporations and tax residency in tax havens pay less tax, but that’s the way it is at the moment. In your case I’d say you’ll probably stay under the radar, but I would review the following:

  • Where do you receive your funds and how (cash/bank/paypal)
  • Is there a chance that your home country gets a hold of this information
  • What are the tax rules in your country, perhaps they only have territorial tax and it is best to stay registered and report?
  • Are you officially signed out of your home country?

If what you say is true and you are indeed a poor traveling freelancer, why not just stay registered in your home country and set up a sole proprietorship? You’ll probably benefit from a lot of favorable tax rules and barely pay any tax, on top of that you’ll get:

  • social benefits
  • health insurance
    Assuming that is the case for your home country.
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Laws vary from country to country. Check the laws of your citizenship country, you probably still have to pay taxes, unless you have an offshore business. I nomad full time and still have to pay income tax and social security in my country.

Same here, nomad full time this year, but as a US citizen, I still file and report worldwide income for tax determination. There are credits and exclusions available depending on circumstances, but there is still tax involved, at least for me.

If you’re not resident anywhere and you are not a US citizen it is possible to be what is termed a perpetual traveller. The big concern I have had for most of our clients is that the common reporting standard requires them to declare somewhere that they are resident for tax purposes. I considered this to be a bit of a headache to me personally but then I realised that the simplest solution is to become tax resident somewhere that is friendly for expats. There are a number of potential locations many of which are quite interesting. I’ve outlined the options below. Of course the key question is where to opt for and hopefully this list will help. The key is there’s no point in ‘jumping out of the frying pan and into the fire’. Anyway to get this done you essentially have three choices:

• Nil tax havens
• Foreign Source exempt havens
• Low tax havens with special rules that share investors/traders can benefit from.

Nil Tax Havens
These are simply countries that do not have any of the three main direct taxes:
• No income tax or corporation tax
• No capital gains tax, and
• No inheritance tax

Many of the nil tax havens you’ve probably heard of or read about in novels. You may even have holidayed in some of them. They include:
• The Cayman Islands
• St Kitts and Nevis
• Dubai
• Monaco
• The Bahamas
• Bermuda
• Vanuatu
• The Turks & Caicos Islands
• Anguilla

Foreign Source Exempt Havens
These countries do levy taxes and sometimes they can be pretty high. However, what makes them tax havens is the fact they only tax you on locally derived income. In other words, if all your income is derived outside the tax haven you will not pay any tax.

Good examples of foreign source exempt tax havens are:
• Panama
• Costa Rica
• Hong Kong
• Singapore

Thiese final two interesting.
Malta - In Malta individuals holding a residence permit under the ordinary residence scheme pay personal income tax, at progressive rates of up to 35%, on any local income and on any foreign sourced income which is remitted to a Maltese bank account. The key here is you aren’t subject to income tax in Malta on foreign source income not remitted to a Maltese bank account. You are also not subject to income tax on any foreign capital gains whether they are remitted to Malta or not. Technically ordinary residence permit holders are required to reside in Malta for at least 183 days a year coupled with an intention to reside in Malta but I know two or three PT’s who live there three months a years and work around the world and as long as the government gets some tax each year the probably aren’t going to worry too much because they won’t want you to be resident somewhere else if you can be paying them! The main thing here is that you can hold a residence permit under this scheme and pay zero income tax in Malta in a completely legal way and probably nothing elsewhere. I recommend you pay some tax in Malta, but it doesn’t have to be a huge amount.

Number two is Uruguay. In 2011 Uruguay introduced changes to the tax laws that made some foreign-source income taxable for all residents of Uruguay, the government however decided to grant a tax exemption for all foreign residents! they did this in order to keep the existing foreigners in Uruguay and ensure future immigration to the country. This exemption applies for 5 years so it’s worth a look. Personally I have residence in Panama and that works well for me but if Europe is better for you Malta is a good choice.

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Very good write up with possibilities. Isn’t there also a distinction between residency and being a tax resident?

For example, you may have residency in one European country for part of the year, or multiple countries for parts of the year (in the case of the perpetual traveler scenario) but only considered a tax resident if the duration is longer than 183 days (in most countries of the EU [verify your country’s specific requirements for tax filing obligations]) in a specific country?

The key is avoid multiple residency situations. A friend in Canada who had a holiday home ended up tax resident but not actual resident which was a nightmare but had he been resident somewhere else he would have been fine. This is an interesting summary "Many countries, including Spain, France, Portugal and Cyprus, have a double tax treaty which will determine an individuals tax residency status in favour of just one country, forcing the other to drop their residency claim. If you remain within the rules of your country of residence, then tie breaker rules will come into effect.

Using Spain as an example (it is similar in many other countries) In Spain, you will become resident for tax purposes if you spend more than 183 days in the calendar year (tax year) in Spain; or your centre of economic interests is in Spain.

The first tie breaker rule is that if you are resident in both countries according to each country’s domestic rules, you are deemed to be resident in the country in which you have a permanent home available to you. Note that a permanent home is any form of accommodation which is continuously available to you for your personal use, and does not have to be owned by you.

Where you have a permanent home available in both countries, the second tie breaker rule comes into play and that is which country is your centre of vital interests, i.e. the country with which your personal and economic relations are the closest. The term centre of vital interests covers the full range of social, domestic, financial, political and cultural links within your personal and economic relations. For example, if you have a home in the UK where many of your possessions are kept, and your family and majority of friends live in the UK, and you have UK based pensions and investments, it can be difficult to prove that Spain is the centre of your vital interests.

If this test is indeterminate, then the third tie breaker is used: in which country you have an habitual abode. This broadly means the country in which, over a reasonable period, you stay more frequently. The comparison must be made over a sufficient length of time for it to be possible to determine whether residence in either the UK or Spain is habitual.

Finally, if the answer to the third test cannot be determined i.e. you have an habitual abode in both countries, you are deemed to be resident in the country of which you are a national. At this point for example UK nationals will be regarded as UK residents.

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Who or which authority, which country, determines the multiple residency issues and situations in your examples? Which tax authorities would be alerted to even be involved in contesting your tax resident status?

For instance, contrary to the OP’s “never a resident” scenario, since there would be residency in each country to fulfill legal obligations (even simple census reporting), if in this scenario, I am ONLY filing a US tax return, and claiming IRS-54, the foreign earned income exclusion, and qualifying it by listing my locations for 2017, for example, 150 days in Spain, 150 days in Italy and 65 days in France for the complete year, who or which country determines my tax residency status? While my domicile is in the US, the company paying my wage is in the US, but I am working outside the country for more than the 330 days a year to qualify for the exclusion, my tax residence would be where?

Since I was resident in three foreign countries all under the 183 day threshold to be considered a tax resident for each, Spain, Italy and France, and I would not be reporting income already taxed in the US in those countries, also since I was not employed locally, and all three have double tax treaties with the US, which country would be my tax residence in that scenario? Is this the multiple tax resident situation that you are talking about? Or is the tax residence still in the US, since that’s the reporting authority involved for the taxation and the exclusion?

In the UK it’s more than pyhsically being in the country for a certain length of time. Under my current business setup I will have to pay tax in the UK even if I do not step foot in the country, because my earnings are derived from the UK. Not sure how this compares to other countries.

I think it’s better in the long run to maintain some sort of tax presence in your home country or somewhere you might settle eventually.

Regarding CRS and offshore banking, many countries use the concept of domicile vs tax residence for reporting. That’s because tax residence can change quite often but domicile doesn’t change so often. I won’t get into what domicile means but in general you can assume it’d default to your country of citizenship. So they’ll report your bank account to your country. You need to prove you don’t owe them anything and if you’re not a tax resident, this isn’t that hard.

Now, depending on your country of citizenship it might be easy or difficult to prove to the tax department that you are not resident there. A lot of nomads on this forum come from countries which are quite aggressive tax hounds (US/Western Europe/etc.). However, not all countries have such onerous requirements on their citizens. Some countries just have a physical presence test so if you’re not there for a certain number of days a year then they let you off the hook. You don’t need to prove that you are resident elsewhere for these countries. Please check up on what your local tax residence rules say.

UK/Western European countries/Canada etc. are really difficult to break tax ties with. I wouldn’t really try that without setting up a solid residency somewhere else.

Also, worth mentioning is that Chile also offers 3 years of exemption on foreign source income. You can read more about it here:
http://www.sii.cl/aprenda_sobre_impuestos/estudios/sistemrenta_ingles.htm

Also, another article about Taxes for nomads.

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Hi Daniela,

Thanks for starting this thread. It’s a really interesting topic that’s relevant for a lot of DNs. Although there’s some good information in this thread already, there are also a lot of inaccuracies. So here’s my attempt at clearing up some of those inaccuracies.

First, this is the best introduction to the whole PT thing I’ve come across (written by “Streber”). Check it out.

As long as you’re no longer tax resident in any country (including country of birth, citizenship, but also others where you’ve lived/worked/have a connection) according to those countries’ domestic rules, it’s totally possible to be a tax resident of nowhere. Note that if you have a US or Eritrean passport (citizenship based taxation) or are born in a country with domicile based taxation (e.g. Australia, Canada, and quite a few more), you’ll probably always be tax resident somewhere (you will always have a domicile, if you lose your previous domicile it reverts to where you were born). But lots (most?) countries don’t determine tax residency based on citizenship or domicile (including most European countries), so it’s not unlikely that you’ll be in the clear.

Always make sure to get confirmations from previous countries where you’ve lived for a significant amount of time (and been registered as tax resident) that they no longer consider you to be tax resident according to their domestic rules.

Being tax resident of nowhere doesn’t necessarily mean that you don’t owe any tax anywhere, however. Generally income (for legal and natural persons) is taxed both based on tax residency and source. If tax residency and source is not the same country, DTAs and unilateral tax credits usually step in to make sure you don’t pay tax on the same income to both. With no tax residency you won’t be able utilize any DTAs, so income is generally taxed at source. This means that you won’t be able to lean on a DTA to reduce the tax burden for income that, for example, is subject to a withholding tax (e.g. 30% for a lot of US source income). But even if your income is not subject to any withholding tax, then the country where you physically perform the work (even just for a day) can tax you on the corresponding income (according to their domestic rules). However, many don’t if you only stay in the country for a short while. And those that have rules in place to tax you from day one, often (usually?) don’t come after you in practice as long as you don’t work for a local employer. It’s definitely a legal gray zone, but the chance of getting in trouble with the tax authorities in a country where you spent 2 month working from your Airbnb is miniscule.

If none of the above caveats apply to you, and you’re okay with being in the above mentioned gray zone, then there’s nothing stopping you from being a true PT.

Still, @ORCA is right that establishing a tax residency can still be beneficial. It makes dealing with banks easier (although you won’t get into trouble for listing your country of citizenship as your tax residency for CRS purposes, as long as you’re not a tax resident in your country of citizenship according to that country’s domestic rules), and will open up opportunities to use their DTAs to lower your tax bill in other countries (where you’re tax liable based on source or withholding taxes). Like @Orca mentioned, Malta is definitely worth a look—especially if you have a EU/EEA/Swiss passport. In that case it’s super easy to register as a “self-sufficient” resident there.

And although the number 183 days is often thrown around as a minimum requirement for being considered a tax resident (through being “ordinarily resident”) in Malta, that’s not really the case. According to Maltese tax law, residing 183 days per year in Malta would make you “ordinarily resident” automatically, but it doesn’t define anyone spending less than 183 days per year as not “ordinarily resident”. If, for example, you spend parts of your winters in Malta, with the intention of doing so year after year in the regular course of your life, then case law suggests that you could be considered “ordinarily resident” and hence also resident for tax purposes in Malta. Plus, it’s in Schengen, so it’s hard to know how long you really spend in the country.

The regular disclaimer applies. Don’t trust what I or anyone else write in some internet forum. Assume we’re all dead wrong and have no idea what we’re talking about. Talk to professionals in those countries that might consider you to be tax resident there to make sure that’s not the case.

Anyway, one classical challenge with a truly location independent life with no home base is whenever you’re asked for a utility bill or similar to prove your residential address (to open various financial or investment accounts, verify Paypal, etc). Often a bank statement will suffice, and many banks will let you change your address on file with them to anything you want, in any country. So just change the address on file for with of your current banks to whatever address you need the confirmation for, and download an online statement. BOOM, that’s sufficient address proof for most situations.

Cheers!

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Thanks for a great write up. Reading those deeper links now.

you can even avoid paying personal tax even if you are American (I am). But not paying tax has many consequences, for examples, not being able to buy condo even with full amount in cash (because they are worried that I wouldn’t be able to afford the maintenance fee, even though I have X times of annual maintenance fee in my cash saving account).

Aside from the tax, you are still considered the resident of your home country.

@bananaeatsmonkey Not to stray too far OT but, that’s worrying about not being able to purchase something in cash, like a condo. Which country has given you difficulties? I find the banking regulations for US citizens outside of the US [mainly in Europe] to be a problem as well, either with reporting requirements for us [FBAR] or for the banks, their non acceptance of US citizen accounts, deposits, probably stemming from AML/KYC regulations and the extra burdens complying. I have yet to open a non-US bank account for these reasons, and was wondering about just this sort of scenario, purchasing a condo. Have you tried to build credit in the foreign country either in a savings account or by another means? I could understand if you were applying for a loan, where you’d have to show income to qualify, but for an outright cash purchase, seems horrible.
I am paying tax in the US from my salary. I will take any available deductions allowed when filing my return, but most likely the FEIE will cover us fairly well.