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

 

by @mpp | 6yr  | 68 comments

While his type of question has been asked before, please bear with me as the existing threads don’t match/answer my questions.

tl;dr

German citizen working as a consultant for a US startup and moving perpetually every < 3months.

  • (Where) Do I pay taxes when I technically don’t have a residence?
  • Is it allowed by European/German law to not have a residence?
  • 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?
  • Can you recommend a good European/German tax advisor who could give a professional opinion?
  • Do I need to start a company to invoice an US company for consultancy work?

less short version:

Inspired by this community & @levelsio, I’m in the process of becoming a digital nomad myself. The one issue that is currently blocking me is sorting out what the best way to handle taxes is. I’ve been offered a job by a US startup, they want to hire me as a remote consultant (contractor). I’m not limited to a location and free to move where/as often as I want.

As the German tax authorities are known for not joking around, I want to make sure I handle the tax issue correctly. My research so far leads me to believe that as long as I don’t own any property in Germany or do any business there, I should be fine with not paying taxes there. Switching countries at least once every three months also should be sufficient to not create any tax obligations in the respecitive countries.

While in theory this sounds like you don’t have to have a residence anywhere and are not obliged to pay taxes, I have a hard time believing that this is not covered by International/European/German law. Did anyone (ideally European/German citizen) consult a tax advisor / lawyer on this and can give an educated answer to this? I’d also be thankful for recommendations for good tax advisors specialized on this topic.

Last but not least, as I haven’t freelanced before: Do I need to start a company to be able to invoice the US company for my consultancy work or could I just do this as an individual?

Sorry for this rather long post, thanks to everyone who’ll take the time to answer <3

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@busdriver | 4yr

I hear they are easy about “letting you go” if you do “Abmelden” at your “Einwohnermeldeamt” (heisst heute vielleicht anders) and get a “Abmeldebestaetigung”. You might also tell your Finanzamt. But I hear they are not very difficult, don’t ask for proof and such. But that was some years ago
I hear Sweden asks for proof (like buy property).
You could PM me for more.

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@grantage | 5yr

Tax like death is unavoidable, EU law states that if you are not resident in any country, then you are deemed for tax purposes to be resident in the country of the company that you work for. Set up a company in a 0 tax jurisdiction, think cayman islands or BVI. If you work through a Cayman registered company you’ll pay 0% corporation tax and you income tax rate will also be 0%, it’s all perfectly legal and complies with EU law, the most important element is to make sure you do not spend more than 90 nights in any country in any given year, as spending any longer will resident you in that place.
As an EU citizen you could alternatively head to, Monaco, Andorra, Isle of Man, Switzerland or any other low or no tax jurisdiction in Europe, where you can live with no visa.

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@flagtheory | 5yr

EU law states that if you are not resident in any country, then you are deemed for tax purposes to be resident in the country of the company that you work for.

Unfortunately this is incorrect advice. The above is NOT true.

If you were a citizen & resident of Finland and you did this, (or many other countries, Finland is just a country in the EU to serve as an example) you could have serious tax penalties and the situation would not work at all as you describe.

Where you are a tax resident personally, and where your business is domiciled are two distinct issues.

  1. Most countries deem residency by either where you derive income, or where you are physically present.
  2. Most countries determine nexus of a business by looking at the mind & management and control of the legal entity.

If both are the same, and you control a foreign entity from within a county with cfc laws (controlled foreign corporation laws) then you can have some unintended tax liability.

Also - If you “don’t have a residence” you are possibly in a sticky situation. You should look very carefully at the laws of where you were previously resident.

Why Should I look at where I was previously resident?
MANY countries have laws regarding residency that surround your intent and they state that if you intended to return (i.e. you didn’t get a tax residency elsewhere) you are still a tax resident of that country.

Worse case scenario: You leave X country for several years, “never intending” to go back to Country X. Years go bye. Unexpectedly, Fido dies, you return home and stay for 18 months. When you do return, country X can, and probably will try to tax you for every year you were gone. They would claim that your intent was always to return.

Unless you can prove otherwise (with tax treaties, certificate of residency, etc.) then you might have large tax bill to pay (complete with interest, penalties, etc.).

To have CERTAINTY in your tax situation, you must

  1. Setup a new tax residency in a country with best tax laws. (one without CFC laws preferably).
  2. Setup a company in a tax advantageous jurisdiction. You can compare corporate tax rates, % withheld on dividends, CFC laws and other geeky tax and legal stuff at Incorporations.IO
    3.** Consult with a professional** who can give you specialized advice. This is a forum with general information and not tax advice. It’s best to sit down or book a call with an expert who can help you.
  3. If you can’t or aren’t willing to speak to a professional, at least try to educate yourself with the correct information, read the tax treaties of the country where you are previously resident, and resident now and see how you will be treated.

Here are some indepth articles I’ve written on this issue of tax residency on a personal level of taxation. This an article written on how CFC laws and residency can affect your corporate level taxation.

TL;DR - There is some incorrect advice in this thread. You must consult a professional to be certain, but in general (and I’m simplifying to make this applicable as broadly as possible) it’s better to have a tax home somewhere, and pay a bit of tax - than no where - else the country you were previously resident can come after you for back taxes, penalties, and more…

Is there a bright side to this?
Yes! Get a real tax residency, get a second passport!

When you are a legit entreprenuer or self employed person, countries will reward you for immigrating under an official entrepreneurship or investment program and paying a bit of tax (and some of them have tax holidays and more!). Find a place where you can get a permanent residency or citizenship after just a few years.

You are a digital nomad? You have a fantastic opportunity to parlay your freedom into a sustainable business, a stable tax situation, and a new travel document (and more).

Tools to help

  1. Here is an article with all the different countries where you can be a resident and then become a citizen after a certain period of time.
  2. Here is our tool to sort different compare costs for residency and citizenship by investment.
  3. Here is our tool to sort out CFC laws, tax treaties and more: Incorporations.io

My hope is this post saves someone a lot of money!

You’ve can get certainty in your tax affair, a new home, and a new residency and another passport. #business:legal-visas #nomads #business

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@grantage | 5yr

Dear Flag,
I’ll let you into a little known secret, when one citizen of the EU is chatting with another they can take umbrage if a shouty American jumps in telling them what’s what without any actual knowledge of the situation. What I say is relevant only if you are a citizen of the EU, but Flag you should notice that I am stating FACT not opinion.

Here is the relevant case-law from the European Court of Justice relating to cross-border workers as published by the EU, you will notice that this has been European law for over 20 years so not new.

The principles of the Recommendation were largely confirmed by the Court of Justice in its judgment of 14 February 1995 in the Schumacker case (C-279/93). They have been further settled in later judgments such as Gschwind C-391/97 , Zurstrassen C-87/99 , Gerritse C-234/01, Wallentin C-169/03 and Meindl C-329/05. The Gschwind case suggests that non-residents obtaining 90% or more of their total income in the state of employment should normally be entitled to the same tax treatment as residents.

Here is my rather (even if I do say so myself) elegant summary of ACTUAL EUROPEAN LAW that you incorrectly said was not true, I have added a bracketed qualification.
EU law states that if you are not resident in any country, then you are deemed for tax purposes to be resident in the country of the company that you work for (if 90% or more of your income is obtained there).

Let me use an example – Mikko, a Finnish IT contractor gets a job from “Big Tech Co”, who are rolling out a new IT system across the EU over the coming year, he is going to be spending 1 month each in 12 different countries, this means that for the next 12 months he is not resident in any country. Being an intelligent chap Mikko understands that if he sets up a company to work through in a low tax jurisdiction he can reduce his tax burden, so he sets up ‘Monaco Co’ in Monaco (not possible by the way to resident here unless you spend a minimum of 3 months as a resident so not good for Mikko but hey this is just an example). Mikko is now an employee of Monaco Co based in Monaco, he is paid by Monaco Co and obtains 100% of his income in Monaco, he pays himself 100% of the revenue of Monaco Co as salary so Monaco Co does not make a profit or pay a dividend, and thus following the letter of European law he pays income tax to Monaco at the Monegasque rate of income tax which is 0%. Again this is not using an example that would work in real life because of Monegasque residency requirements.

For citizens of the EU it is not necessary to set up your own company, there are ‘umbrella companies’ that do all of this for you, for a small % of your income or maybe even a flat fee, these companies are based in all the low/no tax places (Luxembourg, Switzerland, Isle of Man etc), and they might well be the best place to start because they will take care of everything for you, because you do have to do things properly and make sure everything is above board and legal.

So just to clarify if Finland or any other EU state were to try and penalise a national for doing this they would be contravening EU law, and be fined – yes Finland would be fined for attempting to penalise this.

Please Flag in the future check EU law before making spurious factually incorrect statements.

Kindest Regards

Grantage

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@tkrunning | 5yr

First of all, are you a tax professional, @Grantage?

I’m not, but I do have a fairly good grasp on international tax law, nonetheless. And I really struggle taking your “FACTS” seriously.

First of all, the case you refer to (Schumacker - C-279/93), does nothing to say that you only have a tax liability to the country of incorporation for the legal entity you are collecting a paycheck from.

To fill in others I’ll briefly summarize what the case is about: it is about a Belgian resident (i.e. he is not “a resident of no country”) physically working in Germany for a German employer (i.e. he is working for a company that is clearly tax resident in Germany) and receiving more than 90% of his income there. It was a tax treaty between Belgium and Germany that gave Germany the right to tax the full income, not EU law, and not what the case was about. The case was about Germany’s right to discriminate against the Belgian national by not allowing him the same rights to deductions and tax rebates (including “splitting of income” between spouses) as a German resident. And that’s where European Law was applicable, in stating that due to the free movement of labor within the European Community, Germany was not allowed to engage in such discrimination.

So to take a look at your example with a Finnish national (and assumed resident until the point where your example started). First of all, Finnish residents are deemed to be a tax resident for 3 calendar years after leaving the country. It doesn’t mean that they must pay taxes to Finland in all cases, e.g. if they are resident in a country with a tax treaty with Finland, they might pay some or all of their taxes there (depending on the treaty).

If you don’t understand the basics of international tax law, I can see how you might think that registering a company in a third country (with a tax treaty with Finland), and then paying yourself a salary from that company might shift your tax liability to that country. The problem with this is the typical “mind and management” test, where unless you actually become a personal tax resident of the country of incorporation (assuming you’re sole owner of the company), Finland would be likely to consider the company to be a Finnish resident. So without physically working for an actual established company with actual economic activity and management control within that country, no such treaty (nor the “EU law” you apparently do not understand) will give you any benefit.

It is however possible to be a resident of no country, and have no tax liability anywhere. But that has nothing to do with EU law. You will probably be skirting some laws, but at very little risk. See Streber’s excellent article on the topic. The exception to this (like Edmund aka @FlagTheory correctly stated above), is depending on the laws of the country of your previous tax residency. Or in the case of the US and Eritrea, depending on your citizenship.

@jdmcwalter I would be wary of trusting any advice on this thread (including my own), and especially the one you just got from @Grantage. Instead, talk with tax professionals in each country that might somehow want to collect taxes from you.

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Grantage

From the above, if Mikko creates his company in lets say a non-EU country, e.g. singapore, are the rules the same, if Mikko is presumed to be a tax resident from EU point of view of singapore? Or does it only apply to a company formed within EU jurisdiction?

My current situation is, Irish national, nomad the last year, was in US 3 years before that on a now expired visa (so no longer resident) haven’t lived in Ireland in over 10 years total. I eventually want to pay tax in ireland for political/personal reasons, but at the moment trying to flag my income as low a tax burden as possible as my income is lower than ideal. So, want to set up LTD firm, and I am not sure whether to do it in low tax country in EU or non-EU

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@grantage | 5yr

Hey J,

EU or non-eu doesn’t matter, Switzerland was the original destination of choice and they still aren’t in the EU.

If I were you I would look at one of the British overseas territories/protectorates whatever we’re calling them these days, if for no other reason than there will be less of a language barrier, and the laws will not be a million miles removed from Ireland, the isle of Man is good (and close to home for you) and you’ll likely find a company that can help set it all up for you.

I am not fully up on the latest machinations, but my understanding is that Ireland has corporation tax advantages, it seems a popular place for the big corporations (google etc) which is usually a sign that this regime can be used to the advantage of the regular human being too.

You could look into setting up a structure with an Irish company that you use you charge clients and pays corporation tax to the Irish government, and then a 2nd company in the jurisdiction of your choice that invoices “Irish Co” for your time and pays you. If you happened to know a Irish lawyer you might get some better advice.

hope this helps, good luck

G

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appreciated, thats a good place to start.

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@poppyjikko | 4yr

Hi !

Do you have any specific exemple of this ?

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@flagtheory | 4yr

Hi @Philippe

Finland (as listed above), Australia, and many others. I’ve seen this happen to clients in both jurisdictions because they didn’t properly plan in advance.

As countries continually fail to balance budgets properly, they run up debt and fiscal deficit. The only way a country can “raise money” is to collect more taxes and fees, or sell bonds. As most eurozone bonds already are at negative interest - there is little appetite for this asset class.

Therefore taxes are perhaps the only mechanism for countries with a distressed bond market and entrepreneurs, digital nomads, etc. are an attractive target. This is more the reason to get your financial affairs sorted in advance.

If you think it might apply to you, best to consult with an accountant or CPA from previous jurisdiction, alongside an international consultant who can present various options for immigration and your “second flag” of Flag Theory.

As I stated above, the real answers to your residency will be:

  1. in the tax treaty between the two countries (if any)
  2. in legislation (see UK, which has a bright line test called the SRT - statutory residency test)
  3. In case law (the most messy, hopefully you can find something more clear, as how the courts rule is anecdotal by nature, regarding the circumstances of an individual).

Here are a couple articles I’ve written on residency of corporation (flagtheory.com/residency) and for personal residency (FlagTheory.com/residency)

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@poppyjikko | 4yr

But do you have any case or law that would show similar cases ?

On my side, I’ve conduct research and asked consultants for France and could not find anything.

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@eduardjt | 5yr

Hello fellow nomads! I’m an investment nerd here. I’d like to make a quick point, just to make everything easier and clear, this is a simple strategy:

  1. Read the tax treaties of your home country. Look which is the best treaty that allows you to repatriate dividends of a foreign company to your country and crosscheck to see which one of the other parties (the countries signing the tax treaties with your country) has the lower taxes. Important: search for countries or cities that don’t tax foreign income such as Hong Kong.

  2. Origin of income. Look at how much of your income derives from your home country and what are the legal percentages % you must have in order to invoice your customers from abroad. Example from X country: if less than 50% of your income derives from your home country then you can legally invoice from a foreign company.

  3. Set up a company in one of those business havens and you’re good to go. Now you know that you don’t pay taxes in your company’s country plus you pay a lower rate on your personal income in your home country due to the tax treaty (best case scenario: 10%, 5% or less).

Good luck! :smile:

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@cpruijsen | 5yr

Once you have the ability to save up ~$500k it seems Nevis Citizenship by Investment is the Holy Grail. And it pays off doing this asap as the sooner you do it, the less taxes you’ll pay over your lifetime earnings. Definitely on my roadmap.

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@kfk | 5yr

I think as European it might be actually easy - just set up residence in a country with low taxation. My brother lives in Bulgaria. He pays 10% income tax for his company + 5% tax on dividends. Then if you get to the point where 10+5% is too much because your income is sky high, you are going to have enough resources to find good advise to optimize things.

For health insurance, you could stay with Bulgaria, or get a private one (private will be cheaper probably).

For pension, check boggleheads and vanguard, they are they only decent option to a real pension out there. State pensions - if you are below 40 today are not an option (look at most of the demographics in the European countries to see why).

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@reganha | 5yr

Does your brother actually live there or is just “base”? If not, do you think it’s doable spending most of your time actually outside of Bulgaria?

Can you ask him and give me an idea of accounting/maintenance costs? Can you buy a car VAT free from another EU country and register it as company car? I can’t find proper info anywhere, google results is full off accounting/legal firms trying to sell their stuff. Would really appreciate info from someone who is “doing it” already.

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@kfk | 5yr

@reganha

I have just noticed your questions on bulgaria, but first, let me say I love this comment:

It must be because I am a finance guy, but people totally miss this. Making $10k per month in Germany is very different than making the same in Bulgaria. In Germany you pretty much have to divide by 2, while in places like Bulgaria you pay a 10% + 5% and you are done. That’s a $3.5k more that you get doing pretty much nothing.

Does your brother actually live there or is just “base”? If not, do you
think it’s doable spending most of your time actually outside of
Bulgaria?

He lives there, in Sofia. I have spent a week there in November and totally get why now: people speak English (more than in Italy…), it’s cheap (I think it’s one of the cheapest capitals in Europe, decent flat rent runs at euro 200 per month), it has a very decent party life (but it’s no Ibiza), it’s relatively European. But of course, it’s still south of Europe, so it’s no Germany.

But as of using Bulgaria as a base, the problem is not Bulgaria, is whatever country you are really living in. If you spend more than 180 days in any other European country, in theory you are liable to pay taxes there. If you don’t, you are good, and you can decide to pay your taxes in Bulgaria.

Can you ask him and give me an idea of accounting/maintenance costs?

very low. It depends on the business, but we are in the euro 100 range.

Can you buy a car VAT free from another EU country and register it as company car?

This is a tricky thing to do. What kind of business are you running? What is your overall plan with this? Are you sure you can register a company car even in your own country if you do online business/freelancing?

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@blueblueocean | 5yr

It’s actually very complex.

You don’t have to sever all ties with Canada to not have to pay taxes in Canada, being a non-resident.

For example, you can keep: RRSPs, some bank accounts, brokerage accounts. Consider that a non-resident investor in Canada might have many of these assets in the country, that does not make them a resident. However, the risk increases the more you keep. Obviously wife, car, and children will certainly push you into residency like it or not. Perhaps you keep a driver’s license or a medical card. Now it gets more risky. Also make sure to change your residency status on any accounts you keep in another country. Some digital nomads live simple lives and have few possessions so secondary ties would take a greater significance and can often be a grey area.

What I would do as a digital nomad is separate the time out of the country into a 2 year and 5 year period. These are the times at which documents begin to expire. Passport 5 to 10 years. Medicare - 2 years after extended absence. Drivers license: 5 years. I think one should stay a Canadian resident for between 3 to 5 years abroad. It’s much simpler. Then transition over afterward. As an aside, a new law about Canadian citizens abroad for over 5 years and their right to vote: You don’t have the right to vote after 5 years abroad even if you pay taxes back home or anything. So to me this is as clear as day. 5 years is the benchmark time away. Use the maximum given to you, then switch. It’s the simplest.

A final word: None of this is relevant if the two countries have a tax treaty with each other. Since most all countries have a tax treaty with Canada, tie-breaker rules would kick in if both countries consider you a resident by virtue of a technical rule (such as days spent in a country or certain ties otherwise). Those rules supersede all country specific laws. If you look at the tie-breakers, they are very similar to the criteria mentioned above for Canadian residency and you have to judge the case in both countries. The catch is if you are not a resident in the new country, you can’t really apply the tiebreaker rules, you will then have to fall back on the rules regarding your home country and if those don’t apply because you move around forever, that is a grey area of being a digital nomad that virtually no country has addressed.

My opinion: Remain a resident of your home country for up to 5 years, then decide to switch or not depending on the ties you have or don’t have. If you have no ties anywhere, default to the country you spent the most time in and had the most ties in - or just don’t pay taxes anywhere if you feel comfortable doing that. Sometimes, there is a benefit to paying taxes in a language you know, using software you know, in a country you know well. If the rate for you is not crazy high, why bother with the hassle? Think of the future. It seems these days someone wants a claim on your earnings somewhere, somehow.

I think, but am not sure, that if you stay in a country long enough even if you don’t register or get any documents, the tiebreaker rules would kick in and if it comes to that in court, one country or the other will claim taxing jurisdiction.

After 5 years, be strategic. Choose a structure and country that will minimize your capital gains, dividend, and lastly salary income (although this one is hardest to minimize). There are all sorts of ideas of a corporation continuing in a new jurisidiction or incorporating offshore and living in a country that has favourable repatriation of funds laws relevant to you personally. In the end, where you spend more time should be of primary consideration. No point setting up on an island if you don’t like that or will never spend time there or aren’t already some giant company. Also don’t be lured by zero rate countries. You don’t need zero rates. What you need is reasonable, low rates with special features to your situation that requires research.

Good luck!

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@manu | 6yr

There is just too much uncertainty around this topic. Many posters here keep mixing concepts or suggesting tactics that will never hold up. E.g. Estonian e-residency vs. real residency or controlled foreign company (CFC) laws.

To answer OP’s question:

  • without any residency one or more double tax treaties (DTA) will apply
  • without any residency those will usually fall back to citizenship - BOOM

My tip: get some kind of residency and read the relevant DTA. They are shorter than normal laws. Then do whatever the DTA says to keep personal tax residency in a low-tax, territorial income-only jurisdiction.

Here the presentation, I recently gave on the topic: http://bit.ly/1cfReIW

It gives a high-level overview of concepts that won’t change. If you are looking to execute, best talk to someone who did something similar for a few years. I can give tips for Europeans in Asia, but can’t help Americans for example.

@TheGlobalCitizen is also knowledgable on the topic. I liked his Philippine residency blog post.

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I think I forgot to thank you for the compliment. Thank you!

Anyway, I was not going to respond but now people start to message me confused.

“without any residency one or more double tax treaties (DTA) will apply”

The first criterium for taxation is always national law. A DTT (not DTA) can be applied to lower the tax burden when one can proof a residency and/or permanent establishment in another contracting state. So a DTT between two contracting states ONLY applies in a situation where there is a residency and/or permanent establishment in BOTH states. It would not make sense for a government to give you a tax break when you cannot proof you are entitled to one.

So this statement is not only false. It is the complete opposite of true. You NEED residency to apply a DTT.

“without any residency those will usually fall back to citizenship - BOOM”

I do not understand this statement but it cannot be made without context. The only countries that tax on citizenship are the US and Eritrea.

All other countries tax based on the facts. Facts like residency and permanent establishment.

Also I do not really get all the references to DTT’s on this forum. For most DN’s making use of DTT’s is very difficult.
Yes, one side can be proved. Residency. Just go and live somewhere. We call it “location A”.

But the business side is more confusing. I mean, just look at the criteria (OECD MODEL CONVENTION Article 5 https://www.oecd.org/tax/treaties/1914467.pdf):

The term “permanent establishment” includes especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop, and
f) a mine, an oil or gas well, a quarry or any other place of extraction of natural
resources.

Most DN’s dont have (b) to (f). What they do have is (a). But this is where they are because they are most likely the director of their company. This is “location A” because that is where they are located the entire year. Or they have to fly to the supposed place of business, conduct board meetings, document all decisions made, and have a non fiscal reason why they make those decisions abroad.

But most people run their business on a continual basis, not during x amount of board meetings in another country. So it will be an interesting discussion with the tax authorities (one I would not want to have).

In addition, how could DN’s proof (a) when they are travelling all the time?

That is why you see a lot of multinational avoiding taxes by using DTT’s. They have the money to hire a local manager and finance (b)-(f).

Small companies and DN’s working from their laptop, not so much…

Cheers!

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@manu | 5yr

Julius, I welcome a discussion. We can all learn from it. I’m certain we agree on more than we differ. Let me respond to your earlier points:

Here is the context: (DTA of HKG-France as example), Art. 4.2c

© if he has an habitual abode in both Parties, or in neither of them, he shall be deemed to be a resident only of the Contracting Party of which he is a national (in the case of France) or in which he has the right of abode (in the case of the Hong Kong Special Administrative Region);

Does this mean, if a French national is a DN with a Hong Kong company and no residency, he can be taxed in France? I saw cases where expats were asked to prove their current residency or pay up at home. It’s not enforced for petty cash, but for higher amounts they keep that option.

This seems wrong, when I read Article 4 above. A DTA rather ensures you tax the income arising from one jurisdiction somewhere, rather than not at all. I’m not quite sure on cases, where 2 states have no DTA.

“DTA” is a very common expression to describe this kind of tax treaty. Wikipedia uses it. Hong Kong IRD also calls it that. As do PWC and KPMG. Are we all using it wrong? Could you clarify the difference?

No problem. We’re all here to learn. I like to look at and refer to DTAs because they are an important part of international taxation and thus relevant to many questions. Not just big corporations as you said, but also expats, DNs, PTs. They are an extension to national tax laws and supplement them in many important ways, when they exist. When applied correctly, they can protect us against taxation. With mounting pressure on tax havens and increasing exchange of banking data, there are fewer ways to escape. Playing by the rules is more future-proof and lets you sleep better at night.

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Dear Manu,

First of all, thank you for your feedback.

What I am trying to get clear is the following:

Tax treaties do not create taxing rights. A state cannot base the exercise of its tax jurisdiction on the fact that under the relevante tax treaty it may tax a certain income. Double tax treaties only limit the exercise of taxing rights, the cannot create new ones. Taxing rights can only be created by the domestic legislation of a state according to its sovereign powers. These rights may then be limited by the application of a double tax treaty.

(so no, a french national DN with a HK Co and no residency will not be taxed based on his nationality because of this tax treaty).

I fully understand that laws apply to everybody, regardless of size (or understanding, which is pretty unfair if you think about it).

But getting back to my previous remark that a DTT can only by applied to prevent double taxation I still don’t see how this would be useful for most of the small entrepreneurs and digital nomads on this forum. It is very difficult to proof substance when it is just you and your laptop and you are travelling around.

When people are being asked to proof residency, that means there is uncertainty created by the actaul facts. I agree that these discussions can be devastating once you get into them. But that, you luckily have in your own hands.

The reason I say this is because once I stopped being a resident of the Netherlands, I have never had to report my current residence so that a government employee could check if my income streams would be in breach of any of the tax treaties they have in place based on which they could not force me to pay taxes because I am not a tax resident anyway (but off course, you never know with the French).

And maybe I took my definition of a digital nomand to much like my own image (travelling around) and that a lot of the readers on this forum are actually going to live in place A while managing a business in place B, in which applying a DTT could be useful. So you have a point there. But in that case, a discussion will first address points (a) & (b) in the clause you refer to and only in very exceptional cases will point © be relevant.

With regards to the abbreviation used for Double Tax Treaties (DTA) I admit it was just anal. You were right and I was wrong.

Have a good day!

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@blueblueocean | 5yr

Let’s look at a country like Canada. First of all, they say that the courts have established that a citizen must be resident SOMEWHERE. This is really hard to argue “not resident on planet Earth for tax”. So a Canadian citizen must be resident somewhere. Then it says, one condition of non-residency is becoming tax resident somewhere else. If this does not happen, you are most likely to be taxed at home. If you are resident in two places at once, the tie-breakers kick in. And I hate to say this, but it almost never gets to citizenship. Usually the first 1,2,3 conditions are met. Just living in another location and having no more “home” at home is often enough. Just saying, I hate the way the governments of the world are so protectionist but it seems that everyone will end up paying tax somewhere unless they want to live on a little island in the middle of nowhere.

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Hi,

That is a very interesting comment. Do you have a link so that I can read more about it? (residency requirement for Canadian Citizens)

About living somewhere without paying taxes:

You do not have to live on an island to not pay taxes. There are countries that dont have taxes, like the UAE (Dubai).
The list of countries that don’t tax income that is sourced abroad is even bigger (and has a lot of places interesting for digital nomads like Philippines, Panama, Costa Rica).

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@bavals | 5yr

@TheGlobalCitizen You can look at this document
http://www.cra-arc.gc.ca/E/pbg/tf/nr73/README.html

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RESIDENCY REQUIREMENTS FOR CANADIAN CITIZENS

@bisonravi. Thank you for the document. It is of course just a form to fill in when Canadians leave the county (like a lot of other countries have). But it mentions the underlying regulations. I did some digging.
Here is what I came up with…

There is absolutely NO doubt that in order to be able to stop paying taxes in Canada one must cut all residency ties in Canada and proof permanent residency a new jurisdiction. You will need a new home and a residents permit (although other factors measure in as well).

It becomes interesting when you are away for more than 2 years. You now become a non tax-resident emigrant:

Generally, you are an emigrant for income tax purposes if:

*you leave Canada to live in another country; and*
*you sever your residential ties with Canada.*

Severing your residential ties with Canada means that you do not keep your main ties with Canada. This could be your case if:

*you dispose of or give up your home in Canada and establish a permanent home in another country;*
*your spouse or common-law partner or dependants leave Canada; and*
*you dispose of personal property and break social ties in Canada, and acquire or establish them in another country.*

Now, after you have become an immigrant, you no longer even have to file tax returns in Canada (unless you have Canadian sourced income).

The original statement (@blueblueocean) was that courts upheld that everyone must be resident somewhere and therefore must have a country where he has a residents permit. It seems pretty clear. But there is one question: how is residency defined?

The problem is that it is not defined in the law. But the subject has come up in the supreme court.

This is from McFadyen v. The Queen (but they cite Thomson v. Minister of National Revenue).

"For the purpose of income tax legislation, it must be assumed that every person has at all times a residence. It is not necessary to this that he should have a home or a particular place of abode or even a shelter. He may sleep in the open. It is important only to ascertain the spatial bounds within he spends his life or to which his ordered or customary living is related. Ordinary residence can best be appreciated by considering its antithesis, occasional or casual or deviatory residence. The latter would seem clearly to be not only temporary in time and exceptional in circumstances, but also accompanied by a sense of transitoriness and of return.

But in the different situations of so-called “permanent residence”, “temporary residence”, “ordinary residence”, “principal residence” and the like, the adjectives do not affect the fact that there is in all cases residence; and that quality is chiefly a matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question. It may be limited in time from the outset, or it may be indefinite, or so far as it is thought of, unlimited. On the lower level, the expressions involving residence should be distinguished, as I think they are in ordinary speech, from the field of “stay” or “visit”."

What are they saying? You do not necessarily need to have a home or a residence permit in order to have residency somewhere. They just state that for income tax legislation some sort of a residence MUST be determined. (it is like 1 + x = … - you can not solve that formula).

So I do not see how as a Canadian Citizen that is considered an emigrant and non-tax resident is required to be a formal resident (residence permit) in a different jurisdiction. Meaning that the original statement would be false.

However, having a residence permit and a permanent home will make his case much clearer and stronger if he ever runs into a dispute. In addition I would like to emphasize, that he really has to have cut all ties with Canada. Even things like social relations, maintaining a bank account and spending to much holidays at home could open the door to discussion when ones residency is not clearly defined.

Having said that, as a Canadian you already have proven to the government that you lived somewhere else for two years.

Surely, they will understand that you are no longer their milking cow by then…

Cheers,
Julius

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@flyonthewall | 5yr

@manu Most DTAs are formulated to prevent Double Taxation (which is obvious from the name) in case you are a resident of one country and a citizen of another.

They usually apply to residents and the term ‘resident’ in most DTAs refers to people who are tax resident. In most cases this means you have to spend at least 6 months in that country (it depends though, the US has a lower threshold for example)

DTAs fall back to citizenship in case there is confusion about whether the person is a tax resident of one state or another (usually the country of citizenship). Tax residency is defined by each country according to their own rules. Just because you were present in a country does not make you tax resident. In most cases not even a RESIDENCE permit makes you tax resident. You still need to meet the criteria that the tax laws of each country have set, whether that is a physical presence test or some other kind of test.

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@riennn | 5yr

Yeah I think that was what Manu was saying as well.

I’m heading to Thailand soon and I am from Belgium. I will unregister myself from the resident registry here in Belgium so I won’t have to pay city taxes and all that other stuff while I’m not here. Doing that won’t prevent Belgium from taxing me on any income I will make since I will be on a tourist visa and won’t have a working permit in Thailand.

I have been reading the DTA (DTT whatever you want to call it, they’re both correct) between Belgium and Thailand and what it basically comes down to is that as long as you don’t have a proven residency in any of the two countries, you WILL be taxed by your home country on any income you have made. Of course you’d first have to declare that income to the government institution. And while I haven’t looked into other DTA’s yet, I guess it will be the same basics for many countries. So basically, for DN’s on tourist visa, having no residency anywhere, doesn’t automatically mean that you don’t have to pay taxes anywhere.

Article 4 Fiscal domicile

  1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person whose income or capital, under the law of that State is subject to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State respect only of income from sources therein or capital situated in that State.

  2. Where by reason of the provisions of paragraph 1 an individual is a resident of Contracting States, then his status shall be determined as follows:

a) He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (center of vital interests);

b) if the Contracting State in which he has his center of vital interests cannot be determined, or if he has not a permanent available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;

c)if he has an habitual abode in both Contracting States or in either of them, he shall be deemed to be a resident of the Contracting State of which he is a national;

d)if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3.Where by reason of the provisions of paragraph 1 a company is a resident of both Contracting States, it shall be deemed to be a resident of the Contracting State in which it is incorporated or under the law of which it derives its status as a company. If the company under this criterion still is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

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Dear @Riennn,

The exact same feedback:

Tax treaties do not create taxing rights. A state cannot base the exercise of its tax jurisdiction on the fact that under the relevant tax treaty it may tax a certain income. Double tax treaties only limit the exercise of taxing rights, they cannot create new ones. Taxing rights can only be created by the domestic legislation of a state according to its sovereign powers. These rights may then be limited by the application of a double tax treaty.

Also, in your comment there are variables that you have not mentioned that are important. Like where is your income sourced? Will you live there permanently? What are the requirements of becoming a non resident.

If you keep running a business in- or have sources of income from Belgium and you move to Thailand and want to prevent double taxation yeah, you have to learn that DTT by heart.

Also, if your exiting state request you to proof residency abroad before you can be considered non resident a tourist visa will not be sufficient.

But if your income comes from let’s say Hong Kong and you are no longer considered tax resident in Belgium, the DTT Belgium-Thailand (or Belgium-HK) is completely irrelevant.

Context context context.

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@riennn | 5yr

I’m totally with you on your point that DTA’s are there so that your income won’t be taxed twice…

And I know that a tourist visa won’t be sufficient. That was my point, I will be on a tourist visa like many others, so I won’t have a permanent residency. At least not one that I can prove with a non-immigrant visa for business or whatever. This does give the Belgian government the right to tax me on my worldwide income, doesn’t it? Income will be generated through freelancing online, from Thailand.

The requirements of becoming a non-resident are easy. Just like in your country, the Netherlands, I have to go to the government institution in my town and ask them to get me off the records, including the paperwork of course. But getting a residency in another country is a whole lot more difficult. I probably can’t even subscribe myself to the Belgian consulate in Thailand, since I’m on a tourist visa. Unless I need help from them, that won’t be a problem. But if the shit hits the fan (natural disasters or lost my passport or whatever) and I need help, they won’t be able to help me (as good or as fast) like a citizen that is on the list of the consulate in that country.

Another question that has been on my mind that you might be able to answer. Right now I don’t have a business, but if I would ever start one, let’s say an ecommerce business in Belgium. Am I obliged to incorporate in Belgium, or with a corporate model that is recognized in Belgium? Or can I operate in Belgium with an American LLC for example? I know of the British Ltd. and something called the eurobv, but the sites that are ‘selling’ this all look a bit scammy.

Thanks for your time! :slight_smile:

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“This does give the Belgian government the right to tax me on my worldwide income, doesn’t it?”

The Belgian government ONLY has the right to tax you on your worldwide income when you are a tax resident of Belgium.
The most important part of becoming a tax free digital nomad is completely exiting a high taxed country and comply with all the requirements for doing so. But once you are “out” you can only become liable for tax when certain conditions are met. Like when you stay a certain amount of time, have a permanent establishment, have a certain taxable income, etc. (this goes for any country). In some countries, you are requested to proof residency before they “release their tentacles”. If it is as easy as you say, please do it.

Keep in mind that it gets more difficult once you established a profitable business. You probably want to set up your business after you leave. But keep in mind that for setting up a company + bank account in most places in the world you will have to provide a current dated proof of residence. This is difficult for most DN’s to obtain.

“Am I obliged to incorporate in Belgium, or with a corporate model that is recognized in Belgium?”

No, you can set up a company everywhere in the world. In fact, I do not see why you would set up it up in Belgium. This will involve a lot of paper work and tax considerations that you don’t have in other jurisdictions. If it is just you sending invoices it is very easy to set it up tax-free.

Remember: You are a citizen of the world. A world of possibilities. Not just restrictions.

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@riennn | 5yr

Yup, that was what I was saying, I am a tax resident of Belgium and I will stay one even if I unsubscribe from the population register. They give me the option to be ‘absent’ for a year and then I can still decide to come back, meanwhile paying all sorts of city taxes and other health care taxes… Ooor I can unsubscribe but then they suggest me to go subscribe again at the Belgian consulate in wherever you are. But being on a tourist visa won’t give me those rights if I don’t have a permanent address somewhere. And to get a permanent address in most countries in Asia (where I’m heading), you need a job with a company from that country. So no, it’s not as easy as just unsubscribing from the population register, as I’ve said in previous post.

I know it is difficult and that is why I said in my post 5 days ago that, “as long as you don’t have a proven residency in any of the two countries, you WILL be taxed by your home country on any income you have made.” Of course you’d first have to Declare that income to the taxman. So basically, for DN’s on a tourist visa, having no residency anywhere, doesn’t automatically mean that you don’t have to pay taxes anywhere and it will fall back to your citizenship UNTIL you get a permanent residency somewhere, preferably a strategic location, business & personal.

I know I don’t have to start a company in Belgium, but I’m not sure what it takes to operate on the Belgian/Dutch market with a Hong Kong company or an American LLC? It sounds like a lot of extra paperwork as well to comply to EU VAT and all that stuff. I’m thinking about selling products for example. The main problem is the cash, since starting an LLC in Belgium requires €18 600 unless you get the starters one, but it has all sorts of restrictions. I’m not planning on taking any big risks yet so that amount of money is ridiculous :smiley: Could live on it in Asia for 2-3 years, if I live on the cheap that is! So yeah where to start a basic company which is recognized in Belgium, The Netherlands, the USA, UK, the world? :slight_smile: There’s all sorts of scammy sites selling the ‘Euro BV’ & ‘Euro NV’ and they are, well yeah… Scammy :stuck_out_tongue:

Starting as a sole proprietor, just for now seems the easiest way, but then I’m not protected as a person from any liabilities. If I set up a company in Belgium it will be even harder to prove residency in another country, since I’m having my ‘seat of wealth’ here, or the place that I ‘do business’. Even though I’m not operating from here. So all this and the big investment makes it definitely a no-go. But I guess I could easily close the sole proprietor company and open a company in a better jurisdiction later, right?

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@Riennn. I will leave the topic on taxation for what it is. As flyonthewall already mentioned, it is going into the wrong direction.

About setting up a company that you can use in those countries. Maybe you try looking into the Dutch “Flex BV” or a “UK limited”. They do not have those capital requirements. There are 10’s of thousands of people setting up companies in Europe every year. I am sure they are not all being scammed.

About starting out as a sole proprietor I wrote a comment for the owner of this site. He is Dutch. But it helps you to understand some of the logic. Hi, I'm Manu, an accountant turned digital nomad and offshore tax expert. AMA!

Note that instead of setting up a low tax structure you will set up a structure with exactly zero tax benefits and a huge tax bill when you get successful.

But you know what, that might be fine.

For some digital nomads or business models it might not make sense to do any tax planning. There can be costs involved. Hassle. And what if you only want to travel for a year or so and come back? Maybe you just need to make a small amount to keep you going in Asia and the taxes will be fine. Maybe you should first try actually running a business and selling stuff. And create the right international mindset.

I once set up a structure for another Belgian guy. Looking at his turnover, I did not see the benefit. He wanted everything cheap and tried to open bank accounts himself. Took him months. If he would have put that time, effort and money into growing his business he would probably make much more money than he could ever save in taxes.

Good luck!

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@riennn | 5yr

Yeah, you’re definitely right about that last bit. Building a business first, is more important than anything else. It doesn’t hurt to weight options before you go about doing anything though, especially if you actually need/want to set up a business entity for sure, to start selling products or whatever.

I read your answers to Pieter in that topic, it was helpful. And I know that people who set up a (flex)BV aren’t all getting scammed. I was talking about the EURO BV in particular. All the sites selling those, DO look very scammy and there are warnings about those types of company structures on several forums. Anyways, I made up for myself that setting up in Belgium definitely is a no-go. How would I ever want to prove my tax residency in another country then! :smiley:

Thanks for your replies man!

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@rxs | 5yr

@Riennn: Whoop Whoop, I’m not the only one from Belgium! I’m really interested about your personal situation and choices since I’m also freelancing and planning on coming to Thailand for a few months (but first Vietnam) - I was in Colombia last week, now back in Belgium. How can we get in touch (if you don’t mind obviously) ? We could probably share useful information between each other as there aren’t many Belgians around here :wink:

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@giovanni | 5yr

One more Belgian here :). Currently in Medellin. I’m not living in Belgian anymore. Setting up a company in Belgium, even while not living there, means that you’ll have to pay social security and other taxes as long you are not paying social security in another country (I have a Belgian bvba). I would avoid setting up a company in Belgium - even when living in Belgium. Bulgaria is a great option - in case you need an EU based company (running one for over 3 years now).

Building a business first, is more important than anything else.

Partly correct. Except for high startup and maintenance costs in some countries, it’s not that easy to move your profitable business to another country/business. Planning ahead is a smart move.

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@reganha | 5yr

I definitely need an EU based company, need a VAT number for import of goods and I’d like to have a car registered in the EU (I know it’s not that nomadic, but it’s nearly impossible to rent a car like a V8 Vantage or an R8).

What I dislike about Bulgaria is that reporting isn’t that minimal, specially for VAT registered companies. . And I’ve heard it’s hard to deincorporate? So it’s hard to run a really low cost solution.

Couple of questions if you don’t mind again :stuck_out_tongue:

Can you run a Bulgarian company without paying yourself? (Doubt it, but worth asking, I sensed this from @kfk post, he didn’t mention social security )

If no, what is the minimum you can pay yourself and what is the min Social security payment?

A company “running on flumes” (meaning, having nearly zero activity), would still spend how much early? (accounting, SS for owner if mandatory, etc)

I’m still researching costs but other solutions I’ve found is a Maltese company with management out of the country, coupled with a Panama residency for instance. (Otherwise you’d run into problems with other EU countries, specially the one where you placed your “management” for the Maltese company).

There’s also an option of registering for VAT in UK with a non-EU company, but then you’d probably have problems doing banking in Europe.

Not when you are giving away nearly 50 to 70% of what you earn (really, do the math and you’ll be astonished). Gladly Portugal has a great sole trader program when incomes are low, VAT registered with simplified accounting and exemption for Social security up to a threshold. No need for accountant and everything can be done online.

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@kristof | 5yr

Another Belgian guy here. ll this tax residency stuff sucks ass, that’s for sure :smiley:

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@flyonthewall | 5yr

I know it is difficult and that is why I said in my post 5 days ago that, “as long as you don’t have a proven residency in any of the two countries, you WILL be taxed by your home country on any income you have made.” Of course you’d first have to Declare that income to the taxman. So basically, for DN’s on a tourist visa, having no residency anywhere, doesn’t automatically mean that you don’t have to pay taxes anywhere and it will fall back to your citizenship UNTIL you get a permanent residency somewhere, preferably a strategic location, business & personal.

@Riennn This is patently false for many nationalities. I don’t know the case for Belgium but please stop generalizing this for all DNs as you are in your statements. It would be very useful if this thread carries helpful info for most DNs. The information you are repeatedly posting is inaccurate so please don’t keep posting it again and again, it might mislead more people who may read this thread in the future.

I have professional opinions from several professional accountants on this and for many many nationalities out there (Portugal, Ireland, India, Brazil, etc.), this reasoning does not apply although there may be certain other considerations to take into account depending on the national rules of each country of citizenship and your individual situation. Please talk to an accountant about your concerns rather than draw up conclusions on your own, it might help you get some peace of mind or find out the right procedure for your own scenario.

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@riennn | 5yr

You’re right. It was a personal case, and it can’t be generalized. But I am asking questions, more than spreading information. And most DNs, what is that anyways when we’re talking Europeans?

For sure there are nationalities who don’t face this problem, but surely there are many other Europeans who face similar problems. That’s what this forum and thread is about, sharing experience and asking questions. But I do understand that not all information is free :wink:

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Dear Manu,

First of all, thank you for your feedback.

What I am trying to get clear is the following:

Tax treaties do not create taxing rights. A state cannot base the exercise of its tax jurisdiction on the fact that under the relevante tax treaty it may tax a certain income. Double tax treaties only limit the exercise of taxing rights, the cannot create new ones. Taxing rights can only be created by the domestic legislation of a state according to its sovereign powers. These rights may then be limited by the application of a double tax treaty.

(so no, a french national DN with a HK Co and no residency will not be taxed based on his nationality because of this tax treaty).

I fully understand that laws apply to everybody, regardless of size (or understanding, which is pretty unfair if you think about it).

But getting back to my previous remark that a DTT can only by applied to prevent double taxation I still don’t see how this would be useful for most of the small entrepreneurs and digital nomads on this forum. It is very difficult to proof substance when it is just you and your laptop and you are travelling around.

When people are being asked to proof residency, that means there is uncertainty created by the actaul facts. I agree that these discussions can be devastating once you get into them. But that, you luckily have in your own hands.

The reason I say this is because once I stopped being a resident of the Netherlands, I have never had to report my current residence so that a government employee could check if my income streams would be in breach of any of the tax treaties they have in place based on which they could not force me to pay taxes because I am not a tax resident anyway (but off course, you never know with the French).

And maybe I took my definition of a digital nomand to much like my own image (travelling around) and that a lot of the readers on this forum are actually going to live in place A while managing a business in place B, in which applying a DTT could be useful. So you have a point there. But in that case, a discussion will first address points (a) & (b) in the clause you refer to and only in very exceptional cases will point © be relevant.

With regards to the abbreviation used for Double Tax Treaties (DTA) I admit it was just anal. You were right and I was wrong.

Have a good day!

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@blueblueocean | 5yr

globalcitizen - if you are in ‘location a’ as resident the main issue is paying high social security taxes as a sole proprietor which dividends from a corporation or investment income is not required to pay. This is probably why people try to incorporate in location B and hope there is no management attribution to location A (for the small fish this is the most rare of investigations by tax authorities - they’d have to PROVE that you literally typed the commands on your computer from within the country).

Is there a way to avoid social security taxes if you have your own income stream? Could you say it’s investment income from say intellectual property assets like a website if you are a digital nomad?

On the DTT issue, do I understand correctly that it applies when you are resident of BOTH countries OR not resident of EITHER country (moving around)? In that case, it does seem that citizenship gets to tax you and if you are dual citizen, then I believe most DTT’s say by common agreement of the agencies which seems to suggest an unknown dividing up of the spoils so you have no certainty which way it goes - plus any penalties or interest if you assume wrong. The problem with all these issues is no government gives you any certainty of their position which makes planning kind of unpleasant and reduces the desire for rocking the boat. Probably easiest to be resident in one place and say you are travelling for years, there is no restriction as far as I know how long you can stay out of your home country except expiry and renewal of passports.
However if you stay in one secondary country there is probably some limit where it becomes obvious you are no longer resident of the first country. For example, in the UK HS302 helpsheet for dual residents claiming exclusion of income from their secondary country two questions ask what you did in the last 4 years. I sort of assume this means after about 3-4 years you will not be able to use the DTT provisions without some noise.

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@oceandweller | 6yr

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.

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@floc | 6yr

“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

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@oceandweller | 6yr

Correct. I mentioned that under no 2) in my answer.

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@poppyjikko | 6yr

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

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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.

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@poppyjikko | 6yr

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 ?

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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.

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@poppyjikko | 6yr

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 ?

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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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@yemoonyah | 6yr

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

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@freedomsurfer | 6yr

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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@tkrunning | 6yr

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).

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@poppyjikko | 6yr

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

Any other suggestion after UAE ?

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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…

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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.

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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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They are probably the only country that taxes based on citizenship but there are others that tax based on worldwide income. I know from personal experience with a tax advisor that France taxes on worldwide income if you are fiscally resident in France. As a DN, being fiscally resident may be unlikely but it is something to be aware of.

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You are absolutely right. Most countries tax on worldwide income. Here is a nice overview: https://en.wikipedia.org/wiki/International_taxation#Individuals
(keep in mind it is wikipedia, do double check when you are )
Countries in the first three brackets (up to Saudi Arabia) do not tax income generated abroad.

One remark: with a lot of countries there is some paperwork involved in order to no longer be considered a resident in the home country. Giving up residency in your home country is the most important step in living an international tax free life.

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@toto2000 | 5yr

Where can i find your blog on Philippines?

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I think this is the one you are looking for:

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@sarab | 6yr

@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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@mpp | 6yr

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

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@freedomsurfer | 6yr

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.

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@mpp | 6yr

@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).

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@levelsio | 6yr

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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Hi, i remembered I read about seeing someone recommending this, when someone asked me to write something about it. Here it is:

The Estonean E-residency is useless in this context. It is just an ID card that you can use to obtain certain services from the government. This can be handy when you set up a company in Estonia.

If you look at the actual law: https://www.riigiteataja.ee/en/eli/513042015004/consolide/current
It states “Identity Documents Act”

This has nothing to do with actual immigration, nor can you proof residency for tax purposes with it (and I don’t know why anyone would pick Estonia for that).

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@albsen | 6yr

Hi mpp,

I’m not a tax specialist but I’ve recently research this particular topic of German law
myself.

You’re fine as long as you’re not subject to “unlimited tax liability” as per German law.

However, your country of residence might have signed a special agreement with Germany
to avoid double taxation (DBA).

How not to be subject to “unlimited tax liability” as per German law is a much longer
discussion and depends significantly on your personal circumstances.

There are a couple of portals in German language with regards to this topic,
this is just one of them:
http://www.frag-einen-steuerprofi.de

Hope this helped.

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Hi, I know there are a few posts around this topic but none of them quite answer my questions.

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Oh, and is the money accrued (without being reported tax-wise) considered black money?!

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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.

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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.

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by @sarab | 4yr 4 years ago | 6 comments

Hi guys,

I’m planning to spend a month in Australia before 3-4 months in Thailand, and was wondering if anyone has any experience of applying for the single entry Thai tourist visa in Australia while being a citizen of another country. I ask because in the UK, for example, they won’t give you that visa unless you are a UK resident, and I won’t be an OZ resident then.

I will be travelling before that so cannot apply in my home country.

I am aware of the Penang option, but I am specifically asking about this scenario.

Any feedback would be gratefully received!

admin edit: subject changed as it doesn’t follow forum guidelines.

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Are there any self-employed visas available in European countries?


by @oskar | 4yr 4 years ago | 15 comments

Hi guys

Does anybody know if there are special visas for self employed people in European countries? I dont have a European passport but i would like to stay a bit longer than the time allowed to tourists. I know Germany have some kind of visa but are there any other countries in the region? what about the UK?
Thanks!

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Can Europeans also fly cheaper using credit cards and gain miles?


by @rxs | 4yr 4 years ago | 3 comments

I hear more and more about digital nomads (mainly from the US and Canada) flying cheap (almost for free) by taking advantage of bonuses given by banks / credit card companies. I’m not exactly sure how the system works.

Is it also possible to do for Europeans ? If so, how ?
If not, do know any other hacks to fly cheaper ?

Many thanks for your help.

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