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Digital Nomad Perpetual Traveler + Apartment in Cyprus = tax ?

#142
JustAnotherNomad said:
I'm not sure if I'm understanding this article correctly, but it sounds like it's a non-issue that could only possibly be relevant when you have income from German sources (such as rental income):

https://staatenlos.ch/geld-ins-ausland-schaffen/astg-§2-erweitert-beschrankt-volkerrechtswidrig-oder-warum-perpetual-traveling-keine-steuerhinterziehung-ist/
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While I really like Christoph (who operates that website), I am sure he is totally wrong on this, and is downplaying that regulation in order to keep selling his "Just create and maintain an US LLC, then just travel the world, so be no tax resident anywhere, and therefore pay 0% taxes"-setup.

If you are able to understand German, watch the video on YouTube from the channel "RA Dr. Tim Greenawalt" (a tax lawyer), when you search for the video title "BMF verschärft Steuern für Auswanderer!" (I am a new member on this forum, so I'm not allowed yet to post direct links).

It is a very competent analysis of nearly 3 (!) hours watchtime, that shows that Christoph is wrong on this on so many levels.
 
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#143
If what @Don wrote is correct, then this is about income without a PE? Then just set up a PE somewhere? Even as a perpetual traveler, you'll likely want to have some sort of "paper base" for banks, so just make it the place where you run your business from and you're golden?
 
#144
JustAnotherNomad said:
If what @Don wrote is correct, then this is about income without a PE? Then just set up a PE somewhere?
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Sure, exiting Germany's tax system correctly (= giving up the permanent apartment there), and then setting up a PE somewhere else would trigger that § 2 Abs. 1 S. 2 AStG would not be applicable anymore = no taxes owed to Germany.

But setting up a PE in another country would trigger taxes to be paid there. So Christoph keeps promoting his "Create an US LLC and travel the world with it, so pay taxes nowhere"-setup. While this might work in theory for other citizens, it definitely isn't working for German citizens, because of that law.

If you understand German, and are interested in this topic, I strongly recommend to watch the video I recommended in my previous post.
 
#145
JustAnotherNomad said:
If what @Don wrote is correct, then this is about income without a PE? Then just set up a PE somewhere? Even as a perpetual traveler, you'll likely want to have some sort of "paper base" for banks, so just make it the place where you run your business from and you're golden?
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It could indeed possibly pass the initial scrutiny.
OffshoreDude said:
Sure, exiting Germany's tax system correctly (= giving up the permanent apartment there), and then setting up a PE somewhere else would trigger that § 2 Abs. 1 S. 2 AStG would not be applicable anymore = no taxes owed to Germany.

But setting up a PE in another country would trigger taxes to be paid there. So Christoph keeps promoting his "Create an US LLC and travel the world with it, so pay taxes nowhere"-setup. While this might work in theory for other citizens, it definitely isn't working for German citizens, because of that law.

If you understand German, and are interested in this topic, I strongly recommend to watch the video I recommended in my previous post.
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I can imagine it's theoretically possible to create a PE abroad that is not taxable.
As an example, one could argue that the company has a PE in Estonia, and it is not taxed because the profits have not been withheld from the Estonian PE, which is the very nature of the Estonian tax system.
The PE could actually be such that it is not treated as a PE for CIT purposes in Estonia, but still be an officially registered PE, but only subject to payroll taxes on locally hired employees.
Even tax declarations could be submitted, which would show a summary form with zeroes.
 
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#146
JustAnotherNomad said:
Even as a perpetual traveler, you'll likely want to have some sort of "paper base" for banks, so just make it the place where you run your business from and you're golden?
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If you "on paper" run your business from some fake or real place in some country and give that address as your place of business for your bank account (purpose), the bank would report your account to that country (CRS!), and sooner or later their tax man would knocking at your door.

And when you operate an US LLC from outside the US, the bank always asks for your place of business, besides the registered agent's address, so you need to give that "paper residency" address as place of business, which would then trigger a PE in that country, making you liable for declaring and paying taxes there.
 
#147
Don said:
The PE could actually be such that it is not treated as a PE for CIT purposes in Estonia, but still be an officially registered PE, but only subject to payroll taxes on locally hired employees.
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Yes, but that would require to have and maintain costly substance in Estonia, because otherwise it is not accepted as a real PE (but as a fake "Briefkastenfirma"), and therefore would trigger § 2 Abs. 1 S. 2 AStG again. The definition of what establishes a (real) PE can be found in § 12 AO of german law.
 
#148
Another question would be if it's the German or the local PE rules that apply.
If you live in Thailand and you work from your apartment, this would likely be considered a PE under German rules, but not under Thai rules.

OffshoreDude said:
If you "on paper" run your business from some fake or real place in some country and give that address as your place of business for your bank account (purpose), the bank would report your account to that country (CRS!),
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Sure.

OffshoreDude said:
and sooner or later their tax man would knocking at your door.
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It doesn't sound like you have a lot of experience with how this works in practice.
Even from the German side, Christoph writes there is not a single case where this has ever been applied in the way you claim. I wouldn't worry about this.
 
#149
JustAnotherNomad said:
Another question would be if it's the German or the local PE rules that apply.
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We are talking about the consequences of § 2 Abs. 1 S. 2 AStG, and from that perspective only the German rules on PE establishment is of relevance.

JustAnotherNomad said:
Even from the German side, Christoph writes there is not a single case where this has ever been applied in the way you claim. I wouldn't worry about this.
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Please watch the video I recommended, there the tax lawyer explains why there is reason to assume this will be enforced more strictly in the future. Furthermore, in late 2023 the German tax minister issued new instructions to their tax offices ("Anwendungserlass"), which clarifies these tax for perpetual travellers without PE anywhere.

If you personally would rely on that just because a jurisdiction did not enforce their rules excessively in the past, that will last and be forever, good luck with that! For me that is not sound tax advice.

Again, I recommend to watch that video. And if you do so, I would be curious if you would be still believing Christoph afterwards, or did change your mind.
 
#151
OffshoreDude said:
We are talking about the consequences of § 2 Abs. 1 S. 2 AStG, and from that perspective only the German rules on PE establishment is of relevance.
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That would be great - like I said, then you can tell them you work from your apartment in Bangkok, for example. That would count as a PE then - even though Thailand wouldn't consider it a PE.
I don't know the German rules specifically, but European PE rules in general are extremely strict, so it really shouldn't take much to qualify.
It's an exaggerated risk.

Besides:

"A natural person who, as a German, was subject to unlimited income tax liability for at least five years in the last ten years prior to the end of their unlimited tax liability pursuant to Section 1 (1) Sentence 1 of the Income Tax Act and

1.
is resident in a foreign territory where their income is subject to only low taxation, or is not resident in any foreign territory and
2.
has significant economic interests within the scope of this Act,

..."

Whatever this means, it would also be relevant to check.
 
#153
NewHorizonsParaguay said:
I did not read the whole thread, but from Germans in PY they ask for a Tax Certificate. When they provide, they are being left alone.

So if you can get tax certificate from Cyprus, not have permanent residency in Germany, you should be fine.
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No, absolutely not. The Cypriot TRC is void if you spend less than 6 months per year there and another country has a claim against you. You can safely assume the German tax authority is aware of this.
 
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#155
NewHorizonsParaguay said:
Ok. What are the conditions to have tax residency certificate issued in Cyprus?
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60 days and a declaration that you are not tax resident elsewhere. But is really does not help you anywhere. I think we had discussed this many, many times. @JustAnotherNomad explained it here just very recently
J

Post in thread 'Taking up Cypriot residence as non-dom: steps and timeframes?'

The most important part is properly cutting your ties with the UK, not just what you do in Cyprus.

To give a drastic example: If you keep your apartment in the UK and you live there 305 days per year and you only spend 60 days per year in Cyprus, then those 60 days won't mean anything.
Cyprus will issue a tax residency certificate if you spend 60 days there and you aren't tax resident anywhere else. But usually the certificate wouldn't even be needed.
You should talk to a UK advisor/tax lawyer to figure out what you have to do, so that the UK will recognize that you have moved to Cyprus...
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W

Post in thread 'What countries make the most sense Tax Wise for my situaton?'

JustAnotherNomad said:
Cyprus can't "revoke" it, their own laws say the paper is immediately invalid if any other country claims you as tax resident and you haven't spent 183+ days in Cyprus. So there is no need to revoke anything, the certificate is just void under Cypriot law because you will no longer be tax resident in Cyprus if some other country claims you as tax resident and you haven't spent 183+ days there.

Malta has no such rule, so as long as Malta considers you tax resident, you will have access to the treaty. But I wouldn't try it without proper presence in Malta.
"Hey, I rented a cheap room in...
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J

Question Post in thread 'Cypriot Non Dom looking for possibility to NOT spend 2 Month in Cyprus'

SoNewToAllShit said:
The tax certificate is that required regardless where you relocate to? Say I relocate from Sweden to Switzerland (stay for 3 years) , I will need a certificate from CH to avoid taxes in Sweden?
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No.
A tax residency certificate is a confirmation from a government that they consider you to be living in that country and that you should pay your taxes there, according to their local laws. That's it.

Cyprus requires just 60 days in country to issue the certificate.
Now imagine you spend 195 days in Sweden, where you own a house, car, your wife and kids live there together with you...
 
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