Becoming a Digital Nomad - Advice Please

[PeterOS]

Hi there.

I am new to this forum and offshore in general and am hoping to learn from others and (eventually) contribute to other posts.

I have several properties in the UK which I let out to residential tenants and holidaymakers. I also work as on online IT consultant, offering services worldwide, but predominately to Europe. I am currently self-employed and classified as a UK resident, paying tax in the UK.

I plan to spend time in different European countries each year (3/4 months in each country). I would like to pay zero or very low income tax for the online IT consultancy services, but am happy to pay income tax in the UK for my UK properties.

I would appreciate any advice on the best way(s) to achieve the above.

Thank you for your help and advice.

Pete.

 

[TurnedToRobot]

There are a few threads around the forum about people in same situation as yours. I read they don't have to pay tax anywhere as they don't spend more than 180 days in the same country at a time. This must be the same for your situation.

 

[void]

There are a few threads around the forum about people in same situation as yours. I read they don't have to pay tax anywhere as they don't spend more than 180 days in the same country at a time. This must be the same for your situation.

It's unfortunately not that easy and it's not only about days spent here and there - too easy for people having money. Nevertheless looking at the local conditions is where to start.

 

[abdulkaddir]

Welcome to the forum. I'm sure you will get more insights from here and other forums too.

 

[blizz]

Where do you plan to live while you stay in a country, hotel, renting a flat, etc? will you drive in a car or take a plan? Will you buy food or do you live from plants around?

How about registering off in your current country will you do that or just vanish and don't inform anyone about your plans?

 

[PeterOS]

There are a few threads around the forum about people in same situation as yours. I read they don't have to pay tax anywhere as they don't spend more than 180 days in the same country at a time. This must be the same for your situation.

On www.europa.eu is says the following:

• you will usually be considered tax-resident in the country where you spend more than 6 months a year
• you will normally remain tax-resident in your home country if you spend less than 6 months a year in another EU country.

Wondering if Cyprus may be an interesting place to be for 6 months. I believe they have an income tax threshold of €19, 500.

Where do you plan to live while you stay in a country, hotel, renting a flat, etc? will you drive in a car or take a plan? Will you buy food or do you live from plants around?

How about registering off in your current country will you do that or just vanish and don't inform anyone about your plans?

Hi.

Well, I plan to rent an apartment, go the the shops, rent a car and other normal activities.

It's unfortunately not that easy and it's not only about days spent here and there - too easy for people having money. Nevertheless looking at the local conditions is where to start.

I am considering the possibility of a Cyprus company or becoming a tax resident there or possibly setting up an offshore company in say the Seychelles. I want to be able to operate the online IT consultancy service from any location, but not having the pain and expense of dealing with tax in each country. Do you have any advice?

 

[blizz]

Hi.

Well, I plan to rent an apartment, go the the shops, rent a car and other normal activities.

and what is the problem for documentation of where you have been living for the last 6 months and for sure not in your home country then? If you consult a tax lawyer to fix the questions from the different tax offices then it shouldn't be that complicated.

 

[Tax Cow]

In the case of UK, just being out of the country for 6 months is certainly not enough.

There are a number of tests, but the one most relevant for you will be the "Center of economic interests" test due to your substantial BTL real estate portfolio in the country.

There is a reason many London high street properties are vacant ghost homes. They are owned by foreigners who do not want to carry the risk of tax residency. The laws say in black and white that real estate does not constitute tax residency but this should be taken with a grain of salt. It's safe to avoid tax residency while playing for capital gains but BTL constitutes an economic activity even if the properties are managed by a 3rd party.

To not fall in the "Center of economic interests" net, you will need to prove that you earn more income from ONE SINGLE OTHER COUNTRY. Alternatively, you can just spend 6 months or more in one other country (assuming you have no dependents in the UK).

- Example: Earn 100K from UK BTL and spend 0 days in UK. Spend 3 months in country A, B, C and D respectively. Earn IT consulting income of 30K from each. You will be treated as a tax resident of the UK, but if tax is paid at the source to A, B, C or D, you will get tax credit in the UK.
- Example: Keep everything the same, but instead of earning 120K IT consulting income from 4 different countries, you earn it all from one, you will be treated as a tax resident of that other country.

TL;DR - Do not take reckless tax risks. Get a real tax residency elsewhere where you find the tax rate to be acceptable. Spend 6 months or more in that other country to solidify residency at least for the first 1 or 2 years to avoid a possible tax dispute with the UK. Make sure you register with the local authorities and obtain a document that proves your residency in that other country.

 

[TurnedToRobot]

It must be possible like in any other EU country to say good bye to your country by simply go to the authority and tell them you want to sign off because you are going to live somewhere else! I know I can do that online in my country. It will take me 5 min. and that's it.

I have a friend that did it and took to the USA because of work and lived there for 3 years on a work permission he got from FN!

 

[PeterOS]

In the case of UK, just being out of the country for 6 months is certainly not enough.

There are a number of tests, but the one most relevant for you will be the "Center of economic interests" test due to your substantial BTL real estate portfolio in the country.

There is a reason many London high street properties are vacant ghost homes. They are owned by foreigners who do not want to carry the risk of tax residency. The laws say in black and white that real estate does not constitute tax residency but this should be taken with a grain of salt. It's safe to avoid tax residency while playing for capital gains but BTL constitutes an economic activity even if the properties are managed by a 3rd party.

To not fall in the "Center of economic interests" net, you will need to prove that you earn more income from ONE SINGLE OTHER COUNTRY. Alternatively, you can just spend 6 months or more in one other country (assuming you have no dependents in the UK).

- Example: Earn 100K from UK BTL and spend 0 days in UK. Spend 3 months in country A, B, C and D respectively. Earn IT consulting income of 30K from each. You will be treated as a tax resident of the UK, but if tax is paid at the source to A, B, C or D, you will get tax credit in the UK.
- Example: Keep everything the same, but instead of earning 120K IT consulting income from 4 different countries, you earn it all from one, you will be treated as a tax resident of that other country.

TL;DR - Do not take reckless tax risks. Get a real tax residency elsewhere where you find the tax rate to be acceptable. Spend 6 months or more in that other country to solidify residency at least for the first 1 or 2 years to avoid a possible tax dispute with the UK. Make sure you register with the local authorities and obtain a document that proves your residency in that other country.

Hi and thanks foryour reply.

Initially, I will be earning more from the property lets as the online IT consultancy business is still in its infancy.

I was thinking about setting up an offshore company in the Seychelles as it is tax free and registering the online IT consultancy business there. All taxes would be payable to the Seychelles. I was hoping that it would allow me to obtain business in various European countries either online or by visiting possible clients in person (it would just be to see if they want to become a client before doing business with them online) in each country (but staying no longer than 3/4 months in each country inc the UK) and not being sucked into each country's tax system.

Another option I was considering could be to remain self employed and stay in Cyprus for 6 months to become a tax resident and take advantage of the income tax benefits there.

I am very new to this sort of thing and appreciate your guidance.

 

[PeterOS]

and what is the problem for documentation of where you have been living for the last 6 months and for sure not in your home country then? If you consult a tax lawyer to fix the questions from the different tax offices then it shouldn't be that complicated.

Hi.

Yes, I am likely going to have to consult an international tax expert if I can't get my head around where I would stand

 

[Tax Cow]

Hi and thanks for your reply.

Initially...

You will have a hard time finding reputable clients willing to enter into a IT consulting contract with a Seychelles IBC in Europe.

For direct contracting in EU, you will need to incorporate in Switzerland, Estonia, Luxembourg, Cyprus, Malta, Andorra, etc. but these options will likely be less available and most of them more expensive than Seychelles.

To incorporate in Seychelles is to take on risk that your client will look for someone else. Banks and insurance companies that typically contract with IT freelancers have audits and any contracts with typical offshore jurisdictions will raise questions.

You can use a Seychelles IBC, but you will likely need a local payroll/contract management solution intermediary that will charge about 5% (a rough estimate) of what you make in fees for managing the relationship. If you avoid working with insurance companies and financial institutions, your Seychelles IBC alone might be enough.

Good luck.

 

[void]

You will have a hard time finding reputable clients willing to enter into a IT consulting contract with a Seychelles IBC in Europe.

For direct contracting in EU, you will need to incorporate in Switzerland, Estonia, Luxembourg, Cyprus, Malta, Andorra, etc. but these options will likely be less available and most of them more expensive than Seychelle

We probably live in another EU or I don't know how did you come to that conclusion? In IT sector there are tens (maybe hundreds) of thousands of developers, analysts and consultants missing and no one gives a s**t about where are they incorporated or coming from. And if it's a problem for anyone there are plenty of others that will subcontract you and cover your unwanted parameters (whatever it might be).

 

[Tax Cow]

We probably live in another EU or I don't know how did you come to that conclusion? In IT sector there are tens (maybe hundreds) of thousands of developers, analysts and consultants missing and no one gives a s**t about where are they incorporated or coming from. And if it's a problem for anyone there are plenty of others that will subcontract you and cover your unwanted parameters (whatever it might be).

Name one person using a Seychelles IBC who is directly contracted with BNP Paribas, AXA or any of their subsidiaries. Until then, keep your utter nonsense to yourself.

 

[void]

Forget about it, we are talking about different things obviously, no need to get angry.

 

[mnschwarz]

It must be possible like in any other EU country to say good bye to your country by simply go to the authority and tell them you want to sign off because you are going to live somewhere else! I know I can do that online in my country. It will take me 5 min. and that's it.

I have a friend that did it and took to the USA because of work and lived there for 3 years on a work permission he got from FN!

The difference there is they actually lived in the USA. As previously mentioned, if you can't satisfy the criteria to be resident of another country, you will usually be deemed a tax resident of your original home country. It's always best to cover your bases and have tax residency somewhere rather than just bouncing around and hiding.

Also signing off, leaving, claiming non residence etc is usually pretty easy. The problem comes in later if you get audited, they have reason to doubt the truthfulness of your claims or you move back home.

 

[mnschwarz]

Hi and thanks foryour reply.

Initially, I will be earning more from the property lets as the online IT consultancy business is still in its infancy.

I was thinking about setting up an offshore company in the Seychelles as it is tax free and registering the online IT consultancy business there. All taxes would be payable to the Seychelles. I was hoping that it would allow me to obtain business in various European countries either online or by visiting possible clients in person (it would just be to see if they want to become a client before doing business with them online) in each country (but staying no longer than 3/4 months in each country inc the UK) and not being sucked into each country's tax system.

Another option I was considering could be to remain self employed and stay in Cyprus for 6 months to become a tax resident and take advantage of the income tax benefits there.

I am very new to this sort of thing and appreciate your guidance.

Be sure to check the CFC laws in your country. In most, simply incorporating offshore does nothing to avoid taxes. They all have their own variations but most say something along the lines of, if the company is owned or managed in full or the main shareholders have above 10-25% ownership, the company will be taxed as though it is a local company.

Also as mentioned above, the image of Seychelles "may" be an issue for some. Though for the most part I doubt it unless you're chasing some really big fish. If it did prove to be an issue as you grew, you could look at a second company in UK or elsewhere that does the work and then shift profits offshore to your Seychelles company to reduce taxes. You'd have to pick at what point it becomes more profitable to do so.

 

[PeterOS]

Be sure to check the CFC laws in your country. In most, simply incorporating offshore does nothing to avoid taxes. They all have their own variations but most say something along the lines of, if the company is owned or managed in full or the main shareholders have above 10-25% ownership, the company will be taxed as though it is a local company.

Also as mentioned above, the image of Seychelles "may" be an issue for some. Though for the most part I doubt it unless you're chasing some really big fish. If it did prove to be an issue as you grew, you could look at a second company in UK or elsewhere that does the work and then shift profits offshore to your Seychelles company to reduce taxes. You'd have to pick at what point it becomes more profitable to do so.

Thanks for your reply and help.

HMRC says that the majority of CFCs are set up for genuine commercial reasons and to reduce the compliance burden in applying the rules. They are concerned about diversion of UK profits to low tax territories. It says on their website that the HMRC International manual has the definition and guidance relating to CFCs with accounting periods beginning before 1 January 2013.