Digital Nomad Perpetual Traveler + Apartment in Cyprus = tax ?

[daniels27]

Sounds like you will have to pay exit tax...
Just move to Bulgaria, pay 10%, done. Bulgaria is a Schengen country.

If he does it like I explained many times, he won't. Moving to Bulgaria won't help anything. He will then just pay a maximum of 5 years later in case he stays there. They recently changed the rules.

As with all such small setups, key is to not get into and discussion and keep flying under the radar. Once they have you, you better have leaned a lot in other to fix your case.

 

[JustAnotherNomad]

I meant Bulgaria would be a better fit for his goals than Cyprus. Schengen country, low tax.
Not sure about exit tax.

 

[Don]

If I go with cyprus, as far as i understood now the cheapest way to get the non-dom, without an overpriced cyprus limited, would be to register sole proprietorship in cyprus. Some service providers offer this for 1-2k and then you have way less accounting costs too.

I think one of the cheapest in the long run could be if you register a PE of a foreign entity, as this way you can avoid audit and publishing accounts to Cyprus authorities. Potentially your compliance would be limited to filing a CIT return once per year.

Estonian LP company could be great for this as it can also be exempted from submitting financial statements in Estonia (for example if its members are private individuals).

 

[Don]

I meant Bulgaria would be a better fit for his goals than Cyprus. Schengen country, low tax.
Not sure about exit tax.

Good point.

Its worth comparing the domestic laws on the basis of which an individual qualifies as a tax resident, since this is important for even accessing treaties.

Bulgaria company + residency would be 10% CIT + 5% WHT (pretty much on par with Cyprus with such income).

You could also do Estonia residence + company with a branch/subsidiary in Bulgaria/Malta/Cyprus and operate through such structure outside Estonia with effective 10%/5%/12.5% tax.

CY residence - 60 days minimum stay and if other country claims residence then it will be revoked.

BG - 0 days presence required, if CVI is in Bulgaria

EE - 0 days presence required, but if CVI is in a different jurisdiction the treaty can override tax residence in Estonia

CVI - centre of vital interests


In tax treaties, a certain test is normally included for resolving dual residency – a case where two countries claim the same individual to be its tax resident:

a) Firstly, the individual is a resident in a country where he/she has a permanent home available;
b) If he/she has a permanent home in both countries, the residency country would be the one where his/her personal and economic relations are closer. This means the country where his family, friends, work etc. are located.
c) In case his/her vital interests cannot be determined, the residency country is the one where he/she habitually lives;

 

[Hydrox]

Just move to Bulgaria, pay 10%, done. Bulgaria is a Schengen country.

I dont think i would like to stay in bulgaria. Only good thing is that i could get a nice car and drive, still not for me.

Firstly, the individual is a resident in a country where he/she has a permanent home available;

This means, in case germany wants to go after me - if i dont have ties there and have a rented appartment in some DTA country, then the country with the appartment would be my place of taxtation right?

CY residence - 60 days minimum stay and if other country claims residence then it will be revoked.

I meant Bulgaria would be a better fit for his goals than Cyprus. Schengen country, low tax.
Not sure about exit tax.

Bulgaria has better income tax than CY, so it would be much better for my tax case, yes.

But why would it "protect" me better than a residence in CY? Both have DTA, just bulgaria nobody can really check when i went in and out right?

 

[JustAnotherNomad]

This means, in case germany wants to go after me - if i dont have ties there and have a rented appartment in some DTA country, then the country with the appartment would be my place of taxtation right?

Theoretically, yes. Unless the Germans can claim that you have a key to your parents' house or something, so that in reality, you also have a home in Germany.
Most newer DTAs have also adopted the MLI, then there are no clear rules, just that the authorities should figure it out together. But I guess they would still apply similar rules.

But why would it "protect" me better than a residence in CY? Both have DTA, just bulgaria nobody can really check when i went in and out right?

I have explained it about 100 times in this thread. One last time:

The treaty is relevant when BOTH countries claim you as tax resident.

Neither Germany nor Bulgaria have a minimum number of days requirement to consider you tax resident. Apartment/habitual abode are sufficient.
So if you have tax residency in Germany (because Germany says you spent too much time there) + Bulgaria (because you have your base there) --> Both countries want to tax you, then there would be double taxation --> the treaty applies (to avoid double taxation).

With Cyprus, it would be the same if you spend 183+ days in Cyprus. In that case, also both Cyprus and Germany would consider you tax resident --> the treaty applies.
Cyprus can also consider you tax resident after 60 days. But per their own laws, this tax residency only applies IF NO OTHER COUNTRY considers you tax resident.
So the moment Germany considers you tax resident, per Cyprus' own laws, you cannot be tax resident in Cyprus. You will only be tax resident in Germany.
Since you are no longer tax resident of Cyprus in that moment (per Cyprus' own laws), there is no longer a potential case of double taxation --> the treaty does NOT apply to you.

I really hope it was clearer now...

 

[Hydrox]

Cyprus can also consider you tax resident after 60 days. But per their own laws, this tax residency only applies IF NO OTHER COUNTRY considers you tax resident.
So the moment Germany considers you tax resident, per Cyprus' own laws, you cannot be tax resident in Cyprus. You will only be tax resident in Germany.
Since you are no longer tax resident of Cyprus in that moment (per Cyprus' own laws), there is no longer a potential case of double taxation --> the treaty does NOT apply to you.

I really hope it was clearer now...

Thanks, i got it. So the 60 day thing offers no more protection than just being no tax resident at all... That´s a bummer since i talked to a specialized accountant who recommends this setup to just be 60 days there, have the tax residency and you´re golden.

But you´re right the cyprus law clearly states if another country considers you tax resident, the 60 day rule doesnt apply.

So appt in Bulgaria - get tax certificate - pay 10% is better. They might want the high social security tax on that tho ? (probably wont care)

Then you can f**k around in the world and have more security. Do you think it would change something from german point of view if they analyzed flight data and concluded you only were 1 month in your appt in bulgaria?

Dont really like bulgaria but just getting a flat there for some peace of mind can be worth it

 

[daniels27]

Then you fly to Sofia, leave a burner office there and take a train to Berlin, pay all in cash there and go back to Sofia when you are done with your brother. I am sure he'll let you use his phone while you are in Berlin.

 

[JustAnotherNomad]

Thanks, i got it. So the 60 day thing offers no more protection than just being no tax resident at all... That´s a bummer since i talked to a specialized accountant who recommends this setup to just be 60 days there, have the tax residency and you´re golden.

Exactly. For Germany, there is no additional protection, except the fact that they may not investigate further. But to be honest, the certificate might even look more suspicious, most people wouldn't even know such a thing exists.
You just tell them: "I have left Germany now, bye", I doubt they would even ask where you have moved. And even if so, you could just tell them you'll be traveling the world.
All they will care about is that you have really left.
If you send them a copy of your rental contract in Cyprus, it would probably be enough for most tax inspectors. "Oh, ok, he is gone"
Basically that's all you want.

But if they have doubts and they start investigating - say you are from a small village and they ask your parent's neighbors how often you visit: "Oh, he was just here for a month! And then another month a couple weeks ago!"
They could just say you still have habitual abode in Germany - so you are tax resident under German rules.
If you can't convince them/a court otherwise, then your Cypriot tax residency certificate would be worthless.

With Bulgaria or some other country without such a strange rule, at least then you would have double tax residency and there would be one more thing to protect you - even though Germany could still win. But it would be much harder for them.

But you´re right the cyprus law clearly states if another country considers you tax resident, the 60 day rule doesnt apply.

Exactly.

So appt in Bulgaria - get tax certificate - pay 10% is better. They might want the high social security tax on that tho ? (probably wont care)

No idea.

Then you can f**k around in the world and have more security. Do you think it would change something from german point of view if they analyzed flight data and concluded you only were 1 month in your appt in bulgaria?

Yes, of course, they can say you are tax resident in Germany.
Then it will be up for debate - I don't know how strict they are with the tie-breakers. If you have an apartment in Bulgaria, but you spend 360 days per year in hotels in Germany - would Bulgaria really win that one? I doubt it.
You also have to remember that this can get costly. You would likely need tax lawyers from both countries to defend against such a case.

But I don't want to scare you too much either - I think you should be fine either way. I doubt anyone will really investigate closer if you really only spend 3 months maximum in Germany, you have long breaks between each visit, you have a proper apartment in the other country etc.

But you should really be gone. You shouldn't secretly be living with a family member or anything like that, then it would really be tax fraud.
Maybe get another opinion from someone specializing in nomads. I asked a German nomad friend and he mentioned https://easydigitax.de - I haven't heard about them before, so I can't say if they're good.
Ideally you'll want to get some more information on how risky it is to spend 3 months in Germany, how long the breaks in between should be etc.
This usually isn't written in the tax code but there will be some case law.

Dont really like bulgaria but just getting a flat there for some peace of mind can be worth it

It's actually really popular with nomads. You might like it.

 

[JustAnotherNomad]

Also, I think it would likely be better if you spend e.g. 4 months in Cyprus than if you spend 3 days in Bulgaria.
It would look much better, even if in theory Cyprus wouldn't protect you. But you would have receipts, friends, a life in Cyprus. I doubt the German tax office would try to build a case against you, even if they could, in theory.
In Bulgaria, there would be nothing. It would clearly be tax fraud.
Of course, the best option would be to spend 4 months in Bulgaria, or 6+ months in any low-tax country...

 

[Hydrox]

Also, I think it would likely be better if you spend e.g. 4 months in Cyprus than if you spend 3 days in Bulgaria.
It would look much better, even if in theory Cyprus wouldn't protect you. But you would have receipts, friends, a life in Cyprus. I doubt the German tax office would try to build a case against you, even if they could, in theory.

friend and he mentioned https://easydigitax.de

Actually had a paid meeting with this guy a few weeks ago. We basically came to the conclusion that i should incorporate in cyprus and do the whole setup there.

He basically said every proof like tax residency, apartment, company is better than no proof. We only talked about that setup tho, not exactly about how long you can be in germany, since i wasn´t that much into the topic back then.

i´m just still on the edge about if i should even get the 60 day tax cert in cyprus or just only rent an apartment there, since this would spare me the unnessecary company operating costs and taxes there. Of course i would in both cases make sure to cut ties with spermany.

Not an easy decision, basically comes down to if the imaginary extra protection is worth it for me to pay 8k for setup and accounting and then also pay taxes there

 

[DeepDrilling]

But then you might still be tax resident in Germany, simply by having a place to stay available. Germany doesn't just care about days you spend in the country.

But if he completely deregisters from Germany and states that he has moved to Cyprus, then the Germans won’t do anything further about it.

 

[daniels27]

Actually had a paid meeting with this guy a few weeks ago. We basically came to the conclusion that i should incorporate in cyprus and do the whole setup there.

We only talked about that setup tho, not exactly about how long you can be in germany, since i wasn´t that much into the topic back then.

The problem is that when hiring people to give you advice, the advice is only as good as you can explain them your situation. And most of the time not very good.

 

[daniels27]

But if he completely deregisters from Germany and states that he has moved to Cyprus, then the Germans won’t do anything further about it.

Yes. But...

1. I explained many times here that he first needs to slow down his profit. Then deregister.
2. We also explained that the Cyprus stuff just costs a ton of money and does not help much unless he actually spends more time there than in Germany.

If he wants to spend 4 months in Germany read this here again:

Then you fly to Sofia, leave a burner office there and take a train to Berlin, pay all in cash there and go back to Sofia when you are done with your brother. I am sure he'll let you use his phone while you are in Berlin.

Your only choice is to fly under the radar. And then reduce that amount.

 

[DeepDrilling]

Yes. But...

1. I explained many times here that he first needs to slow down his profit. Then deregister.
2. We also explained that the Cyprus stuff just costs a ton of money and does not help much unless he actually spends more time there than in Germany.

1. What does he has to slow down wit hand why ?
2. I didn't spoke about Cyprus

 

[daniels27]

1. What does he has to slow down wit hand why ?

He needs to have profits of 20k to 30k this year and then close down the business towards the end of the year. Then, he can unregister. In all other cases, they will ask for exit tax and the discussions about the company valuation will either cost him 3 months of his time if he does it himself (and 0 exit tax). If he hires a guy, it will cost him 30k and 2 months of his time and then most likely only 50% of the exit tax.

2. I didn't spoke about Cyprus

I don't know who did spoke about what. What I said is that he needs to fly under the radar. Having something is better but you don't want the Germans to know.

 

[DeepDrilling]

I don't know who did spoke about what. What I said is that he needs to fly under the radar. Having something is better but you don't want the Germans to know.

well you quoted me!

Where does he claim to have a company in Germany, I read his initial post, can't find it.

 

[daniels27]

Where does he claim to have a company in Germany, I read his initial post, can't find it.

No. He as a company in the US. US LLC. But he pays tax on the profits in Germany as "freelancer" self-employment income. He wrote it here

H

Post in thread 'Digital Nomad Perpetual Traveler + Apartment in Cyprus = tax ?'

Saturday at 01:07

How much money are we talking about by the way? You work as a freelancer? How much do you even make per year?

100k profit 2024. Before that it was way less (below 30k). Not a freelancer, real online business.

May i ask what your structure is?

Yes, and then, they just claim the income to be derived from a PE as the guy has a room with good desk in his mother's house where he normally works from.

What if i destroy the desk everytime i leave and then get a new one when i arrive? Jokes aside how would they ever know that?
How would they even know i worked in the time being in...

• Hydrox

 

[Marzio]

i´m just still on the edge about if i should even get the 60 day tax cert in cyprus or just only rent an apartment there

Just rent because the 60 days tax residency is worth nothing if Germany will claim you are german tax resident.

If Germany will claim you are tax resident you need to be considered tax resident by the other country (other country = any other country that has a double tax treaty with Germany).

Other country could be Switzerland where you only need 30 days to tax residency with gainful activity.

Other country could be Cyprus where you need 183 days to tax residency.

If you need to visit Germany that often just setup somewhere in CH near the German border.

Yes you will pay taxes in CH but you'll be able to visit friends and parents any time you want.

You need to be clear on your priorities.

Is it more important to be able to visit friends and parents any time you want or be tax free?

You can't have both.

 

[JustAnotherNomad]

But if he completely deregisters from Germany and states that he has moved to Cyprus, then the Germans won’t do anything further about it.

This isn't true.
The only thing that is relevant for them is that he has "really left Germany".
What they want to see as proof of that, is up to the individual agent/tax office. Some may be fine if you tell them you're going to travel the world and never return to Germany.
Some may want to see proof of where you have been every day of the first year after leaving Germany.
If it's the latter, maybe you can tell them it's none of their business and that they have no legal leverage to demand this information. But it would probably also look like a red flag to them and might make them want to keep an eye on you...

That's why I suggested him to contact the tax office and ask what kind of information they want to see.