Long-term strategy for digital nomad

[jscargo]

EMI is a Electronic Money Institution, like Paysera, Payoneer and others.

Well, it is hard to guess without knowing more about your situation.

First of all, are you a non resident and digital nomad because you think so, or you have took de facto steps to erase your residence in this given country? If you are just absent more than 183 days per year, but you keep a room at your parents house, have a car to your name, a bank account in which you get paid and then let's say you live in Spain, for the government you are another resident like everybody else.

Then, solutions cost money, if you are earning less than 5k per month as many digital nomads do, the cost of the solutions is often greater than the tax you would have to pay in the given country.

You have to be specific, "I live in X place, I earn below/above X amount, I am (or am not) ready to move today and close all ties in this country of current residence. My clients are global or my clients are mostly from a specific country." If you are ready to explain your actual situation I am sure you will have more clear suggestions.

Regarding Andorra/Georgia/Gibraltar - how it can work. You become a tax resident in Georgia, have a company in Gibraltar paying 0 taxes, get an EMI to work with it, send dividends from your GIbraltar company to your Georgia personal account. Accumulate wealth until you are happy, return to high tax country and get taxed from that point on on dividends your ETFs or real estate might generate.

 

[Tax Cow]

For example, I would like to invest into ETFs long term. Should I do that in my own name? Probably not? Via a company? A trust? A foundation? Etc.

In your name, until 1M of portfolio size. You have no expenses to deduct. Company structures are for real estate investments and other hard asset portfolios, but also for asset segregation which starts to make sense after you have too much stuff in your name.

Keep in mind that if you are not a US person, you should not buy US stocks in your name. It's safe to use US brokers and banks to trade in other markets, but don't hoard US stocks.

 

[John Andrews]

Keep in mind that if you are not a US person, you should not buy US stocks in your name. It's safe to use US brokers and banks to trade in other markets, but don't hoard US stocks.

Why not?

 

[Tax Cow]

@mange38

Tax trap: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

Referred doc is in "small-business-self-employed" sub-folder, but the tax applies to individuals alike. The allowance for non-US persons is just $60K (worth of estate). Everything after $60K is subject to up to 40% confiscation (equity, not just profits) upon death.

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I'd also like to add an extra comment to OP regarding stock and ETF investing - in some cases, investing in stocks via a company could make sense from the start. Particularly for tax residents living in countries where undistributed profits are not taxed, or where territorial taxation principles apply to companies but not to individuals. Morocco, France and Estonia - to name a few examples. As a nomad, I'm assuming you take tax residency in a 0% country so this will likely not apply to you.

 

[John Andrews]

@xzars we're going a bit offtopic here but I assume it would be fine if one invested in US stocks through an Estonian company and Interactive Brokers for example?

 

[JustAnotherNomad]

EMI is a Electronic Money Institution, like Paysera, Payoneer and others.

Thanks. Not really relevant for me as I don’t do any mass market B2C stuff. I just get paid into my company’s bank account. Or do you also mean like TransferWise/Revolut etc.?

Well, it is hard to guess without knowing more about your situation.

I understand that it is difficult, but I would prefer not to share too much information publicly. PM would be another story.

I don’t have a room, car, or anything in my country of citizenship. I go there from time to time for a weekend to visit family. I have a couple of bank accounts which I’m still using, mostly for credit cards, but that by itself shouldn’t be a problem, according to my accountant. I’m also working on getting rid of them. The CC payments show I’m abroad. Clients don’t make any payments into those accounts, only my own company.
I haven’t set up residency anywhere else yet because I’m skeptical paying for Panama/Paraguay/UAE will actually matter if you don’t actually spend a significant amount of time there every year. My home country has already confirmed I am not resident there anymore.

I’m no millionaire, but I make significantly more than 5k per month.
My clients are currently in one country in Europe (but not in my home country, I don’t have any economical ties there except the bank accounts), but I wouldn’t mind finding new clients in other parts of the world.

Regarding Andorra/Georgia/Gibraltar - how it can work. You become a tax resident in Georgia, have a company in Gibraltar paying 0 taxes, get an EMI to work with it, send dividends from your GIbraltar company to your Georgia personal account. Accumulate wealth until you are happy, return to high tax country and get taxed from that point on on dividends your ETFs or real estate might generate.

How would that Gibraltar company charge my clients? They would never do business with such a company. They would probably call the cops on me, just to protect themselves. This works much better with my Estonian company.
How would becoming tax resident in Georgia make any difference if I don’t actually live there? I can see that it would probably look better since the banks would report there instead of to my country of citizenship, but otherwise?

 

[JustAnotherNomad]

I'd also like to add an extra comment to OP regarding stock and ETF investing - in some cases, investing in stocks via a company could make sense from the start. Particularly for tax residents living in countries where undistributed profits are not taxed, or where territorial taxation principles apply to companies but not to individuals. Morocco, France and Estonia - to name a few examples. As a nomad, I'm assuming you take tax residency in a 0% country so this will likely not apply to you.

Again, I don’t get it. One moment you guys tell me that without a proper substance (actual office and employees etc.), this stuff would never work. Then you tell me I should invest through a company in such a jurisdiction. I find that a bit confusing.

 

[Tax Cow]

@xzars we're going a bit offtopic here but I assume it would be fine if one invested in US stocks through an Estonian company and Interactive Brokers for example?

No, there won't be an exemption if the foreign company has a single beneficial owner that is the natural person who passed away. Give 1% of the company to a family member to solve that problem. As long as the foreign company has 2 or more ultimate beneficial owners, there is no basis for estate tax.

Since the US congress has been increasingly anti-foreign-investor, especially when it comes to estate tax, the best idea is to find other opportunities outside the US.

Again, I don’t get it. One moment you guys tell me that without a proper substance (actual office and employees etc.), this stuff would never work. Then you tell me I should invest through a company in such a jurisdiction. I find that a bit confusing.

Note the part where I said "Particularly for tax residents living in countries where...".

This means a person living primarily or full time in a country, for example, in Estonia. He can invest in stocks using an Estonian company, without substantiating the company at all. For him, there's no risk in this setup because the tax benefits of using an Estonian company don't originate from articifial corporate tax residency shifting to a foreign country. Strong substance is required if, for example, that Estonian tax resident wants to invest via Belize company to which even more favorable terms apply.

At this point, you're completely unprepared to go offshore and will get roasted the first tax investigation that comes your way. Find a modest 5-10% tax semi-shore solution, because then you will at least have one country that might be willing to step up for you when you get in trouble. Nobody will defend you if you pay 0% tax, but everyone can ask from you, and treat you like a criminal tax evader until you prove them wrong. You're clearly unable to defend yourself, so please don't ruin your future for some tax savings.

 

[Artemis Eleutheria]

Ruin yourself by paying taxes instead it goes much faster.

 

[jscargo]

Thanks. Not really relevant for me as I don’t do any mass market B2C stuff. I just get paid into my company’s bank account. Or do you also mean like TransferWise/Revolut etc.?

I understand that it is difficult, but I would prefer not to share too much information publicly. PM would be another story.

I don’t have a room, car, or anything in my country of citizenship. I go there from time to time for a weekend to visit family. I have a couple of bank accounts which I’m still using, mostly for credit cards, but that by itself shouldn’t be a problem, according to my accountant. I’m also working on getting rid of them. The CC payments show I’m abroad. Clients don’t make any payments into those accounts, only my own company.
I haven’t set up residency anywhere else yet because I’m skeptical paying for Panama/Paraguay/UAE will actually matter if you don’t actually spend a significant amount of time there every year. My home country has already confirmed I am not resident there anymore.

I’m no millionaire, but I make significantly more than 5k per month.

My clients are currently in one country in Europe (but not in my home country, I don’t have any economical ties there except the bank accounts), but I wouldn’t mind finding new clients in other parts of the world.

How would that Gibraltar company charge my clients? They would never do business with such a company. They would probably call the cops on me, just to protect themselves. This works much better with my Estonian company.

How would becoming tax resident in Georgia make any difference if I don’t actually live there? I can see that it would probably look better since the banks would report there instead of to my country of citizenship, but otherwise?

Transferwise and Revolut are also EMIs. Basically anything in Europe that is not a bank and will provide you an IBAN is an EMI (exceptions may apply).

If you want to PM me I can give you my free advice, this is just a hobby for me.

You have a couple of bank accounts in this country, these accounts in Europe, as of 2019 require a tax ID. Is the tax ID tied to the account issued from the country you are trying to get rid from? If yes, this is still easily a strong case for the government to claim you are a resident. You need to erase or neutralize this tax ID and get a new one abroad in the country you will be a tax resident (even if you spend 15 minutes per year there). But at least good that your clients don't pay on these accounts

Gibraltar is pretty decent, it is part of the UK, although I can agree that Estonia may sound less shady than Gibraltar.

If you become a resident of Georgia, as in, you have a residence permit there and a tax ID, you are a tax resident there. Even if you don't spend that much time, but you might have to spend some. The thing is, even as a digital nomad, nowadays you have to be a tax resident somewhere, and it better be Georgia than let's say Spain. Because how can you even open a bank account, a company, or an EMI account if you are are not a resident of anywhere?

Georgia has territorial tax, so it won't tax your Gibraltar company profit distributions, and Gibraltar does not tax this type of international consultancy activity. So in this set up, once you are an established tax resident in Georgia and open the Gibraltar LLC as a Georgian tax resident, you will pay a negligible effective tax rate.

 

[jscargo]

Finally, in many cases, depending on where you will want to buy real estate, the bureaucracy will almost force you to open a company in the given country to buy the property. Although buying property in the EU with an EU company tends to be easier, but not always the most convenient option.

 

[celizo]

It seems US treasury bonds are excluded from the estate tax: U.S. Tax

However, assets that are exempt for U.S. estate tax generally include securities that generate portfolio interest (e.g., U.S. treasury and U.S. government agency securities and certain U.S. corporate bonds and U.S. commercial paper), and dividend income from certain foreign corporations or offshore mutual funds are generally not subject to U.S. estate taxes.

 

[celizo]

No estate tax aswell for US Corporate bonds and UCITS ETFs

 

[bisk]

What about US stocks? Isn't it taxed only if you die on US soil?

 

[Tax Cow]

What about US stocks? Isn't it taxed only if you die on US soil?

Hahah! Pink sunglasses

US Stocks, and US-situs real estate are subject to estate tax regardless of how and where the foreign investor passed away.

Furthermore, this applies regardless of using nominees, regardless of investing through a foreign company or a trust; if the structure leads to a single beneficial owner who passed away. It's not theory in statutes only because this stuff is being enforced by the IRS as a daily routine.

@celizo

Your points are valid. Not all US assets and investment opportunities are subject to this tax.

 

[fshore]

The thing is, even as a digital nomad, nowadays you have to be a tax resident somewhere, and it better be Georgia than let's say Spain

This is not true for all countries.

I don’t have a room, car, or anything in my country of citizenship. I go there from time to time for a weekend to visit family. I have a couple of bank accounts which I’m still using, mostly for credit cards, but that by itself shouldn’t be a problem, according to my accountant. I’m also working on getting rid of them. The CC payments show I’m abroad. Clients don’t make any payments into those accounts, only my own company.

This seems to be your assumption. I would check and confirm 100% that you are not tax resident in your home country.

If you don't like a US llc then a UK Ltd is another good option for you, as you can take a salary that is not taxed in the UK.

 

[JustAnotherNomad]

This means a person living primarily or full time in a country, for example, in Estonia. He can invest in stocks using an Estonian company, without substantiating the company at all. For him, there's no risk in this setup because the tax benefits of using an Estonian company don't originate from articifial corporate tax residency shifting to a foreign country.

Of course, but we're not talking about such cases, are we?

Strong substance is required if, for example, that Estonian tax resident wants to invest via Belize company to which even more favorable terms apply.

Nothing new here.

At this point, you're completely unprepared to go offshore and will get roasted the first tax investigation that comes your way.

I'm not one of those people who read something on a blog and then risk all their assets and career for that. Before taking any action, I would get everything double checked by tax lawyers. The challenge is that it's extremely difficult to find a non-shady lawyer (not some blogger or affiliate marketer) who knows something about more than 1-2 jurisdictions. So I'm looking for inspiration here to then find the best lawyer for a given setup.

Find a modest 5-10% tax semi-shore solution, because then you will at least have one country that might be willing to step up for you when you get in trouble. Nobody will defend you if you pay 0% tax, but everyone can ask from you, and treat you like a criminal tax evader until you prove them wrong. You're clearly unable to defend yourself, so please don't ruin your future for some tax savings.

That's actually a good suggestion, thank you. I know several people from my industry who have relocated to Bulgaria. If I can claim travel expenses etc., I might be able to pay very little taxes. EU VAT handling would be easy (for when I buy a new computer etc.), I could get that A1 certificate and whatnot.
But maybe there are other solutions that might work even better? At least I actually left my "home country" several years ago and only go there a few days per year.

 

[JustAnotherNomad]

You have a couple of bank accounts in this country, these accounts in Europe, as of 2019 require a tax ID. Is the tax ID tied to the account issued from the country you are trying to get rid from? If yes, this is still easily a strong case for the government to claim you are a resident.

I'm not very worried about that because I opened the accounts before moving abroad and I know a guy who simply claimed to have left the country, but who ended up staying there after all and still uses his private checking account. He has done that for over 10 years and never heard a thing. Even had a Ltd. company in said country still.
Yes, really, really stupid, but I just don't think they have the capacity to care about people like me that don't make millions.

I have actually left the country, I have no economic ties to that country (no customers, real estate, company shares, ...), so I don't see why they would even start coming after me.
That said...

You need to erase or neutralize this tax ID and get a new one abroad in the country you will be a tax resident (even if you spend 15 minutes per year there). But at least good that your clients don't pay on these accounts

I don't disagree with this. I'm just not very convinced that getting a tax ID from, say, Panama, Paraguay or UAE, would make much of a difference when SHTF. The strongest advantage I see is that the reporting to my home country would go away.

If you become a resident of Georgia, as in, you have a residence permit there and a tax ID, you are a tax resident there. Even if you don't spend that much time, but you might have to spend some. The thing is, even as a digital nomad, nowadays you have to be a tax resident somewhere, and it better be Georgia than let's say Spain. Because how can you even open a bank account, a company, or an EMI account if you are are not a resident of anywhere?

Oh absolutely, I agree with that part. See above.

Georgia has territorial tax, so it won't tax your Gibraltar company profit distributions, and Gibraltar does not tax this type of international consultancy activity. So in this set up, once you are an established tax resident in Georgia and open the Gibraltar LLC as a Georgian tax resident, you will pay a negligible effective tax rate.

I have a couple of questions about this:
1. What would be the advantage with Georgia over Panama, Paraguay, UAE, maybe Cyprus or any of the other jurisdictions that don't tax foreign-sourced income?
2. If any other country claims I'm tax resident there, would they really leave me alone when I show them my Georgian tax residency certificate? I strongly doubt that.
3. I cannot do business through a Gibraltar company. Period. I understand it probably works great for online B2C businesses, but that's not what I do. I would have to use a company from a different jurisdiction for that. Maybe a UK company could work (after brexit - as long as they're in the EU, there's the issue that they wouldn't issue a VAT ID without substance, as far as I know). Or a US LLC with transparent taxation. Or a Singapore company. Which would you choose? Ideally something that would work relatively well, even if I one day move back to a high-tax country. For example by getting personal residency in that jurisdiction as well (in addition to the high-tax country) to build some more substance. In my opinion, it would be a big advantage if there was no or very little information exchange, just in case.

 

[JustAnotherNomad]

This seems to be your assumption. I would check and confirm 100% that you are not tax resident in your home country.

Uhm, no, thank you. I left the country years ago and the tax office never bothered me after. I don't want to give them any ideas, especially since I'm currently not a registered resident anywhere else.

If you don't like a US llc then a UK Ltd is another good option for you, as you can take a salary that is not taxed in the UK.

Oh, I'm not against US LLCs at all! They sound almost too good to be true (provided you can get a bank account, which I've heard you can with Transferwise).
With UK Ltd.s, there's the challenge of getting a VAT ID, as long as they're still in the EU. Without a VAT ID, my clients would not be able to deduct the VAT.

The UAE still seems interesting as well. It would work for personal residency, I actually like the UAE and they seem to be implementing economic substance regulation. Maybe it's just a stupid fantasy, but I'm wondering how strictly the UAE actually implements those rules. Maybe it's actually a net positive?

 

[JustAnotherNomad]

Googled a bit re. Georgia. Seems like they have a Virtual Zone regime for IT companies where such businesses pay no tax at all. Only dividends paid to non-residents are subject to 5% withholding tax, which one might be able to claim back. Given the low costs in Georgia, it shouldn't be too difficult to build substance there?
But of course there would be the same issues regarding reputation as with a Gibraltar company.
Getting personal tax residency in Georgia also seems more difficult than in other jurisdictions.