No tax on trading profits when registered nowhere?

[JustAnotherNomad]

But an agency in Singapore with US clients is foreign sourced income, even for Thai citizens.

Yes, of course, the Thai guy simply hires his employees in Bangkok through his company that is registered in Singapore, boom, no tax. Not.

Say, for example, that I'm under Portugal's NHR system and have a company in Singapore, and my company pays dividends in a Singaporean account, isn't that foreign source income for Portuguese tax authorities?

It depends on your involvement in the company. If you're only a passive investor, it should be fine. If you run everything from Portugal and the Singapore company is only a shell (only a mailbox in a building with thousands of companies registered on the same address), then no. At least in theory. In practice, there are probably thousands of NHR people in PT with such a Portugal who are doing just fine.
Like I mentioned, there's often a discrepancy between the written law and how it's applied. Either because the tax authorities don't have the resources to go after everyone, or because they don't want to scare off the foreign investments, or both.

 

[scooterguy]

Yes, of course, the Thai guy simply hires his employees in Bangkok through his company that is registered in Singapore, boom, no tax. Not.

I agree, that is a completely different scenario. But if the employees are in Singapore, a Thai citizen managing that Singaporean company from within Thailand is not liable for tax in Thailand.

It depends on your involvement in the company. If you're only a passive investor, it should be fine. If you run everything from Portugal and the Singapore company is only a shell (only a mailbox in a building with thousands of companies registered on the same address), then no. At least in theory. In practice, there are probably thousands of NHR people in PT with such a Portugal who are doing just fine.
Like I mentioned, there's often a discrepancy between the written law and how it's applied. Either because the tax authorities don't have the resources to go after everyone, or because they don't want to scare off the foreign investments, or both.

Good points.

 

[JustAnotherNomad]

But if the employees are in Singapore, a Thai citizen managing that Singaporean company from within Thailand is not liable for tax in Thailand.

That is possible, though I still doubt it if the owner works from Thailand and isn't just a passive investor.
But even if you're right, it's not "because Thailand has territorial tax" (because pizza is food), but because that's how Thailand's tax code works, which falls in the category of territorial tax.
There could be other countries that also have "territorial taxation" and that have a completely different approach to this.

 

[countryfree]

As a rule of thumb, if you don't want to pay tax anywhere, you must not live anywhere. That means travelling all the time.

 

[scooterguy]

That is possible, though I still doubt it if the owner works from Thailand and isn't just a passive investor.
But even if you're right, it's not "because Thailand has territorial tax" (because pizza is food), but because that's how Thailand's tax code works, which falls in the category of territorial tax.
There could be other countries that also have "territorial taxation" and that have a completely different approach to this.

JustAnotherNomad, I'm not the one who said "because Thailand has territorial tax." I'm aware that different countries have different approaches to territorial taxation.

 

[Mike Forman]

Wrong (most likely).



If they don't update the address, this is at least a violation of the terms and conditions of the bank, it can also lead to "accidental tax fraud" as I explained with the US 15% vs. 30% WHT example. No bank will open an account for you without a proven address, usually a utility bill or some other official residency document is required.


They will close the account because anything else would be a violation of AML protocols.


"Because it is a territorial tax system" is about the same thing as saying "Pizza tastes good because it is food". Just because a country has a territorial tax system doesn't mean you don't have to pay tax.
Yes, you can live in Thailand and pay no taxes, but it's not a given.


This doesn't make any sense whatsoever.


Again, doesn't make sense in any way.


This is just plain wrong.


bulls**t.

TL;DR: Please don't believe everything you read on the internet.

There is a lot of bullsh*'t and other comments but little clarification. Personally will also not go in a debate on this as I believe there are little to no tax consultants on this forum and every situation is unique and sometimes complex

1) if you don't live anywhere fixed and don't have a residence, some institutions consider you to be a permanent resident in the country of citizenship hence might exchange all information to there

2) tax authorities if they challenge you will ask for proof as mentioned in the post before. Still having ties with Germany such as bank accounts which are registered on a German address and that receive regularly income can get challenged. As in many Western countries in Europe your centre of vital intrest can make you a resident, even you don't spend much time there.

3) every situation is different and living in different countries can become very complex tax wise IF any of those countries start to investigate your income for any reason. Many people have opinions which are what they are.. opinions. How many have had here tax authority investigations? I speak from personal experience being involved in a tax investigation (involving tax authority raids on several locations) at present in three countries and might further escalate to other countries. I definitely don't know all the rules and implications but some things learned :

- break all ties with European country of citizenship if you don't want to get challenged. It's ok to still have a bank account or credit card as long as it's infrequently used and definitely no regular income or outgoing, preferable not.

- make sure if you stay over 6 months in a country, it is a country only taxing on local sourced income and not worldwide income, or you can also get challenged there (each country has its own tax rules, make sure you understand them well and the risk of having them enforced). The risk of being investigated is low if amounts are low, but anything (mostly unexpected) can trigger an investigation

- keep most of your assets out of any country you believe that can be a potential risk. Chose countries that are easy on transferring larger funds, multi currency etc

- have a residence, preferable in a country that doesn't tax on worldwide income, is not tax aggressive and preferable doesn't exchange information through CRS. Use this residence to register bank accounts / companies in other jurisdictions


GENERALLY (this is not conclusive) , individuals are deemed to be resident:

• if they have a dwelling in Germany that they use, or that is at least available to them (irrelevant if rented or owned – even a room at a friend’s house could be enough if always accessible), or
• if they have an habitual abode in Germany. This can be assumed if the individual is physically present in Germany for more than six months in any one calendar year, or for a consecutive period of six months over a year-end.

Objective circumstances are decisive. Nationality is not, in itself, a criterion for determining residence or tax liability. Also, registration with the German (tax) authorities is only an indicator.
Where an international assignee has a residence in two or more countries, the employee is deemed, for application of a double tax treaty (DTT), to be a resident of the contracting state in which the employee has a centre of vital (personal and economical) interest

As a rule of thumb, if you don't want to pay tax anywhere, you must not live anywhere. That means travelling all the time.

This is not entirely correct, since you will still need to receive your income on a bank account, which has a residential address tied to it and can result in tax implications.

Chances are very low to have issues with this set up if the income is limited and you cut most ties with country of citizenship.

Without a residence it is very hard to open a bank account and if you are unlucky and get challenged it's helpful to have proof that you have at least some fixed residence with long term rental contract etc

 

[Houdini]

As a rule of thumb, if you don't want to pay tax anywhere, you must not live anywhere. That means travelling all the time.

That's hard for a normal living person, even harder for someone with famliy!

 

[Cloudbanck]

There is a lot of bullsh*'t and other comments but little clarification. Personally will also not go in a debate on this as I believe there are little to no tax consultants on this forum and every situation is unique and sometimes complex

1) if you don't live anywhere fixed and don't have a residence, some institutions consider you to be a permanent resident in the country of citizenship hence might exchange all information to there

2) tax authorities if they challenge you will ask for proof as mentioned in the post before. Still having ties with Germany such as bank accounts which are registered on a German address and that receive regularly income can get challenged. As in many Western countries in Europe your centre of vital intrest can make you a resident, even you don't spend much time there.

3) every situation is different and living in different countries can become very complex tax wise IF any of those countries start to investigate your income for any reason. Many people have opinions which are what they are.. opinions. How many have had here tax authority investigations? I speak from personal experience being involved in a tax investigation (involving tax authority raids on several locations) at present in three countries and might further escalate to other countries. I definitely don't know all the rules and implications but some things learned :

- break all ties with European country of citizenship if you don't want to get challenged. It's ok to still have a bank account or credit card as long as it's infrequently used and definitely no regular income or outgoing, preferable not.

- make sure if you stay over 6 months in a country, it is a country only taxing on local sourced income and not worldwide income, or you can also get challenged there (each country has its own tax rules, make sure you understand them well and the risk of having them enforced). The risk of being investigated is low if amounts are low, but anything (mostly unexpected) can trigger an investigation

- keep most of your assets out of any country you believe that can be a potential risk. Chose countries that are easy on transferring larger funds, multi currency etc

- have a residence, preferable in a country that doesn't tax on worldwide income, is not tax aggressive and preferable doesn't exchange information through CRS. Use this residence to register bank accounts / companies in other jurisdictions


GENERALLY (this is not conclusive) , individuals are deemed to be resident:

• if they have a dwelling in Germany that they use, or that is at least available to them (irrelevant if rented or owned – even a room at a friend’s house could be enough if always accessible), or
• if they have an habitual abode in Germany. This can be assumed if the individual is physically present in Germany for more than six months in any one calendar year, or for a consecutive period of six months over a year-end.

Objective circumstances are decisive. Nationality is not, in itself, a criterion for determining residence or tax liability. Also, registration with the German (tax) authorities is only an indicator.
Where an international assignee has a residence in two or more countries, the employee is deemed, for application of a double tax treaty (DTT), to be a resident of the contracting state in which the employee has a centre of vital (personal and economical) interest


This is not entirely correct, since you will still need to receive your income on a bank account, which has a residential address tied to it and can result in tax implications.

Chances are very low to have issues with this set up if the income is limited and you cut most ties with country of citizenship.

Without a residence it is very hard to open a bank account and if you are unlucky and get challenged it's helpful to have proof that you have at least some fixed residence with long term rental contract etc

Just wanted to add that among Western European countries Germany is at the trickier end of the scale, in terms of how difficult it is to get out of the tax net, and how aggressive tax authorities are.

On the "easier" end of the scale we have the UK, where it is all determined by days tests, if you dont spend much time in the UK, you are not a tax resident there, even if you have bank accounts, property, even if you are employed by a UK company, etc. Ireland is similar to the UK, but the days tests are different (max 30 days the first calendar year after moving out, and max 183 days after that).

Mid-scale we got Sweden, where if you have family, business, or a permanent home in Sweden, you are still considered a tax resident in Sweden. No problem having a bank or brokerage account in Sweden though. There are no clear days tests, but as per court cases, there was a guy who spent 4 months in Sweden during the summer and 20 scattered days during the rest of the year - and was deemed tax resident. And another guy who spent 3 months in Sweden during the summer and 21 scattered days during the rest of the year - and was deemed not tax resident.

Norway is on the difficult end of the spectrum, but in a different way than Germany. Basically if you leave Norway, after having lived in Norway at least 10 years, you are still a tax resident in Norway for 3 years after leaving Norway - which can be offset by tax treaties, but such treaties are generally only in place with other high tax countries. Similar to Sweden, if you have close family (children, spouse) living in Norway, or a permanent residence in Norway, you are still considered tax resident in Norway. A holiday home that cant be used all year round is ok though.

Italy is mid scale, but unlike most other countries it's not enough to just go to the tax authority's website and enter a new address abroad. To leave Italy, you have to go in person to an Italian embassy abroad , and show proof that you live abroad (typically a residence permit) so that you can be registered as an Italian living abroad (the "AIRE" registry). In some countries you have to wait many months to get an appointment at an Italian embassy. And if you move to a tax haven, they make it extra difficult to register as living there, with more paperwork requirements, and requirements that you must have been there quite a long time.

And France, well I don't know, I've talked to a few French people about leaving the French tax net, and it seems very complicated, I just can't summarise it. Except that they have this quirk that if you move to Monaco you are still a French tax resident forever, US-style taxation by citizenship in other words, but just for one foreign country, not for the rest of the world.

So tax residency rules vary quite a bit from country to country, even just among western European countries. One has look into the rules of the specific country that may claim tax from you. And the main criteria which country that may be is actually usually not citizenship, but if you have lived there a long time (10 years seems to be a cut off point some countries use), even if citizenship often also matters.

 

[JustAnotherNomad]

Just wanted to add that among Western European countries Germany is at the trickier end of the scale, in terms of how difficult it is to get out of the tax net,

Not true at all. If you really leave, it's very easy. It's not like Spain or Italy. There's no need to get a new tax residency or prove anything to the authorities.
As usual, the only tricky thing is if you have your "habitual abode" in Germany, that isn't clearly defined, but there is of course case law for that as well.

Mid-scale we got Sweden, where if you have family, business, or a permanent home in Sweden, you are still considered a tax resident in Sweden. No problem having a bank or brokerage account in Sweden though. There are no clear days tests

Sweden has very clear day tests. 183+ days in a 12-month period and absence is not counted if the absence is shorter than the presence in Sweden before or after. In other words, spend 2 weeks in Sweden, 1 week abroad and another 2 weeks in Sweden - that will count as 5 weeks in Sweden in the eyes of the tax authority.
The thing is that they can deviate from the day tests. For example, someone spending two days every week in Sweden can be considered tax resident (I believe it's important that this person also spends the night in Sweden though), even though it would not trigger the day test.

Except that they have this quirk that if you move to Monaco you are still a French tax resident forever

There are no tax breaks for French citizens in Monaco anyway, as far as I know, so it's probably not that attractive for French citizens anyway?

 

[Cloudbanck]

Not true at all. If you really leave, it's very easy. It's not like Spain or Italy. There's no need to get a new tax residency or prove anything to the authorities.
As usual, the only tricky thing is if you have your "habitual abode" in Germany, that isn't clearly defined, but there is of course case law for that as well.

Well, the process for leaving isn't difficult indeed, but it is the wide "habitual abode" definition that makes Germany fall in the difficult end of the spectrum. And also that German tax authorities are very meticulous in checking habitual abode. I read recently that german tax authorities had hired lots more people specifically to go after Germans saying they live abroad, but that might have "habitual abode" in Germany. Boris Becker famously got caught for this, but the thing with Germany is they don't only go after the rich and famous, they seem to - unlike other countries - also spend a lot of resources going after regular people - and penalties are stiff.

Sweden has very clear day tests. 183+ days in a 12-month period and absence is not counted if the absence is shorter than the presence in Sweden before or after. In other words, spend 2 weeks in Sweden, 1 week abroad and another 2 weeks in Sweden - that will count as 5 weeks in Sweden in the eyes of the tax authority.
The thing is that they can deviate from the day tests. For example, someone spending two days every week in Sweden can be considered tax resident (I believe it's important that this person also spends the night in Sweden though), even though it would not trigger the day test.

Well, days tests arent clear if they arent applied, and much narrower undefined days tests are applied in practice. Businessman Jan Stenbeck used to fly in daily to Sweden and live in a hotel he owned. They had to make the rules stricter just to catch him.

 

[JustAnotherNomad]

it is the wide "habitual abode" definition that makes Germany fall in the difficult end of the spectrum

I don't think it's that unclear. There is case law.

go after Germans saying they live abroad, but that might have "habitual abode" in Germany

Just move and don't spend time in Germany, problem solved. To me it seems like Italy, Spain and I think also Australia, if I remember correctly, are much worse because they make it extremely difficult to leave.
You can just leave Germany without taking up a new tax residency and no one will come after you if you're really gone.

Boris Becker famously got caught for this

Please correct me if I'm wrong, but I believe that's an urban myth ("He was sentenced because of a toothbrush"). Probably this was planted by himself.
As far as I know he was factually living in his sister's (?) apartment at the time. Which is really stupid when you're a celebrity who is being followed around by parazzi all the time.

Well, days tests arent clear if they arent applied, and much narrower undefined days tests are applied in practice.

I'm sure there is case law for that as well. In general, one should simply make sure not to spend much time in such countries and all is good.