What are options for tax residency as a digital nomad that never spends more than 3 months in a country?

[DaveFischer]

I'd like to know how I can gain easy tax residence and still travel all around the world. I don't want to spend >6 months in any country. I'm generally ready for move on after 3 months. I like low taxes, but I love freedom, so I'd prefer to pay 5% more taxes in order to not have to spend 6 months in the same country.

I currently have 3 customers, 2 in the US and 1 in the UK. I'm considering working more for US companies and relocating to Latin America for tax savings, although I have a lot of good connections with UK/EU-based customers and I'm currently working European hours from Southern Europe. I haven't lived in my home country this year, although I'm still officially registered there. I'm considering Georgian tax residency, although the rules seem not overly easy, e.g. the applicant must verify receiving at least GEL25,000 (just over $11,000) of Georgian source income during a single year.

I think my personal tax residency is going to be the most important part for my offshore set-up, because I can open a corporation anywhere in the world and start paying corporation tax, but if don't change my tax residency, I'll still have to pay taxes to my Northern European government because of the CFC (Controlled foreign corporation) regulations. I'm currently an EU citizen and tax resident in Northern Europe.

 

[JustAnotherNomad]

First you need to check the rules for your home country to let you go. Many countries still tax you for a certain number of years, unless you meet certain criteria.
Once you have figured that out, you don’t necessarily have to become tax resident anywhere, but it’s a good idea nonetheless.
Check that the new place has a double taxation treaty with any countries that could potentially consider you tax resident for extra protection.

Typical countries you could consider:
- Cyprus (no tax on foreign dividends received): You must spend 60 days per year there (officially at least) and pay some minimum amount of taxes. But you should get access to basic EU healthcare and pension. Should you move back to your EU home country later on, I think you can transfer the pension points, which can be quite favorable.
- UAE (no tax): Every resident is also tax resident. But you will only be able to get a tax residency certificate if you spend several months there (officially half a year, but I’m not sure how strict they are)
- Georgia (territorial tax): There are other ways to get tax residency, but I’m not sure how much time you have to spend there. I’m generally not a fan of countries with territorial taxation if you want to live there as well, since the rules are often not quite clear.
- Estonia (no tax on foreign-sourced dividends if some tax has been paid): Tax-free residency in Estonia
This one is a bit tricky, so it wouldn’t be my preferred choice. But it might work, especially if you are a nomad.
- Panama/Paraguay (territorial taxation): They are popular options since it’s easy to become resident, potentially even tax resident (not sure if you really have to spend half a year there). But I would not go for this as they have signed very few tax treaties, meaning that even tax residency is quite worthless. It might only work if you are 100% sure that no other country can tax you under their own tax code nor consider you tax resident. Then it could be a nice and cheap residency option.

Finally there are probably other countries in Latin America that either have territorial tax or which might tax your worldwide income, but where enforcement is simply nonexistent, especially if you’re a gringo. I’ve heard that Bolivia might be nice for that. But probably many other countries wouldn’t bother you either.

 

[DaveFischer]

Thanks, very useful input!

My only concern is that I could get away with not paying any taxes in Bolivia, but I might want to some day return to a EU country, probably not my home country. I've heard nightmare stories about Canadians and Germans who were forced to pay taxes on the money they earned while living abroad, as they didn't pay any taxes on it.

Not paying any taxes scares me. I'm happy enough to get my tax rate from 52% to 10-20% and maybe in 2-3 years, when I have more experience with the whole international taxation, offshoring and living internationally, I can go for a more aggressive approach. Not paying any personal taxes at all, seems to be tricky business. Paying a few thousands of $/€ of personal taxes wouldn't impact my bank account and put my mind at ease. I like freedom and mental equanimity/calm/peace.

Cyprus sounds great, but based on the next information, I should go for tax residency, but not have a Cypriot offshore company, as that would cost me an additional 17% of dividend tax after paying 12,5% of corporation tax:

Source: Dividend Tax in Cyprus
In case the exceptions from taxation do not apply, the dividends received by Cypriot resident companies and individuals from non-resident businesses will be imposed with a tax rate of 17%. Our company formation advisors in Cyprus can offer more information on the taxation of dividends received from foreign companies.

 

[JustAnotherNomad]

The people you have heard about probably kept ties to their home country. They probably still had an apartment there, visited frequently or had investments there. If you’re properly gone from your home country, they can’t tax you just because you didn’t pay tax anywhere else, unless you’re a US citizen.
If you keep such ties, staying in Cyprus for 60 days per year won’t necessarily save you. So definitely check with a tax lawyer from your home country. Your country really is the biggest risk factor in this whole thing.

But I understand your concern - definitely go for Cyprus as a non-domiciled (“non-dom”) tax resident then. I believe you usually don’t use a Cypriot company at all. Instead you use a company registered elsewhere, then pay yourself in dividends from that company. Cyprus is known to be very lax in applying the rules, so it should be easy to use such a setup to pay zero tax, as long as you pay the minimum amount of tax due in Cyprus. You should talk to some service providers in Cyprus to get a quote. Many people in this forum also have a lot of experience with Cyprus.

There’s an additional benefit I forgot to mention: As long as you keep your tax residency within the EU, your home country cannot charge exit tax. Most (possibly all unter ATAD?) EU countries tax your company to death when you leave the country. This is done to make it so expensive for business owners to leave that you will think twice if you really want to do it. But within the EU, they can’t charge the tax, as it would violate EU treaties. So in practice, it’s a tax that is charged when you leave the EU, trying to lock people inside.

 

[DaveFischer]

Yes, I have no interest keeping ties to my home country except for keeping my EU passport. It's way to risky and I'm really enjoying my life as a free international citizen. I always felt a bit trapped by tyranny and societal pressure in my home country.

I'll contact some service providers in Cyprus. Can you recommend some google search words to find reliable people? I'm worried to spend a lot of money to unqualified people that actually don't really help me out.

Yes, I'm also worried about a future exit tax. Fortunately my country and most countries don't have an exit tax yet. I find it preposterous that you would have to pay a percentage of your money, that you already paid 50%+ taxes over, to the government, but it is what it is.

 

[JustAnotherNomad]

I always felt a bit trapped by tyranny and societal pressure in my home country

Sounds like Scandinavia/Finland indeed.

I'll contact some service providers in Cyprus. Can you recommend some google search words to find reliable people?

No, but I’m sure somebody else (@Admin ? @clemens ?) can help. Maybe try the search function. There should be several threads on this.

Fortunately my country and most countries don't have an exit tax yet.

I believe the EU made exit tax mandatory under ATAD. So pretty soon all EU countries should have implemented it.

 

[xipoid]

But I understand your concern - definitely go for Cyprus as a non-domiciled (“non-dom”) tax resident then. I believe you usually don’t use a Cypriot company at all. Instead you use a company registered elsewhere, then pay yourself in dividends from that company. Cyprus is known to be very lax in applying the rules, so it should be easy to use such a setup to pay zero tax, as long as you pay the minimum amount of tax due in Cyprus. You should talk to some service providers in Cyprus to get a quote. Many people in this forum also have a lot of experience with Cyprus.

Just to add to this, a condition of the 60d tax residency is to either have a Cyprus company, or have employment in Cyprus (and if it gets terminated before the end of the year, that doesn't work). You can actually download the 60d tax residence application form from the finance ministry website in English and avoid all secondary sources or miscommunication. https://www.mof.gov.cy/mof/tax/taxd...22582280036DC1E/$file/T D 126.pdf?OpenElement

I don't believe it can be a completely dormant company either, you have to pump some funds through it and pay some salary and social insurance contributions. As others in this forum have said you're therefore looking at a certain minimum outlay per year for as long as you want to keep this setup going. And you may want to go further and have a proper apartment and evidence of financial activity in Cyprus if you also need to prove to your home tax office that your centre of interests has shifted.

 

[DaveFischer]

It looks like you need to rent an apartment in Cyprus for the 60d tax residency for the entire year? That's going to be expensive.

And it looks like Portugal has very strict CFC regulations and is complex. So the NHR scheme, could end up costing you. Also, it's weird that you don't pay taxes on foreign source income, when some countries will consider all income local sourced if you're running the company from that country.

 

[JustAnotherNomad]

It looks like you need to rent an apartment in Cyprus for the 60d tax residency for the entire year? That's going to be expensive.

That’s probably true, but Cyprus being Cyprus, I’m sure there’s some way around it. Probably in some 30sqm apartment 500 people are resident at the same time.

And it looks like Portugal has very strict CFC regulations and is complex.

Yes. It’s also limited to 10 years. Not really worth it, unless you were going to move to Portugal anyway.

Also, it's weird that you don't pay taxes on foreign source income, when some countries will consider all income local sourced if you're running the company from that country.

Yes, it’s extremely important to check the rules. Both in theory and how they are applied in practice. When you only have a passive investments and you’re not involved in the daily business, it should usually work though.

 

[DaveFischer]

I'm currently in Portugal and the rule is that you have to stay 182 days in Portugal for tax residency. I wonder if they will actually verify this?

As long as I don't stay more than 6 months in any other jurisdiction. Wouldn't most countries actually want you as a tax resident? I know that Malta requires you to proof that you are there, but some countries don't verify.

 

[jackfrost]

Usually they will request things like grocerie bills, rental contract etc when you request your tax certificate. Till then nobody will really check that rule especially when you pay your taxes.

Malta will also never check it until you actually want that printed tax certificate. Then they want receipts etc

 

[jackfrost]

portugal only 100% passive otherwise they will get you at some point. good lawyer there is huenermund. told me without charge right away its not going to work (not 100% passive income) and explained other options to get to 25% or so but thats it.

 

[JustAnotherNomad]

I'm currently in Portugal and the rule is that you have to stay 182 days in Portugal for tax residency. I wonder if they will actually verify this?

That’s not true. I don’t know where you read that. Like in most high-tax countries, having residency there is enough. So you just rent an apartment all year and you’re also tax resident.

 

[jackfrost]

Thanks, very useful input!

My only concern is that I could get away with not paying any taxes in Bolivia, but I might want to some day return to a EU country, probably not my home country. I've heard nightmare stories about Canadians and Germans who were forced to pay taxes on the money they earned while living abroad, as they didn't pay any taxes on it.

Not paying any taxes scares me. I'm happy enough to get my tax rate from 52% to 10-20% and maybe in 2-3 years, when I have more experience with the whole international taxation, offshoring and living internationally, I can go for a more aggressive approach. Not paying any personal taxes at all, seems to be tricky business. Paying a few thousands of $/€ of personal taxes wouldn't impact my bank account and put my mind at ease. I like freedom and mental equanimity/calm/peace.

Cyprus sounds great, but based on the next information, I should go for tax residency, but not have a Cypriot offshore company, as that would cost me an additional 17% of dividend tax after paying 12,5% of corporation tax:

Yes that is why you want a tax certificate / tax residency somewhere! Germany even if you server ties will make it extremely hard for you to argue that you are not liable to German income tax if you cannot proof you where out of the country >183 days AND ideally have lived in another country for >183 days AND can present that tax certificate. What the law says and how the German IRS interprets it are two ENTIRELY different things and it is not quite as easy as "you can just fight it in court" because of the way German tax law + enforcment works in general. Even if you would in THEORY win at some point you might already be bancrupt by then.

Dont f**k with them.

 

[JustAnotherNomad]

portugal only 100% passive otherwise they will get you at some point.

It is extremely complex. You might be able to do it if you can prove that you never work from Portugal, but even then, there is a lot of risk. And it’s limited to 10 years anyway. And a lot of bureaucracy. And everything is in Portuguese, you can’t get an advance ruling and everything is slow. Just don’t do it.

 

[jackfrost]

Btw you can visit Germany for many smaller visits without an issue of that is your only tie - IF you have family. Family, health reasons (dont use that!) are explicitely exempt from point of interest / days calculation. Best is if you can stay with family and dont need to go into a hotel or if you need to go into a different one every single time. Never book the same hotel/room multiple times. That has been used to argue an appartment under your name successfully before by the german irs.

 

[jackfrost]

It is extremely complex. You might be able to do it if you can prove that you never work from Portugal, but even then, there is a lot of risk. And it’s limited to 10 years anyway. And a lot of bureaucracy. And everything is in Portuguese, you can’t get an advance ruling and everything is slow. Just don’t do it.

yes 100% agree. reason i dropped it. would have loved lisbon.

 

[JustAnotherNomad]

Germany even if you server ties will make it extremely hard for you to argue that you are not liable to German income tax if you cannot proof you where out of the country >183 days AND ideally have lived in another country for >183 days AND can present that tax certificate.

I think you are being overly dramatic. If you don’t have an apartment in Germany, don’t spend time in Germany, don’t do business in Germany, don’t have investment income from Germany, I don’t think they’d have a case.
Obviously you must be able to prove that, but it’s not a requirement to spend >183 days in one and the same country.

 

[DaveFischer]

Portugal: Way too complex, dangerous.
Cyprus: Looks like it would cost €10.000 yearly, renting an apartment.

Georgian HNWI Residence is starting to look pretty great.

(ii) he or she verifies receiving more than GEL25,000 (twenty-five thousand Georgian Lari) of Georgian source income during a single year.

You can use your own Georgian company for this.
Actually, this can be satisfied e.g. with a term deposit in a Georgian bank.

• No taxes on worldwide income. Residents get taxed on Georgian-sourced income only.
• For non-US citizens, it is easy to create an international structure and pay zero tax on profits while being a legal resident of Georgia. It is also possible to maintain a part-time home base in Georgia without incurring tax obligations. You can even become tax resident without living in Georgia if you can prove wealth or high income.

 

[jackfrost]

I think you are being overly dramatic. If you don’t have an apartment in Germany, don’t spend time in Germany, don’t do business in Germany, don’t have investment income from Germany, I don’t think they’d have a case.
Obviously you must be able to prove that, but it’s not a requirement to spend >183 days in one and the same country.

no it is not but advisable to not spend more time in germany than in the other jurisdictions should have rather worded it this way. dont remember the exact details but there was a case where this was being argued in the context of digital nomading and tax structures like 60 days cyprus for a certificate.