Ask HN: Digital Nomads: How do you manage taxes?

Are you an american, or not? If you're not, there are possibilities of paying (close to) no tax at all if you travel around.

Where are you resident now?

I suggest you ask an accountant or some other kind of tax specialist in the country which contains the bank where you will receive your salary. Presumably that's your home country.

As others have said, it's probable that if you are out of this particular country for long enough you will not have to pay tax there.

When I moved to Dubai, I declared myself non-resident in UK for tax purposes. Dubai was tax-free. Now I find myself resident in two countries for tax purposes and paying tax in both. But I've mixed feelings about it. I'm actually quite happy to pay taxes back in the UK, less keen on paying taxes in Australia, as they're rather scummy these days to NZ citizens, so I'm getting a little screwed over with no path to permanent residency, very little benefits, yet still have to pay full whack of tax... Lovely. (Fuck Australia)

But, in your situation, moving every 2-3 months can mean you might actually avoid tax residency in most countries. So it can be complex. Look into the three or five flags theory for perpetual travellers. Also into tax-residency rules of the countries you'll be staying in.

Essentially you want to have your citizenship somewhere where your foreign income is not taxed. Have a legal residence somewhere with low tax/tax haven. Earn your money/host your business somewhere with low corporate rates, have your assets somewhere where they aren't taxed massively and spend your money somewhere with low levels of consumption tax/VAT.

As for visas, it's really just travelling at a slower pace. While working remotely, it's kind of a blurry situation. Mostly though, as long as you don't remain longer than six months in one country, you're unlikely to fall foul of residency laws (for tax purposes).

Visa-wise. Very few countries let you work remotely, most do not.

Canada for example says right on their immigration website that if you are working for a company not based in Canada and are paid from outside of Canada then there is no problem.

Thailand, and most of South East Asia frankly, have laws on the books that say any work, including volunteer work, is work and is forbidden. Thailand has however stated some years ago that 'Digital Nomads' aren't their concern, just illegal workers. There have been arrests in shared work spaces but people were released after. Definitely a grey area.

Singapore's another example but you can count on them to enforce the law to the letter.

That's an uncomfortable truth you don't see people talking about on the remote job boards.

You don't read about many issues because nobody is going to know that a guy on his laptop is working and not uploading holiday snaps to Facebook. I'd personally avoid coding camps, shared workspaces and collaborating in person if I was going to skirt the law and do it anyway.

I've been a digital nomad for almost 6 years and have written in great detail about this subject here: https://bkpk.me/digital-nomads-tax/

The gist of it is that it depends a lot on your citizenship, the kind of work you do, and how it is all setup. Normally, taxes are to be paid where the work is done if you are a tax resident in that country. Interpretations vary so most nomads are on tourist visas and just fly under the radar. There is no proper framework for this kind of work yet. Even if you wanted to pay taxes in a country you're visiting it would be impossible in many cases because they wouldn't even issue a tax number without proper residence papers. You should be most concerned about your home country and speak to an accountant about that.

> How do taxes work in this case? Am I supposed to be taxed based on my home country, the company's home country or the country I am currently residing in?

I'm not a tax accountant, but I've spent a reasonable while looking at this and talking to various people in similar situations.

Step one: work out where you're tax resident. You're typically tax resident in the place you spend more than 6 months of the year. There are some more complex per-country rules if that doesn't cover you though, and lots of tie breakers on things like where your ties are (where your business/family are located) and how many days you spent working in the countries involved. This can be complicated and gets relatively subjective in the tricky cases. If it's truly ambiguous and you're not a super high earner, you can probably pick any plausible option without much risk.

Step two: pay taxes on income earned in the country(ies) when you earned it (i.e. where you currently are working, if you're working remotely), plus taxes on your whole annual income wherever you're tax resident. There are double-taxation treaties between most nations that allow you to claim it back. If you're American, I think you also have to pay taxes in America, on top of the above (but I'm not American, so I'm not sure on that). An example:

- You live in the UK for 9 months this year, so you're a UK tax resident

- You work from Spain for 3 months (remotely or locally)

- You should pay tax in Spain for the earnings of those three months

- You should pay tax in the UK for the full year, but claim payments in Spain back against that (there's a field for this on UK tax returns).

- That means your total tax bill is the same as if you were just in the UK (this isn't necessarily always true, if you have wildly different tax rates), but there's just more paperwork.

In practice, my impression is loads of people ignore these rules (I personally know large numbers of people doing so), and just pay tax where they're tax resident (or even just where they were last tax resident), and skip the extra paperwork.

Whether you can get away with that depends on your situation, but if you're asking for tax advice on HN you're probably not an individual where it's going to bite you, as long as you pay tax correctly for the majority (i.e. if you just pay normal full tax to the UK, in this example).

This is 'what happens in practice' advice though - it's a good idea to actually talk to an accountant, and take the risks of shortcuts here seriously, especially if your situation is interesting or complicated or you're earning a lot of money. These rules can also vary significantly in other nations, so you'll need to double check them for each of the countries you're planning to visit.

In countries like Argentina you can stay as much as you want without any issue. Just need to travel (and return) to a near country like Uruguay every some months.

I would love to know in a comment why this suggestion is downvoted.

The world hasn't really caught up with the reality of remote work, but for now, I just pay taxes where I reside most of the time.

Step 1: Don't be American. They're taxed on global income so you're pretty screwed there if you are - see point 3 though.

Step 2: Avoid being tax resident in countries. e.g. In the UK you only become a full tax resident after ~90 days (or something like that - I didn't deal with it). The more tax residencies you collect the more of a mess it'll be.

Step 3: Stick to countries with double tax agreements in place ("DTAs")

The reality is that most countries don't have visas to support the "digital nomad" life and you will either be working illegally under a tourist visa (everyone I've met), or spend months trying to get work visas and be rebuffed everywhere because you don't have a sponsoring employer, self-employment business starting capital+business plan, etc. And if you're there on a tourist visa, there's no way for you to pay tax.

I've seen two setups among people I've met who are doing the digital nomad thing: Either they are tax resident in their home country (wherever they started) and pay their taxes there, or they told their home country they moved out and they pay taxes nowhere. This obviously depends on the laws for tax residency in the country you're coming from (some depend on # of days in the country, ties like owning property/a business, etc). Traveling around inside the EU is also an exception.

Re: the visa thing. For instance if you tell US border control that you're going to be doing productive work, they WILL turn you back on the spot. Either get comfortable lying about your intentions or you will severely limit the countries you can visit.

edit: one more thing, everyone I've talked to as a digital nomad makes sure their status is as a contractor. If you're on payroll as an employee things instantly get more complicated, especially internationally.

Nobody is mentioning Estonia.. They promote it, but you should be aware of double taxation rules with your own country, in short it means you can be double billed but can ask it back.

I've started my own company there and can bill from there, or pay myself a salary, whatever is most handy.

Question to the crowd.

What if you are not staying more than 3 months in a country, per year?

Where are you tax resident?

Are you even legally resident somewhere?

Should you even pay taxes? Who is going to catch you?

Honest question. I'm not American, part time nomad, paying taxes but thinking about the uselessness of doing so quite often.

I do not do this and am not an expert by any means, but I would look into establishing residency in whichever non income tax state is easiest to do so. Then you just have to worry about federal taxes.

Kind of related:

Is there an easy way to ask the VAT back from each country?

I have a related question, but switched around: I have a US based company that recently started paying an international contractor (individual) for some programming work. He’s not a W2 employee and being that he’s not a US citizen I’ve just been paying him in full and not withholding anything for taxes. This mirrors how I’ve paid other US based 1099 contractors.

As the project has gained momentum and is looking to be something that will continue long-term, it has me wondering about the correct process. A couple weeks ago I spent a few hours researching IRS documents and posts found by googling, but nothing was conclusive. Some of the information I found indicated what I’ve been doing is correct, but I need to have the contractor sign a W-8BEN [1]. Other information indicated that I should be withholding 30% of his earnings even though he meets the standard to be a 1099 contractor if he was a US citizen.

Do others have experience with this and what can you offer as advice?

[1] https://www.irs.gov/pub/irs-pdf/fw8ben.pdf

It depends where you are from, where you are going and how much time you intend on spending there. Anyone giving you answers without knowing the answers to those questions should not be listened to. You probably want to speak to somebody who is actually qualified to give you proper answers.

I'd say generally you are tax resident in your own country until you spend enough time in another country for THAT country to consider you tax resident. At that point a double tax agreement kicks in and therefore you only need to pay tax in your new country of residence. If you move around all the time then you generally have to pay in your own country. This all assumes you are working freelance.

I believe a lot digital nomads actually declare no income anywhere and don't pay any tax. This is obviously risky and illegal and not a great idea.

I am self employed. My country allows me to declare flat expenses on up to 60% of my income. No accounting or proof needed. Real taxation is around 20% on $100K income (including social and health insurance).

So every year I spend about 2 hours with:

- sum all money that arrived to my account in last year

- fill form on IRS website

- update standing orders for health/social contributions for the next year

- one month latter, ring IRS and other offices, just to check all went through

If you move every two months, I would not worry about it too much. Important is:

- you pay taxes somewhere (preferably in your home country)

- you do not work for locals

Every country is different. You will have to specify what country you are a citizen to, and where you plan on going.

I know that being an American citizen can make it very difficult to live abroad. I am an accidental American and I have to report all of my money that I earn and keep abroad. That means if I have a job and earn a salary, keep a pension fund, have investments, work as a contractor for 1 job and have my spouse's bank account under both our names, I have to report all of that. Seeing as no free software offers a way to do all that I have to pay a yearly I-am-an-American "tax" to an accountant to make sure that everything is filed properly. If any mistake is made I could be fined up to half of the money that I own (not the money that I have in America, but all of the money that I own). If I want to open a bank account, I better hope that my bank in my country decides to bother with all of the liability involved with having an American customer. If not, they can (and some have) simply close my account and tell me to withdraw everything. If I want to start investing through a company such as Schwab, I must declare exactly how I earned all of the money, be limited in the funds that I can buy, and receive less perks.

If anyone else is an American living abroad or who wants to live abroad, feel free to contact me. On the bright side, we still are allowed to vote. That means that I periodically call my representative and let them know that I don't care whether they are Democrat / Republican, Pro-Life / Pro-Choice, like Trump / hate Trump, if they want to repeal these laws preventing Americans living abroad from living a normal life, I will vote for them.

If you are and American who is interested in leaving America or if you already have, feel free to read more here: https://aaro.org/position-papers-2015/taxation-and-financial...

1. Speak to an accountant. Each country has their own tax regime, depending on your residency status.

The bigger issue is making sure you have the legal right to work where you are going and don't get into double taxation. Everything is country specific. (And see #2, if you are a US citizen there are tax treaties so you need to see).

2. You don't state where you are a citizen of and where you are working but the United States taxes on global worldwide income (only country to do so but there are tax treaties).

3. On an offhand way, it's probably easiest for you to incorporate and work for that corporation but it depends on the nature of your remote work.

Taxes: It depends on your citizenship, nominal or achievable tax residency status and plans for the future whether you benefit from paying taxes in a given jurisdiction, as well as that jurisdiction's regulations. You can pay in to multiple jurisdictions if you want, and sometimes this may be smart. You can pay it as various corporate taxes, or you can pay it as personal income tax. Sometimes you can avoid tax entirely (eg. structure a company to operate at a loss, and keep profits outside the country of tax residency in a special low or no tax jurisdiction - large companies do this all the time, though it is becoming very much frowned upon it is still pretty damn common). Note that some countries have low or no personal income tax, but have pretty low/reasonable corporate profit tax (eg. Hong Kong), and some waive the latter for a period when starting a new company (eg. Singapore I believe). Moving arbitrary amounts of capital between countries to avoid profits accruing is often achieved using "IP licensing agreements" or similar. Personally I have three citizenships, plus bank accounts in fourth, fifth and sixth countries (shut down a seventh). Sometimes I get paid in Bitcoin, just to keep things interesting. A big issue can be the tax implications of share options, in which case you might conceivably even benefit from changing tax residency specifically to vest. Basically there's as much complexity as you can possibly imagine here.

Tourist visa: You're not working, really. It's a continuation of your established consulting commitments. You are on holiday. There's no law against that.

Pay tax in your home country and travel on Tourist Visa's where visa's are required or expedient.

Make sure payments are made to your home country bank account and not to any kind of local account.

Do that and be relatively discrete about what you're doing and you'll have no problems whatsoever. DO NOT try to explain what you're doing to any immigration/officials/authorities, simply say you're a tourist which in practical terms you are.

Re the replies that mention the UK.

Since 2014, tax residency in the UK is now quite a complicated algorithm (see https://www.gov.uk/government/publications/rdr3-statutory-re...). Provided you keep your work-days in the UK low, and can demonstrate workdays outside of the UK, it's possible to avoid tax residency.

However, it's worth considering the benefit of being a UK tax resident is that you accrue National Insurance contributions (even if the amount of those contributions is zero!), which in turn qualify you for a state pension.

Another issue is health care insurance.

For example Germany has mandatory insurance. So you cannot cancel your insurance, and even if you travel in another country they still expect you to pay the insurance in Germany. Public insurance for freelancers costs around 350€ / month, and as DN without German employer they will classify you as freelancer.

You probably do not have to pay the full fee while being outside of Germany, but public insurance has various rules which even the insurance providers do not know, because they are set by law/regulations not by the providers themselves and the clerks by the providers rarely deal with DN.

1. If you have no savings, it only costs a reduced rate of 150€ / month. But traveling without savings is risky, too.

2. If they register you as freelancers, you can opt out and get private insurance, which costs between the reduced and the full public insurance rate, while you are young. But it is a market-rate and become arbitrary expensive, if you are old, and you can not switch back to public insurance (except for marriage or a non-freelancing job with a certain inome).

3. Thus you must be very carefully when choosing a travel health care insurance, because they might consider that to be a private insurance, and if you had private insurance, you cannot go back to the public insurance.

4. There was an obscure emergency-like plan, where you register as being in another country and then only pay a minimal fee to be insured, but do not get anything covered and you must be outside of Germany for several months. Hard to find any information about that.

5. The important thing is to do all (un)registrations before leaving. Since insurance is mandatory, you always have insurance in Germany, even though you were away. So when you are back there, the new insurance will not begin in that moment, but begin retroactively when the last insurance had ended. When you are then still doing freelancer work, they will bill you a lump sum of 350€ for every month you were away.

as of taxes, i've incorporated a free zone UAE company and it gave me a 3 year residence in UAE. it comes much cheaper than paying taxes pretty much anywhere else. establishing residence in paraguay might be another option

unless you're a US citizen, your country of citizenship doesn't tax you if you live abroad

You're asking about tax residency which is a hassle depending on where you are or where you're from. I am not a lawyer, just personal thoughts :)

A not bad idea however, is to incorporate a small limited company that can bill your clients around the world. Clients tend to like this as it is simple to declare expenses. Don't take a $50 Cayman-ish Internet registrar; take a reputable one that will act as named company secretary, $200-$500 should be fine depending on where you are. Gives you a registered address and a professional to call if you freak out.

You need to keep books and file tax reports, but is not a hassle and can save a lot of hassle.

Pay yourself from that company and when incorporating it (less than 30 minutes), wherever you are, ask your accountant/company secretary how the company should pay taxes. For your case (wherever you are) they will have heard the question a thousand times before and give you frank advice; this non-charged advice saves them time during busy periods in the year. You still need to do the books and keep necessary paperwork, or send it to them.

Do not do the above and work as a Nomad while receiving income from a client in the same country (unless you're incorporated in that country, or on a business visa but we're getting really case-by-case in this, ahem, case). You'll be treated as an illegal worker, opposed to a cash-injector.

A bit of a ramble. How something in there was useful.