Avoiding being taxed by my home country if I emigrate and immigrate back after a few years

[soomon]

I am a EU citizen. I would like to move to a low tax country, set up a company over there, enjoy the low taxes and also travel.
At some point in time, I might want to move back to my home country.

I heard that after you move to another country and move back later, local tax authorities might claim you only moved there to avoid taxes and you have to convince them that this was not the case. If you fail to convince them, you'd have to pay taxes for all the time you were abroad as if you lived there the whole time.

Is this true?
Does anyone have experience with this?
What proof did you show them to convince them you didn't just want to avoid their taxes?
Is there any year limit on this? For example: As long as you stay abroad for 5 years, they won't question it any more?

Thanks

 

[BoomBoom]

You should talk to a lawyer in your country that specializes in relocation and it's tax aspects. The law and what actually happens might be different and you want to be in the clear on both accounts.
Generally speaking, you need to prove that our economic ties are in the new country and your real life center is there.
The most important bits are:
* you are not visiting your home country for more than X days in a year (the law might say 183 but a lawyer might say that in reality it is 30 or 60)
* you actually live in the new country (rent an apartment or live in your property and all the utility bills are on you)
* IMPORTANT: you pay taxes in your new country
* your job is in the new country (or your business)
* you spend at least X years in the new country - otherwise they might question you

anything that proves that your center of life is in the new country (job, gym membership etc) is good but the above points are the main important ones

What I know it is legal and allowed to change residency in order to optimize your taxes, but yes, if you move and come back after 3 years they might question whether you really moved or not.

Talk to a lawyer which specializes in relocation and it's tax aspects in your home country - they know best what the tax office actually cares about

 

[JustAnotherNomad]

It completely depends on the laws of your home country, there is no general answer. Talk to a lawyer/accountant.

 

[soomon]

I agree. Thank you guys for your input, it is very much appreciated

 

[Gediminas]

I am a EU citizen. I would like to move to a low tax country, set up a company over there, enjoy the low taxes and also travel.
At some point in time, I might want to move back to my home country.

I heard that after you move to another country and move back later, local tax authorities might claim you only moved there to avoid taxes and you have to convince them that this was not the case. If you fail to convince them, you'd have to pay taxes for all the time you were abroad as if you lived there the whole time.

Is this true?
Does anyone have experience with this?
What proof did you show them to convince them you didn't just want to avoid their taxes?
Is there any year limit on this? For example: As long as you stay abroad for 5 years, they won't question it any more?

Thanks

Hey,

The following aspects are important:

Are you moving to live in a country that has a treaty for the avoidance of double taxation with your country? If so, the treaty defines residency criteria and it makes your position stronger. If you obtained a tax residency certificate for these years when you reside in a new country, for your citizenship country would be difficult to challenge residency because of international agreement.

However, if you moved, for example, in a country that does not have an agreement such as anti-tax avoidance, provisions as substance over form might be applied when you come back. As it was explained before, it will be also important how strong your residency in fact was and how much substance you created.

There might also be special restrictions to move to black-listed countries. For example, in certain cases country considers you tax resident for the next 3 years if you report that you are leaving to live in a tax haven (black-listed country).

I hope this helps.

 

[soomon]

That is great information @Gediminas thank you as well

 

[JimBeam]

What proof did you show them to convince them you didn't just want to avoid their taxes?
Is there any year limit on this? For example: As long as you stay abroad for 5 years, they won't question it any more?

IMO (and I might be wrong) I doubt that they'll pull this on you if you was out for 5 years... It's a long period of time... It may be usually used for those that just go there for a year or two to cash out...

But while you are living there, keep all kinds of stuff, even in electronic copy:
- rental agreements
- all utility bills
- gym membership contracts/cards
- even restaurant and grocery bills, barbershop receipt
- plane tickets
- tax returns

Get a driver's license there, own a car and keep all the docs (registration car repairs, etc).
If you're not a driver Uber/taxi receipts...

So, have this all ready to support your story/claims just in case...

 

[Cyprustr]

"I heard that after you move to another country and move back later, local tax authorities might claim you only moved there to avoid taxes and you have to convince them that this was not the case. If you fail to convince them, you'd have to pay taxes for all the time you were abroad as if you lived there the whole time."

It depends the country you are from. If your country has double tax treaty with the other country and that country isn't considered a tax heaven, they can't tax you for something that you were taxed already in the other country.


In Spain for example we have the following countries considered tax heaven:

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

List of countries and territories that are considered tax havens with the modifications derived from the provisions of Royal Decree 116/2003:

1. Principality of Andorra (9)
2. Netherlands Antilles (3) (10)
3. Aruba (4)
4. Emirate of the State of Bahrain
5. Sultanate of Brunei
6. Republic of Cyprus (17)
7. United Arab Emirates (1)
8. Gibraltar
9. Hong Kong (16)
10. Anguilla
11. Old and bearded
12. The Bahamas (14)
13. Barbados (15)
14. Bermuda
15. Cayman Islands
16. Cook islands
17. Republic of Dominica
18. grenade
19. Fiji
20. Guernsey and Jersey Islands (Channel Islands)
21. Jamaica (5) (6)
22. Republic of Malta (2)
23. Falkland Islands
24. Isle of Man
25. Mariana islands
26. Mauritius
27. Montserrat
28. Republic of Nauru
29. Solomon Islands
30. St. Vincent and the Grenadines
31. St. Lucia
32. Republic of Trinidad and Tobago (8)
33. Turks and Caicos Islands
34. Republic of Vanuatu
35. British Virgin Islands
36. Virgin Islands of the United States of America
37. Hashemite Kingdom of Jordan
38. Lebanese Republic
39. Republic of Liberia
40. Principality of Liechtenstein
41. Grand Duchy of Luxembourg, with regard to the income received by the Companies referred to in paragraph 1 of the Protocol annexed to the Convention, to avoid double taxation, of June 3, 1986 (7)
42. Macau
43. Principality of Monaco
44. Sultanate of Oman (18)
45. Republic of Panama (12)
46. Republic of San Marino (11)
47. Republic of Seychelles
48. Republic of Singapore (13)

Notes:
(1) The Agreement between Spain and the United Arab Emirates to avoid double taxation enters into force on 04/02/2007 (see Annex I ). (Return)
(2) The Agreement between Spain and Malta to avoid double taxation enters into force on 09/12/2006 (see Annex I ). (Return)
(3) As of 01-27-2010 (date of entry into force of the Agreement on the exchange of information on tax matters - BOE 11-24-2009 -) it is no longer considered a tax haven. (Return)
(4) As of 01-27-2010 (date of entry into force of the Agreement on exchange of information on tax matters - BOE 11-23-2009 -) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(5) The Agreement between Spain and Jamaica to avoid double taxation enters into force on 05-16-2009 (see Annex I ). (Return)
(6) The companies mentioned in paragraph A of section V of the Protocol of the Agreement are excluded from it and from the effects of the application of the first additional provision of Law 36/2006 on measures for the prevention of tax fraud. -ERR: REF-NOT-FOUND- (Go back) </g>
(7) As of 07-16-2010 (date of entry into force of the Protocol modifying the Agreement -BOE 05-31-2010-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(8) The Agreement between Spain and Trinidad and Tobago to avoid double taxation enters into force on 12-28-2009 (see Annex I ). (Return)
(9) As of 02-10-2011 (date of entry into force of the Agreement on the exchange of information on tax matters-BOE 11-23-2010-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(10) As of October 10, 2010 (the date of dissolution of the Netherlands Antilles) Curaçao and Saint Martin became autonomous states of the Kingdom of the Netherlands. The remaining islands (Bonaire, Sint Eustatius and Saba) have become part of the Netherlands. The Information Exchange Agreement signed with the Netherlands Antilles is applicable to Saint Martin and Curaçao, while the CDI with the Netherlandsapplies to the other three islands. (Return)
(11) As of 02-08-2011 (date of entry into force of the Agreement on exchange of information on tax matters-BOE 06-06-2011-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(12) The Agreement between Spain and Panama to avoid double taxation enters into force on 07-25-2011 (see Annex I ). (Return)
(13) As of 01-01-2013 (date of application of the Agreement-BOE 11-01-2012-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(14) As of 08-17-2011 (date of entry into force of the Agreement on exchange of information on tax matters -BOE 07-15-2011-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(15) From 10-14-2011 (date of entry into force of the Agreement to avoid double taxation between Spain and Barbados-BOE 09-14-2011-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(16) As of 04-01-2013 (date of application of the Agreement-BOE 04-14-2012-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(17) As of 05-28-2014 (date of application of the Agreement-BOE 05-26-2014-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>
(18) As of 09-19-2015 (date of application of the Agreement-BOE 09-08-2015-) it is no longer considered a tax haven. -ERR: REF-NOT-FOUND- (Go back) </g>

""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

In Spain they have already a law to prevent people to go to a tax heaven and withdraw money and then come back. That law forces you to pay taxes in Spain for 5 consecutives years if you are living in a country considered tax heaven.

And there's also an exit tax:

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

This exit tax is applicable to taxpayers who have been Spanish tax resident for at least 10 out of the 15 years prior to their departure from the country. However it only applies to those who own substantial shareholdings as follows –

• The market value of the shares held exceeds €4,000,000 or
• The total shareholdings exceed 25% and the market value of the shares exceeds €1,000,000

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

Summing it up: If you comply with the requirements to not be considered tax resident, you don't go to a tax heaven and the country has double tax treaty. You can't be taxed when you come for something you've already paid in another country. But it's so important to be able to prove that you stayed in the other country more than 183 days.​

And If you go to a tax heaven you'll have to pay taxes during 5 years in Spain.

What matters is the information below:

When is an individual considered a Spanish resident, and when is he or she a non-resident?​

An individual is resident in Spanish territory when any one of the following circumstances apply:

• They have stayed longer than 183 days in Spanish territory over the calendar year. In order to determine the permanence in Spanish territory, occasional absences are included, except if the taxpayer accredits their residency in another country. In the case of countries or territories of those classified as tax havens (as of July 11, 2021, it must be understood that the regulations refer to non-cooperative jurisdictions) , the Tax Administration may require that permanence in the same be proven during 183 days in the calendar year.
• They situate the main base or centre of their activities or economic activities, directly or indirectly, in Spain.
• They have dependent not legally separated spouse and/or underage children who are usually resident in Spain.This latter situation accepts evidence to the contrary.

Natural persons of Spanish nationality who prove their new tax residence in a country or territory classified as a tax haven will not lose the status of taxpayers for the Personal Income Tax (as of July 11, 2021 it is necessary to understand that the legislation refers to non - cooperative jurisdictions) .This rule is of application During the tax period in which the change of residence OCCURS and for the next four tax periods.
Otherwise, where none of the previous situations applies, an individual is considered as non-resident in Spain.


Disclaimer: I'm not a lawyer, expert in law and nothing similar. I'm not responsible if something that I've written is not true.

 

[uplana]

It depends the country you are from. If your country has double tax treaty with the other country and that country isn't considered a tax heaven, they can't tax you for something that you were taxed already in the other country.

That is true, it just required a trusted and qualified tax auditor in Cyprus in order to get through with this. Say you have PWC or Deliotte in both countries it won't be a big problem to get away with it.

 

[Cyprustr]

That is true, it just required a trusted and qualified tax auditor in Cyprus in order to get through with this. Say you have PWC or Deliotte in both countries it won't be a big problem to get away with it.

Why is it required a tax auditor?

The only thing a tax auditor does is to read the double tax treaty between the two countries and explain it to you.

 

[JustAnotherNomad]

If your country has double tax treaty with the other country and that country isn't considered a tax heaven, they can't tax you for something that you were taxed already in the other country.

That is not necessarily true. Please talk to a lawyer from your home country, don't just assume it will be fine.

 

[Rzeznik]

Why is it required a tax auditor?

The only thing a tax auditor does is to read the double tax treaty between the two countries and explain it to you.

Probably good tax auditor will tell you what to do and not to do.
What forms you should fill before depart, where cut off local connections from health care etc. Countries are different, my spouse friend went to Austria and after 2 years local IRS came to her that she is Polish taxpayer because she doesn't filled form zap-3 (announce that you are living in local IRS) after few month she had to pay taxes. She was in Austria with husband and child... (now I have filled zap-3 and my law firm told me to do it ). In brutal reality for polish IRS because she hasn't filled that form was meaning that she is out just temporary.
Sure maybe she would won in court but it was not worth 300$ tax liability and time. (years in curt). For tax audit she had to travel to Poland for much more that those taxes... Imagine cost of never-ending court case.

Here we talk about overall picture but reality may be different after all - people who helps tax changing residency can save someone problems, the more money you want to be not taxed the more perfect exit you should do IMO and keep all proofs somewhere.

 

[Cyprustr]

That is not necessarily true. Please talk to a lawyer from your home country, don't just assume it will be fine.

Supreme Court has ruled that it is enough to live outside of Spain 183 days.

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For the Supreme Court, the concept of "sporadic absences" must exclusively address the objective data of the duration of the stay outside Spanish territory, without taking into account the intention of the taxpayer to settle occasionally outside the national geography. Ultimately, then, what is relevant is whether or not the taxpayer spends more than half the year outside of Spain, that is, 183 days or more.

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Now the Supreme Court establishes a criterion totally contrary to the previous one, of a more objective nature and establishes the tax residence should not depend on the intention of the taxpayers or on the economic or vital interests to determine whether or not they have tax residence in Spain. The objective criterion that determines the TS is the number of days that the taxpayer spends in Spain vs. the number of days you spend abroad.

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https://www.poderjudicial.es/search/openDocument/5a57493f093f844b
https://www.jda.es/el-tribunal-supr...riterio-para-determinar-la-residencia-fiscal/
https://www.elconfidencial.com/econ...acienda-183-dias-espana-becario-icex_1498033/
https://www.delbas.com/blog/newslin... días en el extranjero para ser no residente.

 

[AnderLezuna]

Hey @Cyprustr ,

Thanks for the detailed and very good information you provided in your 2 previous posts

I am new in this forum so I wonder if you may take a look at my case and tell me what you think: https://www.offshorecorptalk.com/th...al-country-like-thailand-llc-good-idea.35353/

Appreciate it buddy and hopefully I will be able to learn and interact soon here

 

[DrunkFlamingo]

Supreme Court has ruled that it is enough to live outside of Spain 183 days.

It's not quite so black and white. Even though there are the supreme court have rulings regarding sporadic absences, it's still very much a grey area.

I am currently discussing things with a relocation lawyer and he has instructed to be clear you need more than to be just out of the country for 183 days to avoid problems. Spain has interesting rules regarding a "stateless person" or "apatrida fiscal", meaning if you travel the world perpetually for the next 10 years, you could still end up with problems with the hacienda.

In general the advice is, the best thing you can do is go and get yourself a tax residency somewhere else that has a double taxation agreement with Spain (ie. somewhere that's not considered by Spain to be a tax haven), and to be able to provide all the substance required (rental apartment, local expenses, tax certificate etc). Two locations he mentioned that could work were cyprus and dubai.

1. Principality of Andorra (9)
2. Netherlands Antilles (3) (10)
3. Aruba (4)
4. Emirate of the State of Bahrain
5. Sultanate of Brunei
6. Republic of Cyprus (17)
7. United Arab Emirates (1)
8. Gibraltar
9. Hong Kong (16)
10. Anguilla
11. Old and bearded

Gotta love number 11. Old and Bearded. Funny translation of Antigua and Barbuda.

 

[clemens]

In general the advice is, the best thing you can do is go and get yourself a tax residency somewhere else that has a double taxation agreement with Spain (ie. somewhere that's not considered by Spain to be a tax haven), and to be able to provide all the substance required (rental apartment, local expenses, tax certificate etc). Two locations he mentioned that could work were cyprus and dubai.

where would you do that ? I mean country?

 

[DrunkFlamingo]

where would you do that ? I mean country?

This is where it gets tricky. There are not many locations that have a double tax treaty with Spain that are tax friendly.

UAE / Dubai seems to be the best option with zero tax. But you need to live there for 183 days at the very least.
Cyprus could work. 60 days for tax residency so long as you don't spend more than 180 days or so anywhere else. Also would need to provide substance.

Other options I have looked briefly into, but need more info:
Bali (Indonesia) digital nomad visa - worldwide income tax free for 5 years. Unsure if it's easy to get a local tax number / tax residency
Thailand, income remitted from overseas after 1 year is tax free. You'd need some kind of offshore structure for this. Thailand would be very much a grey area according to Thai tax laws, but people report they dont really enforce it, and the general consensus is to fly under the radar and you'll be fine.
Philippines also has a retirement visa for people aged between 35 and 50, but I am not sure if it's still active or as desirable.
There may be more countries that offer some kind of digital nomad visa which have tax advantages, but don't have a full list yet.

Most other countries seems to be tax havens, so won't work.

 

[rainmaker]

This is where it gets tricky. There are not many locations that have a double tax treaty with Spain that are tax friendly.

UAE / Dubai seems to be the best option with zero tax. But you need to live there for 183 days at the very least.
Cyprus could work. 60 days for tax residency so long as you don't spend more than 180 days or so anywhere else. Also would need to provide substance.

Other options I have looked briefly into, but need more info:
Bali (Indonesia) digital nomad visa - worldwide income tax free for 5 years. Unsure if it's easy to get a local tax number / tax residency
Thailand, income remitted from overseas after 1 year is tax free. You'd need some kind of offshore structure for this. Thailand would be very much a grey area according to Thai tax laws, but people report they dont really enforce it, and the general consensus is to fly under the radar and you'll be fine.
Philippines also has a retirement visa for people aged between 35 and 50, but I am not sure if it's still active or as desirable.
There may be more countries that offer some kind of digital nomad visa which have tax advantages, but don't have a full list yet.

Most other countries seems to be tax havens, so won't work.

What about Andorra? Easiest option by far, you prefer the beach I guess

You could also look into Paraguay, which is pretty much off anyone's radar. Similar to Panama but not as bad reputation.

 

[JohnLocke]

You could also look into Paraguay, which is pretty much off anyone's radar. Similar to Panama but not as bad reputation.

are you serious, Paraguay has no reputation, I believe that banks and any financial service provider will look the same way on a business regardless if it is from Panama or Paraguay.

 

[DrunkFlamingo]

What about Andorra? Easiest option by far, you prefer the beach I guess

Have you been to Andorra? It's a tiny principality nestled high in the Pyrenees mountains. No beaches to be seen anywhere! Top skiiing destination though. Andorra also has a 10% tax, while not bad, it's not exactly tax free. Also, not a place I would want to live.

Portugal would be far preferable. There you could manage zero tax if you play your cards right.

Besides, if you're actually going to change your residency I figure you might as well go to a place you actually like. Aint no point in saving tax dollars only to be miserable.