Is this true? You can live in the Europe for years without owing them taxes?

[iloveyouguys]

Is this true? You can live in the Europe for years without owing them taxes as long as you move to a new country every 3-5 months.

Assuming your country of citizenship isn't US.

 

[Tax Cow]

In theory, yes, but DTAs, or bilateral tax agreements, make it a challenge much harder than it sounds.

Based on the days-spent test alone, you can. But what the DTAs specify in their residency tie-breaker rules (usually third in the order of importance) is a clause that equalizes citizenship with residency, giving rise to taxing rights. But what are its implications?

If you have no *verifiable* residency elsewhere, your country of CITIZENSHIP has the right to tax your income, even if that country poses itself as a RESIDENCY-based tax country.

Example:
A Danish citizen but non-resident who earns 100K from the UK, spends 0 days in the UK and 0 days in Denmark must pay tax to Denmark although Denmark taxes based on ones residency. (Absent other residencies, DTA tie-breaker equalizes citizenship with residency, giving taxing rights to Denmark)

Proof:
https://assets.publishing.service.g...e/496664/denmark-uk-dta-consol_-_in_force.pdf

(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);
(b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

If you want full security to live without paying a dime in tax with this method, you must live like a devoted gypsy, always on the move, but you must also earn all income from the states which have no DTA bileteral agreements with your country of citizenship, otherwise, they have legal means to milk you. Enforcement is another story, but we're bound to see more aggression on all fronts by the bankrupt west. Perhaps an opportunity *wink-wink* Spain, Greece, Italy?

 

[mickey]

It's the 180 days rule. But this applies to multiple countries outside of the EU as well. The system which you describe is the residential taxation. It is used by a lot of countries and if you have a citizenship of one of these countries your only taxable if you reside in your country for more than 180 days a year. If you reside in another country with residential taxation for more than 180 days a year you have to pay their taxes.

Some other countries like the USA or Eritea using the citizenship-based taxation, so you have to pay tax wherever you are on the globe or the rest of the universe.

P.S. In practice this doesnt help you anymore. Becasue banks need an address where you pay taxes (often with a TAX-ID) and this applies to almost every bank in the world (except the american ones). So the perpetual traveler and no taxes lifestyle is almost done due CRS.

 

[khinkali]

@iloveyouguys I think this depends how you make money. You can be due taxes without being tax resident; for example if you manage a business from your temporary country, service clients in your temporary country, service clients from your temporary country or have some other economic activity.

To quote a prominent racing driver who lives in Monaco, quoted in The Sunday Times' Style magazine:

...I race in 19 different countries, so I earn my money in 20 different places and I pay tax in several different places...

You should be able to hop around Europe, spending your existing wealth or living on dividends from companies that you do not work for, manage or control. e.g. I can imagine someone living on income from NASDAQ shares while backpacking around the EU, without paying EU taxes. But if you do work in some country or manage a business from there then you might be due tax there.

A Danish citizen but non-resident who earns 100K from the UK, spends 0 days in the UK and 0 days in Denmark must pay tax to Denmark although Denmark taxes based on ones residency.

Surely article 4 paragraph 2 only applies to someone who is liable to tax "by reason of his domicile, residence, place of management or any other criterion of a similar nature" in UK and Denmark? Unless Denmark taxes domicile, I don't see the issue.

The real issue in the example seems to be "earning money from the UK", which with 0 days spent there sounds like it's due to maintaining some office or factory, or maybe the future tech tax or similar. I do agree that if not resident in either, then Danish taxes might be worse than UK taxes so the DTA could work against such a person.

It's the 180 days rule

It is usually more complex. I'll pick the UK (only because I know this one):

• Non resident if:
  • Present for fewer than 16 days
  • Present for fewer than 46 days, if not resident in the preceding 3 years
  • Present for fewer than 91 days, working in the UK less than 31 days and otherwise working abroad full time
• else resident if in the tax year:
  • Present for 183 days or more
  • Present in your UK home for 30 days or more
  • Work full time in the UK
• else it varies from 16 to 182 days in the UK, depending on:
  • UK resident family
  • Available accommodation (even if you only spend 1 night there)
  • UK employment for 43+ days
  • Presence of 90+ days in either of the previous two tax years
  • More days in the UK than any other country (only if leaving UK, not if arriving)

So to take that example, the limit is 182 days only if the you can answer the other 10 questions in a particular way. Other countries have different rules, sometimes much simpler (183 days) and sometimes much more vague (centre of vital interests). People have gone to court based on where they keep their golf clubs or SCUBA gear.

banks need an address where you pay taxes

In some countries, not all. For example in Ireland you need to provide the PPS number if you're resident and want to get a loan or credit of EUR500+ or to get your bank interest paid without tax deducted. Some banks require PPS anyway, but not all. There is a lot of variety to these types of rules.

 

[Spinat]

So much for nothing! This 180 day rules is behaving exact same way as any other tax loophole! If you try to cheat you won't succeed unless you do it right.

You need two properties to do that, so now 90% of the readers are gone already. So you need a good tax advisor which you pay to manage your documents which you collect in both countries while you stay there for no longer then 180 days. Now 95% of the readers are already lost.

For the last 5% still thinking they can do it, read on.

When you stay in one of the two countries you need to collect as many bills as possible in a variety from Gas stations to Supermarket bills, you will have to proof that you stay in country for at least 179 days and then move to country B the other days. Furthermore you need to consider vacation in a third country for some weeks of the year.

If you think this is worth it to save taxes, you should be on the right track.

 

[Tax Cow]

...
Surely article 4 paragraph 2 only applies to someone who is liable to tax "by reason of his domicile, residence, place of management or any other criterion of a similar nature" in UK and Denmark? Unless Denmark taxes domicile, I don't see the issue.
...

That hook holds until the Danish citizen has a verifiable residency elsewhere. As a Danish citizen, you're not truly a non-resident in Denmark unless you have at least one residency somewhere else in the world. Living 0 days in the country won't quite suffice.

Based on the way OP formed his question, he didn't show intent of obtaining another residency. To me, he seems interested in the implications of pulling a gypsy caravan across the EU, hopping countries every few months, not establishing residency anywhere. He has been misled by one of the inexperienced "digital nomads"

Just walk in any co-working space in South-East Asia, and a 20 y.o. white guy from the EU or Canada will swear that flying circles in Thailand, Bali, and Vietnam for all year means that nobody has the right to tax his income.

The correct solution is to obtain residency somewhere else in the world; break all ties with the country of citizenship and then register as non-resident. For that, they require proof of residency somewhere else in the world. Ultimately, it's possible to live like a gypsy for as long as the new residency remains in tact. Once that new residency breaks (absent for too long?), the taxing rights float back to one's country of citizenship.

Denmark's just an example. Works about the same across the rest of the high tax 1st world.

 

[khinkali]

I didn't realise the OP was an EU citizen. That's interesting about the Danish situation; I've heard of similar problems with Swedes (and other EU countries for some period after leaving residence). Not a problem for UK, though Ireland has a flat tax for domiciled people with over EUR1m income and over EUR5m of property in Ireland.

The guys in SE Asia are mostly making such little money that nobody cares. But yes, they might have a tax obligation back home, or none depending on their citizenship and other factors. The bigger issue for "pulling a gypsy caravan" tends not to be so much citizenship as income source.

You do not need to be tax resident to be due taxes in a jurisdiction.

Being tax resident somewhere else is not guaranteed to help either. Just having a tax residence in some other country, doesn't necessarily absolve you from being taxed where you're economically active. Often a DTA will prevent you being taxed again in the country of residence, but depending on what you do you're usually taxed where you're working. Not that most countries really care if a visiting tourist does a few hours web design for an offshore client and pockets a few hundred bucks.

 

[Tax Cow]

Giving an example is important for context. He well may not be a EU national though.

Non-resident online businessmen and remote-work freelancers can pull any amount of income from the UK free of UK income tax. Do you agree with this? You sound like you work with the UK law. AFAIK, earning income while working in the UK as a non-resident is taxable in the UK, but earning income from UK-based clients while rendering services or selling stuff from abroad as a non-res is treated differently; not in the scope of UK income tax.

 

[iloveyouguys]

PS. I'm non-US, non-EU person.

Thanks for your comments

 

[khinkali]

I agree that examples help a lot.

Non-resident online businessmen and remote-work freelancers can pull any amount of income from the UK free of UK income tax. Do you agree with this?

Yes a non resident businessman should normally be able to sell to a UK business, from outside the UK, without paying UK income tax or VAT (though there are efforts to tax big tech companies with UK users in future).

AFAIK, earning income while working in the UK as a non-resident is taxable in the UK, but earning income from UK-based clients while rendering services or selling stuff from abroad as a non-res is treated differently; not in the scope of UK income tax.

Exactly. My point about the OP "pulling a gypsy caravan" is that they might encounter taxes for working in or managing an offshore business from any number of EU countries in the year, regardless of any tax residence outside the EU.

Here is a UK example of guidance for sportspeople, actors and musicians:
https://www.gov.uk/guidance/pay-tax-in-the-uk-as-a-foreign-performer
The gypsy caravan sounds appealing if someone gets their income from genuinely offshore sources. e.g. dividends from a company they're not involved with, long term crypto holdings, foreign property, etc. To take the UK example again this advantage would not necessarily be afforded to a UK resident even though there are some non-dom advantages. Also it might not be necessary; e.g. for long-term crypto gains you might as well just live in Portugal or Germany.

@iloveyouguys, would you be working while you travel Europe? Or managing a business outside Europe? Or have any income from Europe? 3-5 months seems long enough to be making a sizable footprint, even if you don't take up tax residence in any of the countries you visit.

 

[iloveyouguys]

@iloveyouguys, would you be working while you travel Europe? Or managing a business outside Europe? Or have any income from Europe? 3-5 months seems long enough to be making a sizable footprint, even if you don't take up tax residence in any of the countries you visit.

I might work while traveling but they can't prove that I work in the EU, unless they gain access to my servers somehow. I could just tell them I was browsing cat memes instead of working.
No income from EU.

At most, I'd lease an expensive car in EU (maybe) and travel in that car for a few years in the EU, I'd have a lease contract for an apart hotel, I'd stay at airbnbs, I'd open up some EU bank accounts (maybe) and I'd eat out and make food orders. I think one wouldn't need anything more than that to live somewhere, right?

I'm not sure what you mean by sizeable footprint. Like what do they gonna do? They have an automatic system where they check tax residency information of apart hotel lease contracts or car owners, etc? I'm not some rich crazy Russian or Arab living a lavish lifestyle in front of the camera. My business and money are out of the EU.

 

[khinkali]

Like what do they gonna do?

My comments have been based around trying to work within the system. There's no rule against travelling around the EU as a wealthy tourist and if you don't take up tax residency in some EU country (or become a permanent establishment of your business), then I don't see why you'd have to file information on your foreign company. It's just the work that could create taxable income where you're present, not that it would be easy to enforce. Your home country might care, depending on their rules for non-resident citizens.

I'm intrigued by your visa situation. Most Schengen visas are for 90 days in a 180-day period; you can't normally border hop and stay all year (unless you're a New Zealander switching country each 90 days). A lot of people become "students" to get their visa.

In most (maybe all??) EU countries you will need some address verification for opening a local bank account and obtaining car finance. Long term apartment lease could be awkward as a tourist in a lot of places.

If you're happy with paying extra for airbnb, short term car rental, international medical insurance and non-local banking then you seem to be a backpacker.

 

[iloveyouguys]

I'm intrigued by your visa situation. Most Schengen visas are for 90 days in a 180-day period; you can't normally border hop and stay all year

I learned something called freelancer visa. I created a thread about that but nobody contributed to it. So I can get a freelancer visa from Germany and permanently live in the EU for at least a couple of years. However, that might make me a tax resident of the Germany, even if I don't live there most of the time. So I'm not sure what would happen.

In most (maybe all??) EU countries you will need some address verification for opening a local bank account and obtaining car finance. Long term apartment lease could be awkward as a tourist in a lot of places.

Weird to whom? Who's going to check? The bank? They don't care if you have residency address and a local number (AFAIK). You can get proof of address by apart hotel lease (AFAIK) which can be only for 2 months. Affordable short-term accommodation abroad, for tax residency

 

[khinkali]

freelancer visa from Germany

Then you're looking at a registered address in Germany, German tax id, health insurance, German bank account? All legit. The first EUR 8k income is tax free.

Some banks in EU are big on verification. It varies.

 

[iloveyouguys]

Then you're looking at a registered address in Germany, German tax id, health insurance, German bank account? All legit. The first EUR 8k income is tax free.

Some banks in EU are big on verification. It varies.

I'm not sure. Here's my source: Your Guide to (Legally) Staying in Europe for More Than 90 Days It doesn't seem like I'll have to pay tax to the Germany if I don't stay there too long.

 

[khinkali]

@iloveyouguys if you look at five web sites about German freelancer visas you're likely to see five different descriptions of what you need. I'd say you need to do a lot of research, or find someone who has experience with your type of circumstances.

 

[Jea]

So much for nothing! This 180 day rules is behaving exact same way as any other tax loophole! If you try to cheat you won't succeed unless you do it right.

You need two properties to do that, so now 90% of the readers are gone already. So you need a good tax advisor which you pay to manage your documents which you collect in both countries while you stay there for no longer then 180 days. Now 95% of the readers are already lost.

What do you need the two properties for?

And why do you need to collect any documents in countries where you are not tax resident?

 

[Jea]

Exactly. My point about the OP "pulling a gypsy caravan" is that they might encounter taxes for working in or managing an offshore business from any number of EU countries in the year, regardless of any tax residence outside the EU.

What are the general rules? How long you need to spend in an EU country (while managing your business during this stay) to encounter taxes? And are you talking about personal or corporate income tax?

Here is a UK example of guidance for sportspeople, actors and musicians:
https://www.gov.uk/guidance/pay-tax-in-the-uk-as-a-foreign-performer

Is there a guidance like that for "digital nomads"?

The gypsy caravan sounds appealing if someone gets their income from genuinely offshore sources. e.g. dividends from a company they're not involved with, long term crypto holdings, foreign property, etc. To take the UK example again this advantage would not necessarily be afforded to a UK resident even though there are some non-dom advantages. Also it might not be necessary; e.g. for long-term crypto gains you might as well just live in Portugal or Germany.

@iloveyouguys, would you be working while you travel Europe? Or managing a business outside Europe? Or have any income from Europe? 3-5 months seems long enough to be making a sizable footprint, even if you don't take up tax residence in any of the countries you visit.

So basically the issue is to avoid having your income be considered as sourced from the country where you're staying?

 

[khinkali]

What are the general rules?

They vary from country to country. The interpretation can vary from time to time, e.g. some activist judge decides to create new law based on vague older laws.

The extreme cases are easy. Imagine a non UK citizen who has not recently been resident or ordinarily resident in the UK, who has a business in some other country that has no UK employees or customers and employs 50 people in the home country including competent managers. He visits the UK to do some sightseeing for two days and happens to answer an email from his HR manager about some employee's maternity leave. I'm no lawyer but I'm pretty confident that's not going to generate a tax bill, even though he did work while in the UK.

Now imagine a "nomad" who has no employees anywhere but manages to rack up a million dollars in offshore consulting income via Skype during the two month UK part of his "vacation". I can see how HMRC might take an interest in that. A good tax lawyer might be very good value.

Is there a guidance like that for "digital nomads"?

I bet you $10 that you can't find HMRC's publication on "how to legally avoid tax as a digital nomad".

So basically the issue is to avoid having your income be considered as sourced from the country where you're staying?

That is one issue. Another would be place of management. Another would be place of residence, plus place of control. And DTAs. One big advantage of the UK is that there's a statutory residence test so this makes tax residence quite clear, along with CFC scope. Other countries are not so clear. But that's just liability due to your location. You also might consider your place of economic activity, location of customers, your citizenship, your recent residence, etc. The Big Four accounting firms make $29 to $46 billion per year for a reason!

 

[Jea]

They vary from country to country. The interpretation can vary from time to time, e.g. some activist judge decides to create new law based on vague older laws.

The extreme cases are easy. Imagine a non UK citizen who has not recently been resident or ordinarily resident in the UK, who has a business in some other country that has no UK employees or customers and employs 50 people in the home country including competent managers. He visits the UK to do some sightseeing for two days and happens to answer an email from his HR manager about some employee's maternity leave. I'm no lawyer but I'm pretty confident that's not going to generate a tax bill, even though he did work while in the UK.

Now imagine a "nomad" who has no employees anywhere but manages to rack up a million dollars in offshore consulting income via Skype during the two month UK part of his "vacation". I can see how HMRC might take an interest in that. A good tax lawyer might be very good value.

OK, let's assume I'm staying in countries like the UK or Spain for a couple months without becoming tax resident there and I'm:

1. Getting passive income, like dividends from public stocks - definitely no tax issue, correct?
2. Getting income from stocks or crypto which was held for over 6 months and was sold online while staying in that country - no tax issue?
3. Actively trading crypto online while staying in that country - this might be considered as income sourced from that country and I should declare it and pay tax?


My plan was to stay in different EU and South American countries during the year.. It looks like I have to talk to local tax specialist in each one to be 100% safe :/

BTW, appreciate your answers, they are very helpful