How to Optimize Taxes as a Digital Nomad?

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Today we are going to talk about a popular topic, that we often get questions about - How to optimize your taxes as a digital nomad? Do digital nomads even have to pay taxes?
Location-independent work has been increasing in popularity in the last decade, with the situation in 2020 and 2021 we learned that even more jobs can be done remotely, and we will certainly see the rise of location-independent workers aka digital nomads in the future years.
But what happens with taxes in that case? Well, this will depend on whether you're an American or Not. If you're an American citizen you will need to pay US taxes no matter where in the world you live! Are there any ways to work around it, and what to do about taxes if you're an American digital nomad? We are going to cover that today.
What if you're not American? You will not be taxed in your country, but what about other countries? How do you become tax liable in another country and is there a way to avoid it?
Let's first talk about Americans. Just because you're always taxed in America, doesn't mean that you will not be taxed somewhere else as well. If you establish a home in another country, let's say in Bali Indonesia, and you spend more than half of the year there you will be liable for Indonesian tax on top of American tax. In that case, the US will give you a tax credit for what you paid abroad, but you will still have to pay the difference in the US.
However, if you spend a substantial time outside of the US you could get Foreign Earned Income Exclusion where the US will not tax you on the first 100 000 USD that you've made abroad. There's also the possibility of getting a housing allowance on top of this.
If you're making more than this amount, there are still things that can be done with an international structure.
Ok that was that about dealing with America. What about the other side of taxation? Taxes that you might have to pay in a foreign country?
This part applies to both Americans and non-Americans.
What's the ideal solution? You just DON'T become a TAX resident in a foreign country that will tax you a lot. This means that you will not want to spend more than 183 days in another country. Before this period of time adds up you will move to another place.
If you're not an American one thing that you'll need to make sure happens is that you CEASE to be a resident in your home country. If this doesn't happen your home country might still be able to tax you. Just because you're spending your time abroad doesn't mean that you automatically become a non-resident of your home country. In some countries this is more clear than in others.
Canada and Australia will want you to establish a residency in another country if you want to avoid their taxation.
This means you will have to establish a residency in another country and have a home available to you in that country. On top of that, you'll need to cut ties with your home country, meaning that you'll need to sell your home and vehicle in Canada or Australia. They want to see that you have a genuine bond with another country abroad. If they don't see that bond and you still kept your ties at home, you will have to pay taxes!
Who are we and what do we do?
We are Offshore Citizen team. We help people become global: get a second passport, set up a second residency, pay less taxes, do banking abroad, etc.
We have lots of interesting articles on different topics, we have relevant information up to date.
Author: Michael Rosmer
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[@VERTICALWisdom]

For Americans the basic thing you can do is complete a strategy that includes a 2nd citizenship, move, and renounce. There are many wonderful countries and options. MOVE while you can.

[@MichaelRosmer]

There are definitely plenty of great places in the world to go. For a lot of people it's a pretty big mental block to give up their citizenship though.

[@VERTICALWisdom]

@@MichaelRosmer True but once the hurdle is cleared - the options are greater.

[@MichaelRosmer]

@@VERTICALWisdom very true the whole world opens up to you

[@Hikaholics]

So clear!! Watched so many videos about this topic and this is by far the best. Thanks! 🙏 We're a couple from The Netherlands trying to figure out what our best options are.

[@OffshoreCitizen]

Thanks! Feel free to reach out if you've got further questions

[@AlpineDividends]

Dude you are amazing. Just found your channel today, I'm a confused Canadian DN and your videos are extremely helpful 🙌

[@OffshoreCitizen]

Thanks! Any other topics we should cover?

[@AlpineDividends]

@@OffshoreCitizen I'd be interested to know how if (Canadian) individuals earning money through Adsense need to switch Adsense accounts every time they take residency in a different country, or if they can just continue to get paid into their Canadian bank, and not tell Google that they have moved countries. Does that work, or is in inadvisable, and would that source income from Adsense be considered to have been earned in Canada, or the new country. Personally I'm interested in the case of a Canadian deemed residents (perpetual travellers?) or a Canadian deemed non-resident (like on a temporary resident permit of another country without severing ties with Canada). But the broader topic could make for an interesting video, as there is a lot of frustration and vagueness in the Google forums about what to do with Adsense if you move countries.

[@misterniceguy67]

@@AlpineDividends This is why I am here.

[@spryh6742]

Regarding US citizen abroad: 1. Do they need to "cut ties in the USA" or simply meet the 330/bona fide tests? 2. Can you establish bona fide residence for US tax purposes and still manage to avoid establishing tax residency in another country?

[@vladimirskrbic5957]

Thank you, Michael. As always super informative! :)

[@REGDO]

Thanks for recording this based on my comment I really appreciate it❤️👍 very helpful 💯

[@MichaelRosmer]

You're most welcome. Let me know if you've got more suggestions

[@zerotaxcpa2916]

Elite visa 20 years in Thailand with weird tax law = zero tax for 20 years as long as you bring the earned income year after you earned it.

[@MichaelRosmer]

Sort of, you need to be a little careful about source income, permanent establishments etc

[@annagaudia]

Thank you for this. What about consequences of not having tax residency for number of years. That can als catch up with you, can it not?

[@MichaelRosmer]

It depends where you are from and where you settle. In some places it's fine in others it can get you into trouble. Lots of specifics matter here

[@makmcqueen8634]

Thailand is off that list now.

[@sshetty9683]

This was informative. You shud make videos like this.

[@MichaelRosmer]

Thanks. What specific topics would you like to see?

[@thecontainerthecontents6889]

can you make a video fully explaining bulgaria -- you chose to live there out of all global options. Must be good. tax is 10% there but goes down to 7.5%, is that right?

[@MichaelRosmer]

Yeah I've done some videos on Bulgaria what specific factors would you like to understand?

[@stevenogle4217]

Great video, but the wording of foreign income earnings is a little confusing!!! I plan on living in another country, but still earning US dollars. So if I qualify for FEIE then I can exclude up to $112,000 (for 2022) even if all my income is US earnings?

[@gn2650]

Having an employee in some country is considered an economic tie? What if the only economic tie you have in some country is a team of employees, could you become tax liable?

[@MichaelRosmer]

Possible, depends what they are doing

[@gn2650]

@@MichaelRosmer What can I do to have an employee working in some country without becoming tax liable?

[@MichaelRosmer]

@@gn2650 complex topic depends a lot on the details. Best for that is to book a call and we can discuss your specific details

[@Chaseosa]

I just want to confirm I understand this correctly. Say I'm a US citizen and am a remote full-time employee for a US-based company and currently reside within the states. Does my company have to care about how I'm taxed if I don't stay in any 1 non-US country for less than 183 days? And do nomad visas also allow that same sort of tax benefit? Basically, what I'm asking is should I consider in order to live somewhere outside of the US while having my employer not care (tax-wise)?

[@Alan_and_Shannon]

So, if i cut my residency in the UK, and dont become a resident elsewhere, I dont technically pay tax anywhere?

[@OffshoreCitizen]

Take a look at this video and let us know what you think kzbin.info/www/bejne/rHvZkKOlnduMoZY

[@Alan_and_Shannon]

@@OffshoreCitizen Just really confused, I am going travelling around the world next year and have no idea what my best option is

[@islandboy9580]

I know people who have retired in thailand and have been there for years, they dont work and live off social security from usa. So i assume no tax in thailand. Can you comment if this sounds accurate for these expats?

[@MichaelRosmer]

Thailand has quite a friendly tax system but no it's not zero tax intrinsically. You should make sure you manage it properly to be within their rules.

[@islandboy9580]

@@MichaelRosmer you mentioned don't stay longer than 6 months but in situation in my other example it really wouldn't effect them correct?

[@MichaelRosmer]

@@islandboy9580 if you stay 6 months in Thailand you are tax resident in Thailand then you are either going to be evading, which people do in these types of countries because it's fairly easy to get away with, or you need to plan around their tax rules, which is not so difficult to do and in my view the course you should be taking.

[@Reyv1989]

Thanks for the priceless info! I'm a subscriber! So I have a question.... I'm a digital nomad and US citizen. Do I qualify under the foreign earned income if all my clients are from the US and are paid to my US bank account? I couldn't really find an answer. Your help is appreciated

[@MichaelRosmer]

Location of customers and bank account don't factor into whether you qualify for the FEIE

[@Reyv1989]

@@MichaelRosmer business registration does? my location?

[@MichaelRosmer]

@@Reyv1989 FEIE is based on days outside the country and/or bonafide residency

[@p.m.8316]

8:15 does the EU also require you to be residence in another country?

[@OffshoreCitizen]

There's no general rule for the EU you need to look country by country

[@p.m.8316]

@@OffshoreCitizen do you know if this applies in the Netherlands?

[@markpour1068]

Just discovered this channel and instant subscriber. Thanks so much for creating these. Got a question/s: if I am resident and employed in UK, which is easier to become tax resident in: Malta or Cyprus? If eg I choose Malta, does it mean that I would legally continue paying UK income tax on my employment there but not Maltese tax and also no capital gains in the money arrives in my Maltese bank account?

[@MichaelRosmer]

I wouldn't say one is easier really they both have residency programs that are fairly straight forward to qualify for. If you're not a UK resident you shouldn't be paying UK tax on your employment income from there. You would typically pay it in Malta. On foreign sourced income you'd pay tax on a remittance basis and on capital gains you wouldn't pay tax at all.

[@guanyiqing1203]

so having the digital nomad visa doesn't means they are exempt from taxes in the foreign location? the visa only allow them to work legally?

[@OffshoreCitizen]

Not work, you're typically not allowed to work locally. Just stay and work remotely

[@misterniceguy67]

I know in Costa Rica, digital nomad residency holders (2 years long), are exempted from Costa Rica income taxation. You can not make money in Costa Rica though. You income is foreign sourced. You have to look at what the specific digital nomad you are getting offers you. Every country is different.

[@jadexplores2100]

Hi; do you know if 1099 contractors (US based) can work remotely wherever they want in the world (assuming the contractor hires the right professional to file/pay taxes in the various countries they've worked in)? I'm speaking from the perspective of a person that wants to be nomadic, perhaps living in say 2-6 countries outside of the US for half of the year.

[@OffshoreCitizen]

Sure why wouldn't they be?

[@cryptoFi]

How do you spend less than 183 days in any country if you have kids whom must go to school?

[@theelectricpanda8689]

Boom! correct question! ... which is why we think of ourselves as lucky to live in a first world country - and why lots of other folks are trying to get in... unless of course those countries start madating vax for kids

[@misterniceguy67]

Having your kids living in the country may already make you a resident, even if you yourself are not in the country for 183 days. At least that is the case for Canada. There are many other factors to determine if you are a resident or not. Staying less than 183 days in a country may work for someone who has no other ties to that country. You really have to look into specifics of the county's tax laws.

[@soniathakkar3293]

Hello there, I am a tax resident and citizen of Finland, and I'm currently considering the incorporation of a Limited Partnership (LP) in British Columbia for my global trade business, focusing on import-export activities and online product sales in the EU market through platforms like Amazon. Given Finland's high tax system and social security contributions, I'm exploring the possibility of establishing my business entity in a jurisdiction with a more favorable tax environment. Furthermore, I have plans to relocate to a country offering a better lifestyle, a positive family environment, and a more advantageous tax system. In light of these considerations, I am in the process of exploring whether to incorporate as an LLP or LP in BC as a non-resident or possibly establish a Limited Liability Company (LLC) in European regions with lower tax rates. I am seeking guidance on how the earnings from these options can be optimally treated for personal tax optimization. Could you assist me in choosing the most suitable option for my circumstances? Your insights would be greatly appreciated.

[@OffshoreCitizen]

Yes, please reach out so we can discuss properly

[@SamKH202]

Your videos are really great, thank you for this one in particular. I wonder if you have any advice on paying rent as a business expense through an offshore company in Europe? I will be a digital nomad soon and would want to keep as much money in the company as possible to avoid being taxed on it at this stage, and would love if I didn't need to pay myself a higher salary or dividend in order to pay rent. I have heard mixed opinions on whether or not you can expense your entire rent or simply the portion of your apartment dedicated to work (i.e. one room). I assume it depends on which country you have the company set up in? (in my instance, likely Bulgaria or Estonia). If I could expense rent, then I would really only need to have about 400-500 EUR in my pocket each month to live on. Also, I do intend to book a 30 minute call with you once I am a little closer to making the move :).

[@MichaelRosmer]

Technically the rent paid is usually a taxable benefit but depending on where it is you can often get away with it. The best is to reach out to us and discuss specifics

[@SamKH202]

@@MichaelRosmer That is soothing to hear. I will be in touch soon, thanks!

[@MichaelRosmer]

@@SamKH202 sounds great!

[@StuartLoria]

The only thing that worries me is how much he may charge per hour and if it’s worth it.

[@roman-komarnitski]

Is it possible for my spouse to become non resident in Canada while I keep my residency while working for Canadian companies being incorporated in Canada?

[@OffshoreCitizen]

Extremely hard essentially assures you of being Canadian resident

[@roman-komarnitski]

@@OffshoreCitizen Thank you for response

[@Kashimir]

hey :) I would like to live in Montreal for almost 6 months a year and Portugal for the other 6 months. I l currently live in Portugal under NHR. I'm an American. My boyfriend is German and is also doing NHR in Portugal. How can we split time between Portugal and Canada without paying taxes in Canada? Is it possible? Sorry for all the questions... Does it get really complicated? Thanks!!!

[@misterniceguy67]

Why not spend a week or two in a third country as such avoid taxation in all these countries.

[@snterp]

I'm my own kettle of fish.

[@CreepyTrendMan]

Massive THANKS to my ancestors for not going to the US .

[@user-gp1sg6sk1n]

Are you Elon musk brother ?