What is a digital nomad?
Travelling worldwide with your laptop to inspiring places and hotspots for entrepreneurs is more interesting than staying in the drab Netherlands or the UK. You can still remember when it dawned on you that you could work from anywhere. Such a moment starts to dizzy you because of the many possibilities. A month away? The whole winter away? Packing your bags for good and settling in a (tax) paradise? Anything is possible, and you are in charge of your own life.
A digital nomad is simply someone who travels around the world with his laptop and can work independently. Typical professions are, e.g., ICTs, software developers, traders, influencers, bloggers, only fans, models, etc… NOT the baker or the barber around the corner, who, unfortunately, will not be able to bake a loaf of bread online.
Why live as a digital nomad?
Why become a digital nomad? An important factor in your choice of a new lifestyle is the “why.” This is to be sure of your choice and convey your enthusiasm to those back home so that they will understand you. So, what motivates you to leave the familiar behind and choose the unknown? Because everyone is different, we can’t answer this question for you.
However, below, you will find the most common motivations for becoming a digital nomad.
Life is short
It’s better to regret things you have done than you never dared to. You only live once, and chances are that in a few years, you won’t have as much freedom as you have now. So why wait?
You save costs
Even though you farm well and like a bit of luxury, you still pay close attention to the little things. And you have to if you want to run a successful business. The fact is that Western Europe is not the cheapest place. Moving to a more advantageous country (even if only for a few months a year) can significantly reduce your costs and tax burden.
You expand your network
You are assured of interesting new contacts by travelling to places where other entrepreneurs also go. You will meet like-minded people who approach things slightly differently than you do or who have jumped on a new trend and can tell you exactly what works and what does not. A friendship soon leads to a partnership and even more online success.
Yet your adventure doesn’t have to mean abandoning home. Thanks to video conversations, you can let those back home enjoy your new life, and thanks to a flight, you are back in the Low Countries in no time. Also, of course, it is not obligatory to stay away for years; maybe you want to get a taste of this life for a few months first or stay in the Netherlands or Spain for the summer months by default and then travel around again for a few months. You decide what your life looks like, and no decision is irreversible.
What do business associates think?
Another obstacle can be the worries you have about running for your business. And we’re not talking so much about that different time zone or connection problems but about reactions from clients or customers.
Well, experience shows that most clients or customers find it very interesting when you work from a foreign country. Often, they would like to do it themselves, and with your example, you inspire them. In the rare case where a business contact might take offence at your exotic location, you can choose not to mention it. You choose a neutral background without monkey sounds for possible video conversations!
Do you pay no taxes as a digital nomad?
A true digital nomad can go through life untaxed! To understand this properly, we must first see when the tax authorities tax you. And how can you then escape the dance as a digital nomad in a perfectly legal way?
What are the ground rules of the tax authorities?
How do the tax authorities go about taxing you? Of course, each country has specific rules, but it generally comes down to the same thing. Where is your goldfish? Most countries use it as a starting point to tax you in a particular country where you live. All sorts of elements are cited here. Usually, it must be a combination of factors that indicate that the balance tips towards countries A and B.
In other words, if you are still officially living in country A, have an extensive social life there, and your partner lives there, then it is hard to say you are NOT living there.
Tip. If you feel you no longer live there, you will usually not live there for the tax authorities either! Note! Ask for our advice rather than Mr. Google’s because, as mentioned above, some countries are already stricter than others. For example, the German tax authorities harshly dealt with the famous tennis player Boris Becker years ago. Why? He declared that he lived in Monaco, but when he was in Germany, he often slept with his aunt, who always kept the guest room free for her favorite nephew. This was enough for the German tax authorities to tax Boris Becker in Germany. Tip. So, in most countries (but there are exceptions), play it safe by staying there for less than 183 days or six months.
So, if you are a digital nomad, you can escape taxes in your home country. If you are a young, dynamic man or woman who wants to conquer the world and you work from your laptop, then the world lies at your feet, and tax paradise beckons. Bye-bye, taxman! Make your checklist like the perfect murder, and make no mistake! One mistake can be the difference between hallucinating tax freedom and being squeezed like a lemon to the last drop.
First step on the road to freedom as a digital nomad
A trip to City Hall. You can do this online in the larger cities or personally by visiting the town hall with the message: ‘Day dear people, I am moving permanently out of this city, village …country’. This will be noted, and it is the first step towards endless freedom.
Do I have to sell all my real estate now? You are moving out of your home country and still have some apartments and your home there, e.g.. Do I have to sell all that property? No, you don’t. You can just rent it out, and you will pay real estate taxes in your former country of residence, just like the millions of people who have a second residence in Spain or Portugal. You can also still keep your property as a refuge. If you come over again to say hello to your friends, you can still stay in your former home. From the electricity consumption, everyone can see, including the tax authorities, that you only stayed there sporadically.
Tip. If you, for example, let your sister live in your flat when you discover the world, make sure you have a rental agreement so you can always prove that you did not live in the flat. And put the utilities in her name.
You may also have to deal with exit taxes in some countries, such as the conservative assessment. This should be looked at separately. Don’t hesitate to contact us!
If you leave, the roles are reversed. It is then up to the tax authorities to prove that you still live in the country you left. For example, if you deregister at the municipality and are out of the country for more than 183 days, it is up to the tax authorities to prove that you still have your fiscal residency there. You don’t have to prove with your diary that you spent 100 days floating around in a sailboat in the Pacific Ocean and otherwise spent your time in an ashram in Sri Lanka and toured Australia by train.
What about board positions in your company?
Of course, it is also best if you are a director of a company in your home country to resign. If you want to keep that company, find another director. It is difficult to explain that you do not live in country A and still manage a company there daily. Shareholders, you can remain. This is fine.
Can I come back? And will I be taxed then?
When you return, you start with a clean slate. For example, you can also use your accumulated capital or savings to buy a car or a house. You can NOT BE TAXED MORE on the money you earned when you were not a taxpayer.
Overestimated problems?
Most countries in Western Europe have a fairly well-developed social security system. Many candidate digital nomads must be reassured about losing their right to social security. Usually, this is a much smaller problem than I thought. Why? Your social security consists of two parts: pension and health care. Your pension accrual stops and will resume when you return to work in Italy or Germany. If, as a digital nomad, you pay little or no tax and are smart enough to put some money aside or invest it, in 30 or 40 years you will have saved a lot more and enjoy a better income in your old age than you ever would have gotten with a full pension. If there is still such a thing as a pension by then… You better take care of yourself!
Health care?
Yes, health care is usually limited to your country or, e.g., within the EU. You have decided to go out into the world. So you need insurance for, e.g. accidents or hospitalization. Some good players are here (e.g. https://www. globality-health.com or bupa.org). Insure yourself, e.g. for hospitalization, with a franchise of 5000 EUR. The first 5000 EUR you pay yourself, you will see that for young, healthy people, the premiums are low. Suppose you later want to come back or settle in another country. In that case, it is usually no problem if you are working or self-employed to then be included in the social security system again fairly quickly.
Nationality?
Some digital nomads think they can lose their nationality by being away from “home” for a long time. This, of course, is nonsense. Beware! Problems can, of course, arise if, e.g., you have a child in your new country. Suppose you fall like a log for a Thai beauty and have a child together; that child will already certainly have Thai nationality and not automatically your nationality. This is complex legislation that varies greatly from country to country. Check this out early! Sometimes, we also get asked if getting a new nationality helps solve our tax problems. No is the obvious answer.
How do you stay out of the tax grip of other countries?
Let us assume that you have taken our good advice and that you are a free man or woman. You are living on your fiscal pink cloud. You enjoy the long, balmy summer days in Lisbon’s Alfama neighbourhood. During the day, you build up your shop, occasionally you walk along the Tagus River, and in the evening, you enjoy a “vinho verde” and the nostalgic sounds of Fado. The world smiles at you. And you think about spending the winter in Marrakech. Your quality of life has improved by leaps and bounds, and so has your wallet, now that you are out of the grabbing clutches of the taxman.
But danger lurks behind every corner! Avoid the tax traps that fall in your new country. Nomads Move your ass. You’re a digital nomad, remember? So don’t “stick” too much in one place. If you stay ‘stuck’ somewhere for more than six months, this could lead to tax liability in several countries. In fairness, these are different on a case-by-case basis. If you are a Dane with your laptop and smartphone working for 10 months from your nice flat in Marbella, no one will come and ask you what you are doing there. You are among millions of tourists or people with a second residence.
Going local? Your shop needs to be successful or is still under construction, and yes, you work locally during the high season. In that case, of course, you risk ending up in the ‘system’ of your new country! Many countries also tax you on your worldwide income. But also here, we must admit that there is often a gap between theory and practice.
Keep your hands off. Of course, if you are going to live with a local beauty or marry one yourself, then your tax-free status will be very much compromised. So, pay attention and determine a good strategy.
Business as a digital nomad
As a digital nomad, you must invoice your customers or receive payments via your webshop. How do you do that? You spend quite a lot of time in Spain or Portugal, but if you start a business there, you will go from bad to worse. There are tax-efficient solutions for this, such as a USLLC. Every case is different, of course. But contact us for concrete advice and, as always, at info@dehoon-dhp.com. Or countries like Bulgaria can offer solutions.
What about countries like BVI, Belize, Vanuatu, Seychelles, Mauritius… We say no! Even though most of these jurisdictions are no longer “blacklisted,” they have been burned. What are the problems? A lot of countries have their own “blacklist” separate from that of the EU or the OECD. So some of these tax havens are still on the blacklist of a specific country which creates additional problems for clients billed from such a country. Such as reporting obligations or non-deductibility of the invoice.
Establishing yourself somewhere…?
You can settle somewhere, travel, and pay little taxes. Some clients want to pay much less taxes and, for example, travel for five months every year. A country like Bulgaria, with a flat tax rate of 10%, or Dubai (0%), is a good base. Ask our advice!
Is residency in Estonia worthless?
The so-called’ Estonian e-residency is sometimes waxed lyrical among digital nomads. What is it? You get an identity card from Estonia that gives you access to certain digital services in Estonia. For example, your e-residence allows you to sign certain documents digitally, do your taxes in Estonia online, and accept certain online payments… So, it can accept administrative actions in several cases. It is especially useful if you live in Estonia or have a business there and travel a lot. But! It does not entitle you to tax residency in Estonia at all. You cannot get any tax benefit from it at all. Nor is it a document you can travel with. So, it isn’t very helpful. Just like Estonians have 0% corporate tax, once you take money out of it and then pay 20%, there is no escape. Read more about digital nomads in Europe in this blog.
What is a digital nomad Visa?
Some countries, like Spain or Greece, have special visas for digital nomads. As a Belgian or Dutch person, this has no value for you. Because you can live in any country of the EU anyway, this can only be an advantage for a Brit or American. Mar also offers this, e.g., Bali does. Usually, this gives the right to stay locally without many problems and any tax advantages!
Our decision and the ultimate tip!
Anyone who can work location independently and is not wedded to life under the church tower should seriously consider a life as a digital nomad. Even if you only do it for a few years, you are going to be able to save so much money just because of the reduced tax burden, and you are going to be brimming with lots of experiences and meeting interesting people!
But please get proper guidance! Also, think about a will, health insurance and the right structure. Don’t just be guided by blogs with sometimes incorrect information, or sometimes the blogger is in a different situation than you. Therefore, email us and do it today at info@dehoon-dhp.com.
