King, vocalist Olly Alexander sings about the shackles of a bad relationship and how he wants out. However, in reality, he knows he is anything but free and is asking to canada forex income tax let go from the sense of false freedom. Sounds a lot like expats doing taxes.
The phenomenon of digital nomads spawned by books like The Four Hour Workweek is huge. Thousands of people have quit their jobs in the United States, Canada, Australia, and Europe to live overseas in Southeast Asia and other emerging countries. No doubt, many feel like kings. Here’s the dirty little secret: many digital nomads and location independent entrepreneurs are not in tax compliance back home. If you’re in this boat, the fines and penalties could be huge. Even I have trouble keeping up with the endless tax laws these governments put out. On top of that, most digital nomads I’ve met in my travels haven’t properly structured their affairs to legally reduce or eliminate taxes.
While some people unnecessarily set up offshore companies, others who need them totally ignore that. However, maintaining your home country’s passport means you are still a king under the control of that government. If and until you give up your citizenship, you have to play by their rules or risk the penalties of non-compliance. As always, ignorance of the law is no defense to tax authorities. And as of 2017, countries like Australia have been issuing more and more strict tax rulings to non-residents. If you want to truly be free and not under the thumb of your local tax authority, here are some important steps.
It doesn’t cost a lot to get started, but doing this stuff right from the beginning can save you countless hours of time and great expense. As they say, an ounce of prevention is worth a pound of cure. Which is why we’ve taken the time to tell you about these five important tax strategies for digital nomads. Become tax non-resident in your home country This was one of the big discussion points at my private club meeting in Monaco earlier this month. More countries are raising the stakes for their citizens to escape taxation at home, even when your primary home is overseas. For digital nomads, this can be especially challenging.
Countries like the UK, Australia, and others limit the amount of time you can spend there once you’ve ticked the box to have your tax domicile located elsewhere. That’s why obtaining a second residency can be an important step for digital nomads. Historically, many people obtained permanent residence in countries like Panama, but in my opinion Latin America can be needlessly bureaucratic and surprisingly expensive. Options in eastern Europe and Asia are often more attractive, although the choice is yours. Putting down roots in your country of residency can help your case even more. This includes renting an apartment, getting a drivers’ license, joining a country club, or docking your yacht at the local marina. For US citizens, being tax non-resident can be as simple as spending 330 days in foreign countries in any 365 calendar day period.