Tax residency for a true (non-American) digital nomad?

[mitchell_1]

As you can imagine anything to do with taxes can get complicated quickly. You really need to talk to a tax lawyer, one that you trust (they can overcomplicate issues in about a millisecond). You want to make sure you have your ducks in a row before you (hypothetically) become a nomad so it doesn't come back to bite you later.

OP should definitely visit Canadian tax lawyer first. It's not that simple to become tax non-resident as people usually think.

Yes, the unassailably correct answer to any tax question posed on EliteTrader is 'talk to a professional, dummy'. I'm most certainly not going to take any poster's opinion as gospel. But I've found it's still useful to solicit replies as some may have faced or looked into something similar before and be able to provide some good pointers or links.

 

[blink18]

"Here in Europe.". Europe is quite large area with very different countries with very different law What you are writing here is not "standard" for each country. It can be misleading for OP.

It's not even standard compared to Canada as one poster explained above. The point is, if you live in high tax developed country, your taxman will make sure you don't "escape" easily.

 

[rb7]

Hypothetical:

• I am a Canadian citizen (i.e. taxed based on residency, not citizenship)
• I give up my rented apartment in Canada (and file the required exit-tax paperwork), and spend 2021 traveling the world, spending 1 week in 52 different countries, entering each as a tourist.
  
• I trade while I am traveling.

Where am I a tax resident for 2021?

- I presume there's a general principle that one cannot be a tax resident of no jurisdiction(?)
- Is there some kind of default presumption of tax residency in one's country of citizenship when one doesn't meet the tax residency test of any other country?
- Could I simply choose the most tax-advantageous of the 52 countries I travel to as my tax 'home' for 2021? If not, does changing the time spent in each from 52 x 1 week to 26 x 2 weeks, or 12 x 1 month change this analysis?​

The country where your trading account is registered should be considered as your taxable country, but this is only my guess.

 

[Nine_Ender]

Hypothetical:

• I am a Canadian citizen (i.e. taxed based on residency, not citizenship)
• I give up my rented apartment in Canada (and file the required exit-tax paperwork), and spend 2021 traveling the world, spending 1 week in 52 different countries, entering each as a tourist.
  
• I trade while I am traveling.

Where am I a tax resident for 2021?

- I presume there's a general principle that one cannot be a tax resident of no jurisdiction(?)
- Is there some kind of default presumption of tax residency in one's country of citizenship when one doesn't meet the tax residency test of any other country?
- Could I simply choose the most tax-advantageous of the 52 countries I travel to as my tax 'home' for 2021? If not, does changing the time spent in each from 52 x 1 week to 26 x 2 weeks, or 12 x 1 month change this analysis?​

You'll likely still be a Canadian resident and there are likely advantages to being so. Unless you meet the residency requirements of another country and revoke your Canadian status. There are many important considerations such as where you bank, how you get paid ( eg corp vs personal ), health care and travel medical. It's a lot cheaper to be covered medically as a Canadian ( with Canadian health coverage ) travelling for business using private plans; if you don't cover yourself you risk financial ruin.

 

[Nine_Ender]

When you leave Canada, you are responsible for filing 'departure tax' / 'exit tax' forms where you're presumed to have disposed of any assets, property, stocks, etc at their current FMV and then immediately re-acquired them. IOW, Canada is essentially saying "OK, see ya, but before you go we're going to make sure you pay us capital gains tax on any appreciation of assets acquired while you lived here". But AFAIK there's no requirement that you tell them where you're going, or prove that you'll be a resident / tax resident there, or file any ongoing attestation(s) that you're living abroad. You tell them you're leaving, they get their last bite at the tax apple via the departure tax, and then you part ways. So in the OP hypothetical, I'm still not sure where you'd be presumed to be a tax resident when all you've established -- presuming you've indeed severed your Canadian ties -- is that it's not Canada. (Unless, as I wrote, there's a provision or interpretation I'm not aware of that in the event you don't satisfy any other country's tax residency requirements, Canada will deem you to be a tax resident of theirs even if you don't spend a day in the country.)

"Leaving Canada" can take many forms; you can work as a digital nomad for 5 years and maintain full Canadian residency and health care ( some paperwork necessary ). Severing your ties is a big step with numerous repercussions not all good for a true digital nomad.

 

[tsznecki]

I believe Canada requires one to have no "ties" to the country. Whether simply filing the exit paperwork is sufficient I am not sure.

I have heard that you need to give up bank accounts, brokerages, memberships in clubs etc etc.

 

[El Trado]

It's not even standard compared to Canada as one poster explained above. The point is, if you live in high tax developed country, your taxman will make sure you don't "escape" easily.

Yes, for example in Norway, which is in Europe, you still have to pay Norwegian tax for 4 years after you leave the country. Doesn't matter if you have sold all your stuff and haven't been back during those 4 years...

 

[luisHK]

Yes, the unassailably correct answer to any tax question posed on EliteTrader is 'talk to a professional, dummy'. I'm most certainly not going to take any poster's opinion as gospel. But I've found it's still useful to solicit replies as some may have faced or looked into something similar before and be able to provide some good pointers or links.

Absolutely right ime, u might ask different lawyers in the same country and get different opinions. It s useful to look for others' experiences online.

 

[virtusa]

Read Canadian tax laws first. Here in Europe when you move somewhere else, you have to get foreign tax certificate, and show papers to your home tax office: lease contract, foreign tax certificate, foreign bank account, work contract (if you have it), foreign address, foreign telephone number, foreign drivers license, foreign health insurance... + if you have a family they have to move with you. If everything is ok, you get non-resident status for tax purposes. But if you return back in less than 3-5 years, they will still tax you on the difference between tax rate abroad and their tax rate.

Tax non-residency is not just "let's go somewhere else for 183 days and get back".

I can confirm from personal and real experience that what you tell is true. In Europe you will always be taxed SOMEWHERE, no matter where you go or how long you stay somewhere. For each possible scenario there is a taxation rule.
In Europe the rule is that if you don't stay anywhere for 183 days, you will be taxed in the country from which you have your nationality. Maybe if you become stateless it might work, but that will cause a lot of other problems. I have somewhere the text but am too lazy to try to find it.

Check a professional tax advisor as for each country there are different possible rules and depending on the kind of income it can change again. A professional tax advisor will only give you an advice for a specific and very detailed situation. But if afterwards you change your situation slightly it can change your fiscal situation completely.

Best is also to ask a ruling from the country where you want to go, if not you are NEVER sure that what the tax advisor told you, will be accepted. Tax advisors give only advice, the finance ministry will decide what you will pay.

The most simple thing you can do is move to Monaco. Deposit between 500k and 1000K on a Monegask bank account, maybe they ask even more and rent a flat. Starting price for a flat is around 5k a month for a very small flat. You need to pay 4 months rent in advance (3 as guarantee) and hope they will rent to you which is never sure.

The cheapest solution in Europe is to go to Bulgaria. 10% flat fee, and very small contribution to social security. You should live there at least 183 days a year.

 

[Pekelo]

In Europe there are already 4-5 countries for digital nomads with huge tax breaks. Search this subforum I posted about them already. Another good source of information about health insurance etc. is

www.reddit.com/r/digitalnomad

As a minimum, you want to pay into a healthcare system so you would get subsidized care if something happens to you.

Also, there are no taxes in North Korea, if that is your only requirement for a country.

I would get on a Canadian expat website and see how your countrymen did it.