> They will also be exempted from local income taxes, will be able to open local bank accounts and can drive in Costa Rica using their country’s license, among other benefits.
With this kind of visas I've always been curious: Unless you're US or Eritrea citizen, does this mean you don't have to pay any income tax at all, given you loose your home country's tax residentship in 183 days after leaving?
Tax residency is a very complicated matter but in general, you do not loose tax residency 183 days after leaving.
In Spain, it takes 5 years before losing tax residency after you've left the country.
In France, having your wife and children in France makes you resident even if you don't live there.
In the UK, you can be resident by only spending 15 days in the country if some other conditions are met.
On top of that you have to add the interaction between national law and double taxation agreements between countries.
> In Spain, it takes 5 years before losing tax residency after you've left the country.
Do you have a reference? I have never heard about that (which can happen, spain has many rules) and I doubt anyone holds to those rules but it would be good to know. I had a business in spain and as a foreign tax resident I tried to do everything by the book; the locals laughed in my face for declaring taxes at all. The system is so complex and unfriendly (the fines are high and there is world wealth tax which has fines that are probably not even legal in the EU; there are legal cases going on about it) I doubt anyone can follow the exact rules, but I tried (and probably paid way too much because of it).
I keep seeing news titles about football playes like Cristiano Ronaldo and
celebrities like Shakira getting slapped with back taxes and suspended jail sentences in Spain. A complex tax system and unclear rules are just another opportunity for abuse by tax authorities.
Of course this doesn't protect you from outright tax evasion. Also there are some rules like the calculation of capital gains that differ from the US system, meaning that you are not necessarily protected from double taxation, since each system taxes a different transaction.
I guess our definition of wealthy is different. There are bucketloads of 'nomads' under the NHR that have no wealth and just get money from outside PT: I am talking a few 1000 per month. What is wealth for you? The Beckham law wealth is what I would call wealth and sure there are people using nhr to move their wealth from some fund to their person within the 10 years without paying tax. However, unlike the Beckham law, for the NHR you do not need capital to benefit.
I really doubt anyone is applying for NHR status with a few thousand a month, more than likely they would get denied for that. The rules have gotten a lot tighter over the last few years.
I would way that anyone moving to Portugal to apply for NHR status and who is a programmer is wealthy. IE, anyone making over 80k to 100k on the low end.
Ok, but you would be wrong. It is anyone who works in a profession PT wants to attract. And it got more strict but any IT job qualifies and it matters not what the salary is.
VAT is not a revenue tax. VAT is the tax paid by consumers not by the company. Company only acts as tax collector. The weird thing is this: they collect VAT on everyting they sell, but then, for everything they buy (raw materials, office supplies, etc.) they can substract amount of VAT paid for those from the amount of VAT collected. So purchases by companies are basically VAT-free. And of course some tax optimisation schemes come into play here, with some companies getting ahead on VAT (like, actually getting a VAT refund from the government, instead of paying it).
At least in Spain a company will usually be able to avoid VAT on purchases they make. It is true that they charge and collect VAT on their sales to consumers. The majority off tax paid by these companies is on what they pay their employees.
This is very hard in reality though especially on goods from abroad; your NIE has to be on the invoice officially (which companies like BA do not do for you and I flew with them a lot for business) and while this is not strictly enforced, I got slapped many times on valid business purchases. The gestor told me to just deduct 75% of the deductible vat to not get onto the radar. Ugh.
VAT is not the only tax to be paid in the EU. Not to mention they pay less VAT than the local businesses through various schemes(i.e registering the company that makes the sale in a country with lower VAT)
That doesn't work anymore and it only worked for small volumes, not bigger retailers. They previously needed a VAT number from the state the custumer was in, which was very cumbersome. Now they just add the destination state's VAT on the invoice and I think the VAT is settled between states.
What makes you think the tax authorities were the ones being abusive, and not the very expensive tax specialists hired on behalf of a class of people moaning that it's not fair that people earning €100m a year don't pay smaller proportions of their income in taxes than people earning €100k?
All these downvotes, and not one person prepared to explain why portions of a Spain-based footballer's earnings from Spanish companies accruing to Belize based companies is the tax authorities being abusive...
Or why the tax authority would prefer a situation where the tax code is sufficiently complex the Messis and their financial advisers think such an evasion scheme is worth trying to one where they just receive a percentage of his very large earnings without any fuss or court case, like your average employee of a Spanish company. The reality is the reverse: people with a lot of income to disguise and creative tax planners love finding ambiguities and imaginative interpretations of deductions and exemptions designed for other purposes, and tax authorities would rather not be chasing them through the courts years later.
Individuals of Spanish nationality who accredit their new fiscal residence in a country or territory labelled as a tax haven will not lose their status as taxpayers for Individual Income Tax. This rule is of application during the tax period in which the change of residence occurs and for the next four tax periods."
Does this rule actually make sense? So instead of moving from Spain to e.g. Cayman Islands, you move from Spain to the UK, become UK taxpayer (in something like 180 days), cease being Spanish taxpayer, then move from the UK to Cayman Islands. Saves 4 years!
This is just another example of braindead legislation created by people who are unable to consider the full spectrum of the consequences of the law (beyond just the "intended" effects) and/or their primary motivation is publicity ("look at all these great laws I passed!")
In your example, the moment you move from UK to Cayman Islands, the Spanish government/tax system will know (unless you make sure you hide it... but this is another topic). At some point you won’t be a UK taxpayer, in that moment the Spanish government/tax system will categorize you as Spanish taxpayer. I mean, if you are a Spanish citizen and you try to pull this trick, it may work as long as you never try to transfer the money you saved in the Cayman Islands to any Spanish bank account (any normal bank account, actually).
That doesn't sound right, but maybe there is something about the Spanish law I don't know. You can transition to other countries tax residency in Germany if you de-register(most countries don't have the concept of de-registering) and enter the other ones without making use of double taxation laws. You do have to notify your local tax authority of leaving though otherwise they'll happily continue treating you like a resident. Usually the overlap is something like a year. Most countries actually have insight into each others tax records nowadays.
It's even more particular, but in practice, it does affect a lot of funds, if not a lot of people - which is why they legislated. One can move to a no/low tax jurisdiction and not be a Spanish tax resident as long as they're covered by a double taxation agreement.
I too thought of moving my business to Spain until I started speaking to friends and acquaintances that had businesses in Spain. Lots of horror stories.
Not the parent but from my own experience having had companies in many countries: Spain was by far the hardest and most confusing. I only had companies (4) in Andalusia, so I cannot comment on other regions; where other countries are quite logical and I am usually able to reason with the tax auditors, in Spain it was hostile and most accountants, lawyers and gestors basically told us, time and time again, to just relax and do many illegal things as you will lose boatloads of money I'd you do not. However, I like sleeping at night as do my partners so with did everything by the book and it was extremely painful to do so. There are rules on rules on rules, deducting business costs are hard if not impossible etc. And you need help for everything: in Spain there is an industry called Gestors who are not accountants but people who help navigate the bureacracy. The Spanish use them as well and there are many all over the place. So you pretty quickly find out things work if you are a tiny company (autonomo) and just don't declare any tax (put it in your matress), hire people by paying them cash etc. Or you need to be a large corp with lawyers, accountants etc to navigate things efficiently. In between you mostly just get misery. I sold and closed the companies and the people that bought them since then burnt out and quit or just adopted what my Spanish friends call 'the Spanish way', which is, quite simply basically running almost fully illegally: having a 'broken' PoS all the time (so people have to pay cash), using black funds to pay people and goods and just showing losses all the time (paying only the autonomo social security and nothing more). I would find it impossible to sleep as I simply cannot accept the thought of the Guardia stomping down the door in a few years. My friends tell me I worry too much about nothing... maybe; I would never do it again.
Good to know is that Spanish taxes can go back 4 tax years which equates to about 5 years. This is shorter than most countries I did business in.
South African sailors who spend more than 183 days outside the country also don't pay income tax, but they usually are still tax resident: The first million Rand of employment income earned outside South Africa is exempt. But independent contract and investment income is still taxed.
And I'm pretty sure our law was based on laws in other countries, like the UK.
That's not true. If you have an apartment in Croatia, or if your family lives in Croatia, you are a tax resident in Croatia even if you don't spend a single day there.
That's almost certainly not the case since I know multiple people who got in trouble when COVID started because they weren't able to board for a long time and they would stay on land for >6 months and have to pay income tax on the year so far + no income from not being able to work.
In the UK you are non-resident for tax purposes provided you spend 183 or more days of the tax year abroad, and your UK residence is not your sole residence.
Even as a non-resident you are still liable to pay UK tax on UK income, however.
For the vast majority of people, what I wrote is entirely true. Yes, it’s complicated and some people will have exceptional circumstances. But most of the more complex tests on the page you list are for people who want to prove they are UK tax resident, not that they’re not!
Not really, if you spend 120-183 days in the UK, to not be a tax resident, you'd need to not have family there, not have a house/hotel for more than 90 days, nor work there for more than 40 days, nor have spent more than 90 days there the year prior and you'd need to have spent more time in another country. It's a lot of conditions!
The same with Canada. Technically we have a similar residence requirement as far as number of days present is concerned. However try convincing the CRA that you're not a tax resident is far more difficult.
The CRA want some sort of document detailing that you are a tax resident elsewhere which is difficult to obtain if you are mobile between several countries.
It's cool that Costa Rica is doing this though. It legitimises what people have already been doing illegally.
Yeah, but most of those tests are actually pretty easy to pass for someone who is not tax resident.
The “family tie” test is not as onerous as it sounds. It just means you can’t have a spouse or child under 18 who is themselves a full-time UK resident.
It's easy for someone who's not tax resident to pass a non-tax residency test? Isn't that a tautology? ;)
Your understanding of what is a family test isn't correct either. If you have a boyfriend/girlfriend and you spend enough time together, you will be considered as "living as spouses or civil partners" and that would prevent you from passing the family test. The burden of proof would be on you to prove you that you're not that close to your partner to pass the test. And by the way, if your bf/gf owns or rent a place in the UK in which you spent a single night, HMRC would consider you have an accommodation in the UK.
There are solicitors who make a living solely on individual tax residency because it is way more complex than spending >183 days in the UK.
> "It's easy for someone who's not tax resident to pass a non-tax residency test? Isn't that a tautology? ;)"
The point is that if you have enough wealth to make achieving non-tax residency desirable, then most of the time you will also have the resources to arrange your affairs in such a way that you can achieve that status while still being able to spend significant time in the UK. Yes, individual circumstances vary, but for most people in that category these tests are not a huge hurdle.
> "If you have a boyfriend/girlfriend and you spend enough time together, you will be considered as "living as spouses or civil partners" and that would prevent you from passing the family test."
In most circumstances that is unlikely. If you have a partner that you spend enough time with to be considered "living as spouses or civil partners", then they would very likely also be non-resident. Because they'd be living with you!
Got any links with more info on this? Preferably from the ATO?
As an Aussie this sounds really damn tempting but I'm seeing information that implies you can still be considered an Australian tax resident if you have certain assets or interests in AU:
yea, not sure what the OP is referring to or what their personal circumstances are but that is definitely not as simple as that from personal experience (i left Australia for 10 months) along with first hand accounts of people I know.
Besides the obvious wife/kids being in Australia = personal ties, ATO also considers the following to be reasonable points to be constituted as a tax resident:
- Australian Bank accounts, even with $0.01 in it.
- Superannuation
- Properties owned, regardless if it is as an investments or owner-occupied (not rented out)
- Any Australian Account e.g. commsec, vanguard australia, telstra/optus mobile, etc
- Postal address/P.O. box
And so forth. ATO is purposefully applying broad strokes to "ties" to Australia so that they can claim their share of taxes accordingly.
I have a mate whom is a miner, working offshore for BHP, and was audited by the ATO since he lives in Indonesia (wife/family) thus claimed he is a non-tax resident. He is originally from WA so got dinged for a house he owns in WA (which he intended to come back to) + his (Telstra) mobile plan that he never used but paid the smallest plan to keep so that he didn't lose his aussie number + his NAB bank account that had $1000 in it so that he has some cash to spend when he visits family. ATO told him that if he wanted to be considered a non-tax resident, he had to liquidate _and_ close everything he has in Australia to be considered a non-tax resident. Since he didn't do so, they considered he has every intention to return to Australia thus place undue burden on medicare & pension system, if applicable, thus had to pay the difference in tax he paid in Indonesia vs. working in Australia.
Not even close! You can lose tax residency the say you leave ... or you can be overseas for years on end, and still be an Australian tax resident (did that myself for example!). The ATO is notorious for being one of the hardest tax systems to escape.
You just don’t need to tie any of these tax statuses and income to your person.
Form a corporation or trust or both and have those do all the earning, and make a distribution whenever you really need to. This is not simple when you are barely getting ahead in life, but if you are it is very simple.
I can say that for Canada, yes, you're correct. It starts as of the day you left (or the day you become resident somewhere else, whichever is later) As long as you meet the requirements of non-residency. Which is basically no primary ties (spouse or dependants still living there, a house or car there). There are also secondary ties like bank accounts but these may or may not matter. You have to intend to leave permanently basically.
From a tax perspective you still are taxed on Canadian source income, so if your job is in Canada nothing changes.
With digital nomad visas specifically, as they are temporary and usually confer visitor status and not resident status, you may have difficulty establishing that you've left permanently and are resident elsewhere. That seems like a grey area yet to be tested, and the CRA probably has a good case there.
I'm not an expert, so consult a real expert in the field if you want tax advice.
The laws get _weird_ if you have "resident" status in more than one country.
Just to make the rules easier to enforce, it's sometimes easier to show you have resident status somewhere else. I had much bigger issues with the fact that land ownership / house ownership / bank account laws care a lot about non-resident-ownership.
Tax on trade marks must be low, so you make a company in Canada, purchase trade mark rights from a guy in Costa Rica, your Canadian company makes no profit ... isn't that the sort of thing the big companies like Amazon do to pay no local taxes.
This requires that you earn your income through a company under your control and that you can pay to setup a complicated tax avoidance scheme like that, and pay to defend it, and even then you may get it wrong and end up paying taxes and penalties.
I don't recommend trying things like this.
In this specific case I guess you'd make your money from the IP royalties in Costa Rica, so it may avoid the Canadian source income. I doubt it would stand up to scrutiny though, the courts would very likely see right through it.
You wouldn't pay US tax on the first ~$100k of non US income. With remote work that distinction is important, for instance youtube payments from advertisers for US viewers are US income even if you make the videos outside of the US and are not a US resident or citizen starting this year.
For the local taxes, there are a lot of other taxes besides income tax the local government benefits from
I think worth to mention there is distinction between being resident and tax resident. I think matter is getting more complicated if someone working via limited company setup in different country instead of self-employed.
That usually depends on which country you are from. Germany, for instance, follows a residence based taxation. So if you spend a substantial amount of time outside Germany, cut all ties (no spouse, apartments, cars in Germany) and don’t have German income (e.g. from rent) you’ll cease to be considered a tax resident of Germany.
In that case you won’t have to pay income tax anymore. However, where it gets complicated is that usually under these digital nomad visas you don’t get a new tax residence nor a tax file number from your new residence country. So you are kind of falling between the cracks and have a hard time opening bank accounts etc.
I’ve been through this whole ordeal and it certainly is an interesting experience with pros and cons.
> With this kind of visas I've always been curious: Unless you're US or Eritrea citizen, does this mean you don't have to pay any income tax at all, given you loose your home country's tax residentship in 183 days after leaving?
If you really become fiscal resident of a country with 0% income tax and the country you left is fine with that then, yes, you pay 0% income tax. I've got a friend who really went to live with his family in Monaco (he was a native french speaker, but not from France, which helps): he's there since five years now I'd say and, indeed, he pays 0% income tax.
It depends on the double taxation treaties signed between your country of citizenship and the country where you live. Some will allow you to pay no taxes in your citizenship country, other will ask you to pay the difference, and maybe there are other situations too. You’ll have to check the treaty and/or talk to a specialist.
I don’t believe that is correct. Your country of citizenship will by default view any income you have as taxable, no matter from where or where you get it. The double taxation treaty exempts you entirely or partially, regardless of the obligations you have or not in the country of tax residency.
In other words it’s not about what you are taxed in other places, it’s about income.
This is true in the case of American citizens, as well as in many other countries in special cases (mostly to prevent people moving to "tax havens"). Otherwise it is not true, and the other countries in Europe and the Americas that I'm familiar with work on the basis of spending 183 nights within the territory, or having your primary business interest within that country. Of course the laws are long, varied and full of exceptions.
If you don't reside in your country of citizenship (definition of residence varies by country) then you don't have to pay taxes in that country. US is the exception.
That depends on the country and double taxation treaty. E.g. my country (a EU country that is not US) considers me a tax resident since I have 'permanent residence' in the country (weird concept that does not cease when you leave the country, you need to actively go to the bureau and ask it to be terminated, which a lot of people just ignore because they live in other EU country first as students and then they start working etc). You can have this permanent residence even if you haven't lived in the country for 15 years.
Residence and “tax residence” are different things. There are countries where you can be considered tax resident even if you don't step your foot there the whole year (often it's something like you having your family living there, or your business registered there). Some countries can treat you as tax resident by default if you are a citizen, unless proven otherwise, which you'd have to do in court if tax authorities decide to insist and you decide to disagree.
It depends; if you are an employee of a big company and you are working from home, but you covertly move to CR for a few months, you still have to pay taxes in your official country of residence. If you want to move the residence, your company may fire you (it just happened to a good friend that moved to a neighboring country in EU, not even outside EU or a different continent).
But if you are self-employed or a different flexible arrangement, in some countries you can do the trick. For example if you live in Romania and move to CR for 2 years, you don't pay the 45% minimum income tax, which basically makes Costa Rica an "evil tax heaven" and you a very, very bad citizen of your country that is not contributing.
Those countries require taxation of citizens regardless of residency. Citizens elsewhere are taxed based upon residency (the last time I checked). Also - if you are a US citizen you get $120k tax free if out of the country for 11 months. $240k for married.
* Costa Rica is pretty cheap. 30%-50% of US living cost. (minus Manhattan or west coast) You also get monkey’s in your backyard!
It depends on the country and the nature of your income. If you're self-employed, generally yes. If you're a salaried employee, that part of your income is usually taxed in the country of employment* regardless of where you live. The situation also depends on whether your home country has a tax treaty with the country where you live.
Many countries have cracked down on this in the last Decade.
In Canada, you didn't have to pay income tax if you were outside the country for more than half the year.
Now as a citizen or resident you have a bank account in Canada, any assets (house, car) or even set foot in the country within any given year you have to pay income taxes there.
At least in Poland this is not so obvious since to be a tax resident any of 2 things have to apply:
1) you stayed longer than 6 months there
2) Poland is the "center of your life"
Generally the second one is quite abstract and is mostly tested in court and generally the less connection you have in Poland the more likely you are not considered as Poland being the center of your life such as:
- not having company there
- not having family (wife, kids) there
- not having most investments there
- not visiting regularly
- not having any income from there
however still you can e.g. have a bank account or own flat that you rent there and still not considered to be a tax resident, probably you would have to prove that there is other country that is center of your life (e.g. paying taxes there, staying more than 6 months, having wife/kids living there, etc.)
What's gets very unclear what happens if someone doesn't have any "center of their life" anywhere - e.g. someone keep travelling for many years and every 2-3 months switching countries, living on the boat. After all e.g. 'donuts' don't have any center that belongs to them.
> What's gets very unclear what happens if someone doesn't have any "center of their life" anywhere.
Ukrainian tax code has similar provisions about “center of life interest” and “staying more than 183 days”, and a backup clause stating that if your tax residency status cannot be clearly determined with the above approach then you are considered a resident if you are a citizen.
I guess this covers the case where you claim that you don't have to pay taxes in Ukraine just because no other country has considered you a tax resident and you never paid any taxes there, so you can't use that to argue that you're a non-resident as far as Ukraine in concerned.
It might be unclear what happens to you, but the ultra wealthy know exactly what happens when you don’t have a clear center, hint: (extremely low to zero taxes! If you have the right lawyers…)
It is a little bit more complex. If you don't change your residency you are still considered a resident and must pay taxes. If you live in a ship and sailed the world last year you still must pay taxes because you are considered a resident.
If you have assets or a wife in Canada they may declare you a resident even after a year.
I'm a Canadian resident, who has spent over 5 years driving around the world, never staying in a single country more than a month or three. All those were just tourist visas, so it would have been illegal for me to live and work there.
During all of that, I had to pay income tax in Canada, even though I went >2 years then almost 3 years without setting foot in the country.
On the opposite side, the IRS was, a couple of years ago getting interested on Canadians that were spending more than 183 days in the US running away from the winter
With this kind of visas I've always been curious: Unless you're US or Eritrea citizen, does this mean you don't have to pay any income tax at all, given you loose your home country's tax residentship in 183 days after leaving?