Should Digital Nomads Be Worried About Taxes And Permanent Establishment? part 2 – Part one is here.
Taxes on Digital Nomads for Selected Countries
Digital nomads are people who have been able to leave their brick-and-mortar jobs behind and take up a lifestyle that allows them the flexibility of being constantly on the go. In recent years, this lifestyle has become more popular, with many people claiming to experience increased productivity and happiness.
However, while digital nomads may be enamored with their new lifestyles, they may not be as happy to hear about the tax implications. Let’s quickly look at the taxes on digital nomads for some countries.
Taxes on Digital Nomads in Thailand
Digital nomads who base themselves in a country like Thailand for an extended period will have to pay taxes there and back home. In fact, this is true for any country that you are planning on residing in for over four months to a year. Many digital nomads are aware of this, but it is worth noting that you may have to pay taxes twice on your income if both countries levy an income tax.
Taxes on Digital Nomads in the U.S
If there is one country that requires a double taxation agreement with most countries, it is the United States. This means that if you are a digital nomad working in Thailand and paying taxes there, you will have to pay an American income tax as well.
However, you can avoid this by filing a form with the IRS, which exempts you from taxation in America on your income abroad. You need to file this form every year, which can quickly become incredibly annoying.
Taxes on Digital Nomads in the U.K
The United Kingdom is another country that requires digital nomads to file a tax return if they are working there for more than three months out of the year. However, things get complicated when you start to look at income taxes and capital gains taxes, as you may have to pay both.
This makes the lives of digital nomads who base themselves in Britain a lot more complicated than those living elsewhere because of all the taxes they will have to pay.
Taxes on Digital Nomads in Australia
Australia is another country whose tax system can be incredibly complicated to digital nomads. They will need to figure out if their residency is considered temporary or permanent; in the latter case, they will need to pay taxes there and back home.
However, this also means that they can claim certain tax reliefs when paying income tax in Australia.
Taxes on Digital Nomads in Germany
Digital nomads who work from Germany will have to pay taxes there as well as back home. However, things are not so cut-and-dried when it comes to this country, as a tax exemption system also applies here, which can help them save a nice chunk of their income.
Taxes on Digital Nomads in the Philippines
Another country that taxes the income of digital nomads is the Philippines requires them to pay taxes on their earnings in both countries. However, there are many tax breaks when it comes to paying in the Philippines, particularly for married to a local spouse.
Taxes on Digital Nomads in Canada
Canada is another popular place for digital nomads to base themselves, particularly in the tech industry. The tax system here is fairly straightforward for these people, as they will need to pay taxes there and back home without any complications.
Taxes on Digital Nomads in Singapore
Another country that has become incredibly popular among digital nomads is Singapore, which imposes no taxes on their income. While this might sound great for these nomads, it is worth noting that there are still considerable amounts of taxes they will have to pay in the countries they are working from.
Taxes on Digital Nomads in the European Union
The final country to mention here is the European Union, which requires digital nomad workers based in this region to pay taxes in two different places. This can be extremely taxing, and many people prefer to base themselves in the United Kingdom or Germany instead of here, where they will have to pay more taxes.
Should Digital Nomads Be Worried About Taxes?
Of course, digital nomads should be worried about tax. However, if you’re going to stay more than three months in a country, you should be willing to pay taxes. Now, the question is how to do it properly.
Well, digital nomads’ biggest problem with tax is deciding where to pay them since so many countries have a special rule for digital nomads and entrepreneurs. In countries like Thailand, Panama, or Belize, annual income can be as low as $12,000 per year.
But, you would say: I’m not going to pay my taxes in those countries because they are so low! Well, here is the thing: most of the time, digital nomads travel from one country to another, and it’s very likely that sometime in your life, you will transit through a place where your income is lower than in your home country. Then, you are still expected to pay tax.
Nowadays, many nomad-friendly tax services allow you to pay your taxes wherever you are.
Should Digital Nomad Be Worried About Permanent Establishments?
Well, since you’ll be traveling from one country to another, I think there’s no reason to start any permanent establishments. Moreover, if you want to switch from being a digital nomad to a permanent residence, this is fair enough.
Also, since modern nomads tend to make a lot of money but won’t be living in a country where the tax rates are high, I don’t think you will have trouble with not being able to settle. The only concern I would have is what happens if your company crashes and the cash flow stops temporarily or permanently? In an ideal world, you would keep some savings somewhere in the event of an emergency.
I think this is very important if your authorities want to tax you. Of course, they can’t really treat everybody the same way because the nomads are out there traveling all around. They’ll be able to travel without any problems. So I think it’s fair enough, you should not be worried about permanent establishments.
7 Digital Nomad Job Ideas to Inspire Your New Lifestyle
The idea of being your own boss is one that many people dream about. If you’re reading this article, it’s possible that the digital nomad lifestyle is calling your name. You can work from anywhere in the world with an internet connection, so why not take the plunge?
Working on your laptop allows you to rely less on a steady paycheck from a traditional job and enables you to get the most out of your money. For many digital nomads, working remotely is simply a way to show their bosses that they can be trusted with more freedom, while others have built up successful businesses by working on the road.
There are several different career paths you could pursue while traveling the world, and we’ll cover some of the jobs in this article. Ready to get started? Here are seven great job ideas for those looking to begin the digital nomad lifestyle.
1. Freelance Writer
Working as a freelance writer is one of the most common jobs for digital nomads. All you need to do is write interesting blog posts for your clients, and they will pay you per article or post.
2. Virtual Assistant
Similar to working as a freelance writer, virtual assistants also work online, providing various services like email management, social media updates, and even bookkeeping. Many companies utilize virtual assistants in order to be able to outsource tasks that would otherwise require hiring an office full of workers.
3. Web Developer/Designer
Working as a web developer or designer is another popular opportunity for those who want to work remotely. If you have the proper training and experience, companies will often hire you as a freelancer and pay you per project.
If you have a background in education, teaching can be another great way to make a living as a digital nomad. Many teachers choose to become English tutors online or work for educational companies providing lessons remotely. The possibilities are nearly endless if you have the proper training and qualifications.
5. Social Media Marketing Manager
Social media marketing managers are responsible for managing various accounts pertaining to their products or services. They often work with big brands, so you will likely need prior experience working in the field. Digital nomad job opportunities are plentiful in this industry, and some even offer bonuses if you bring in new business through your social media connections.
6. Online Entrepreneur
Everyone is an entrepreneur in some regard or another. If you have a creative idea that you want to turn into a business, it’s up to you to take the necessary action and bring it to life. Being your boss can be rewarding, especially if your business brings in more money than you ever did at your old job.
7. IT/Tech Specialist
As the world becomes more reliant on technology, companies need more people to manage their information and networks. For example, some digital nomad jobs might require working with web domains or managing servers that keep everything running smoothly for businesses around the globe.
Technology is constantly changing, so this industry needs to have people constantly learning and up-to-date on the latest trends.
Frequently Asked Questions about Digital Nomad Lifestyle
What is the digital nomad lifestyle?
The digital nomad lifestyle is when you are not tied to any specific geographic location, and the place you call home changes depending on where your laptop takes you. You can work from anywhere in the world. You do not need to live in one area exclusively.
Is it even possible to do the digital nomad lifestyle?
Yes, but you have to have a computer and some internet connection no matter where you go. You will need to be flexible and willing to research where you want to live next because that part is up to you. You also have to love communication with others, as it can be quite hard over long distances at times.
Is the digital nomad lifestyle only for men?
No! Although statistics say that there are more men than women in the digital nomad lifestyle, it is not only for men. Many women travel and spend their days toiling at their laptops.
Who can do the digital nomad lifestyle?
Anyone who is tech-savvy and has decent internet wherever they go can do this lifestyle. You also have to be willing to adapt from moving around so much, as well as being flexible with your living arrangements.
Where do you sleep?
It depends on where you are and what your day-to-day is like! Sometimes, digital nomads have to pull all-nighters working on client projects. Other times, they might be settling into a new city or country as their home base for several months. Either way, it can be a bit tough.
The bottom line is that there are a lot of countries out there that tax the income of digital nomads, particularly those working for tech companies or freelancing from abroad. However, if these nomads are careful with their paperwork and tax planning, they can avoid being shortchanged by the system.