Ask HN: Digital Nomads: How do you manage taxes? | Hacker News Reader

Ask HN: Digital Nomads: How do you manage taxes?

130 pointsfoobazzy87 comments

There is a brewing possibility that I might come across a remote position. I wanted to take this opportunity and travel a few places around the globe. I am planning to start for a few months in my home country and then make the move. But I am not sure how the taxes and other financials work if I am moving around different countries every 2-3 months(or whatever time is ideal). Hence I wanted to start a discussion on the following:

- How do taxes work in this case? Am I supposed to be taxed based on my home country, the company's home country or the country I am currently residing in? Are there any services that do this for me?

- What kind of visas do you apply for? Business-tourist?

Thanks in advance.

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Visa-wise. Very few countries let you work remotely, most do not.

Canada for example says right on their immigration website that if you are working for a company not based in Canada and are paid from outside of Canada then there is no problem.

Thailand, and most of South East Asia frankly, have laws on the books that say any work, including volunteer work, is work and is forbidden. Thailand has however stated some years ago that 'Digital Nomads' aren't their concern, just illegal workers. There have been arrests in shared work spaces but people were released after. Definitely a grey area.

Singapore's another example but you can count on them to enforce the law to the letter.

That's an uncomfortable truth you don't see people talking about on the remote job boards.

You don't read about many issues because nobody is going to know that a guy on his laptop is working and not uploading holiday snaps to Facebook. I'd personally avoid coding camps, shared workspaces and collaborating in person if I was going to skirt the law and do it anyway.

I can see the desire for a country to control who works for companies in the country, as that takes money out of their economy. But if someone is living there and bringing in money from off shore, and spending it there, that seems like it should be encouraged as there is no local resource drain, and a local economic benefit. Anyone know why this is frowned upon?

I don't think that's actually frowned upon. Your reasoning makes sense and many countries should be happy if nomads earn money abroad and spend it in their local businesses, but often the laws are just outdated and still designed around the assumption that people earn money in the country where they work.

I think 'spending [money] there' is maybe not quite enough. Taxes pay for infrastructure maintenance, law enforcement, fire, public safety concerns, etc. If you're not being paid by a local entity and do not put the money in a local bank account, it's really hard (for the local gov) to figure out/prove how much you should pay in taxes. Basically you might be a drain on resources and the community if you don't pay taxes, even if you're spending some money there. That's likely what they are trying to avoid.

Well tourists are similarly a "drain" on the economy. Yet they are welcome. Logically speaking, they are as much as drain a "digital nomads". For the period they are there they use as much infrastructure as digital nomads. Yet no one thinks about taxing tourists.

You are oversimplifying things. The two are only equivalent if the average daily spend on tourism related activities is the same. After all, taxes, fees, and jobs (and hence taxes at one remove) are generated in these activities with a specific eye to counterbalancing the "drain". The goal is a net positive effect.

If you are minimizing the amount of money you spend while doing remote work, you may well be on the "wrong" side of this balance, from a revenue point of view.

Back packers are a similar category. They live in hostels and spend minimum amount on tourism. They are still tourists by every definition of the word.

Obviously - that's what I meant about a "net positive".

It's reasonable to expect you can find individual tourists who use more in infrastructure than they contribute to the local economy - the system doesn't break down so long as the average case means overall it is significantly net positive.

If "digital nomads" are net negative, then I expect you'll see eventually constraints arise. Assuming long enough for a) local governments to figure this out and b) that it's a big enough impact to care about. It's also plausible that "digital nomads" remain such a small number of people that nobody is really fussed about the impact, and the legalities of what they are doing remaining fuzzy is only used as a justification to refuse visa/entry to anyone who has proved annoying to the people who issue same.

> Yet no one thinks about taxing tourists.

German speaking countries do tax tourists.

https://de.wikipedia.org/wiki/Ortstaxe

They aren't paying income/payroll tax. They are draining local resources, they need to go to the hospital when they get sick, call the police, firefighters. They need trash pickup and sewer services.

Also many countries have different controls for tourists or visitors and permanent residents.

I think if they allowed this type of behaviour then it would be ripe for abuse.

Company A could simply incorporate a subsidiary in another country, then said subsidiary could hire workers to work for company A's whilst residing in company A's country. No work permit required.

What you've seen in response to this type of thing, at least in Thailand, is that it's harder to stay in the country for a long period of time even legitimately.

Visa lengths across land borders are being cut. Back-to-back visas are now limited. X months in X months out rules are being adopted. It's getting very difficult to stay in the country for longer than 6 months.

It's actually not impossible to get a work permit in Thailand but it is expensive (cheaper if you are an American or married to a Thai citizen). Most people just take the risk.

I listened to the podcast where the iconic Johnny FD recounted how he was arrested as part of that raid. Once the Thai authorities found out that they were paying to work at the co-working space and not being paid by the co-working space, they let them go.

Actually it depends on the type of visa. If you are on a tourist visa, you are not allowed to work. You forgot to mention US may be because it's your home country, but it is illegal to work in US on a B1 visa. Edit: also, if you are in US on work visa, you are supposed to declare any income you receive in your home country, and you are taxed on that money, even if the home country already taxed it.

>> Canada for example says right on their immigration website that if you are working for a company not based in Canada and are paid from outside of Canada then there is no problem.

Where does the Canadian immigration site say this?

Look under "What kind of activities are not considered to be “work”?" on this page: http://www.cic.gc.ca/english/resources/tools/temp/work/about...

" Examples of activities for which a person would not normally be remunerated or which would not compete directly with Canadian citizens or Permanent Residents in the Canadian labour market and which would normally be part-time or incidental to the reason that the person is in Canada include, but are not limited to:

long distance (by telephone or internet) work done by a temporary resident whose employer is outside Canada and who is remunerated from outside Canada;"

Awesome, nice find!

The reality is that most countries don't have visas to support the "digital nomad" life and you will either be working illegally under a tourist visa (everyone I've met), or spend months trying to get work visas and be rebuffed everywhere because you don't have a sponsoring employer, self-employment business starting capital+business plan, etc. And if you're there on a tourist visa, there's no way for you to pay tax.

I've seen two setups among people I've met who are doing the digital nomad thing: Either they are tax resident in their home country (wherever they started) and pay their taxes there, or they told their home country they moved out and they pay taxes nowhere. This obviously depends on the laws for tax residency in the country you're coming from (some depend on # of days in the country, ties like owning property/a business, etc). Traveling around inside the EU is also an exception.

Re: the visa thing. For instance if you tell US border control that you're going to be doing productive work, they WILL turn you back on the spot. Either get comfortable lying about your intentions or you will severely limit the countries you can visit.

edit: one more thing, everyone I've talked to as a digital nomad makes sure their status is as a contractor. If you're on payroll as an employee things instantly get more complicated, especially internationally.

Responding to the contractor vs employee thing: I've run into people who manage to remain employees while doing the digital nomad thing, but they maintained "residency" back in their home country. It just requires that your employer be in your home country, not elsewhere.

I've been a digital nomad for almost 6 years and have written in great detail about this subject here: https://bkpk.me/digital-nomads-tax/

The gist of it is that it depends a lot on your citizenship, the kind of work you do, and how it is all setup. Normally, taxes are to be paid where the work is done if you are a tax resident in that country. Interpretations vary so most nomads are on tourist visas and just fly under the radar. There is no proper framework for this kind of work yet. Even if you wanted to pay taxes in a country you're visiting it would be impossible in many cases because they wouldn't even issue a tax number without proper residence papers. You should be most concerned about your home country and speak to an accountant about that.

People on tourist visa by definition are not residents or citizens. They are tourists. You can't tax tourists. Imagine how many people would avoid certain destinations, I mean executives, if this was ever an issue. Many people "work" while being tourists. It would be difficult/impossible to force them to pay taxes for the weeks or months they spent in your country.

While it's still complicated, many countries use the notion of "tax resident", usually defined as "somebody who spend more than 180 days / year physically at our territory".

While it doesn't help US residents, as they have to pay Uncle Sam wherever they live, many non-US people are using this loophole to avoid being taxed anywhere. Just find 3 countries with residence-based taxation, avoid staying more than 180 days in a year in any of them moving back and forth, and boom! Zero taxes.

(YMMV, IANAL)

When I moved to Dubai, I declared myself non-resident in UK for tax purposes. Dubai was tax-free. Now I find myself resident in two countries for tax purposes and paying tax in both. But I've mixed feelings about it. I'm actually quite happy to pay taxes back in the UK, less keen on paying taxes in Australia, as they're rather scummy these days to NZ citizens, so I'm getting a little screwed over with no path to permanent residency, very little benefits, yet still have to pay full whack of tax... Lovely. (Fuck Australia)

But, in your situation, moving every 2-3 months can mean you might actually avoid tax residency in most countries. So it can be complex. Look into the three or five flags theory for perpetual travellers. Also into tax-residency rules of the countries you'll be staying in.

Essentially you want to have your citizenship somewhere where your foreign income is not taxed. Have a legal residence somewhere with low tax/tax haven. Earn your money/host your business somewhere with low corporate rates, have your assets somewhere where they aren't taxed massively and spend your money somewhere with low levels of consumption tax/VAT.

As for visas, it's really just travelling at a slower pace. While working remotely, it's kind of a blurry situation. Mostly though, as long as you don't remain longer than six months in one country, you're unlikely to fall foul of residency laws (for tax purposes).

> Essentially you want to have your citizenship somewhere where your foreign income is not taxed. Have a legal residence somewhere with low tax/tax haven. Earn your money/host your business somewhere with low corporate rates, have your assets somewhere where they aren't taxed massively and spend your money somewhere with low levels of consumption tax/VAT.

How to be a societal leech and contribute the absolute least you can 101. Sickening.

Apart from showing your revulsion to said lifestyle, which is indeed problematic but bound to become more popular in the future, you might also consider that this is acceptable since decades for the Jet set (who employ all of these techniques to the max), but not for ordinary 'nomads'.

If choosing to mitigate taxes is wrong, is it also wrong to choose not to donate additional money to the US treasury?

It seems unlikely that the legal tax rate is the precise amount of money that you should owe society if you calculated it from first principles somehow. And so either mitigating taxes or donating additional taxes would be the 'moral' thing to do.

Are you saying if you had the opportunity to do this you'd opt not to and instead pay taxes?

Your over the top and uncalled for moral judgements aside, did you not read the part where they said?

"I'm actually quite happy to pay taxes back in the UK,..."

>"look into the three or five flags theory for perpetual travellers"

I am not familiar with this theory. Can you explain what it is? Thanks.

https://en.wikipedia.org/wiki/Perpetual_traveler#Flag_theory

Interesting, thanks.

Pay tax in your home country and travel on Tourist Visa's where visa's are required or expedient.

Make sure payments are made to your home country bank account and not to any kind of local account.

Do that and be relatively discrete about what you're doing and you'll have no problems whatsoever. DO NOT try to explain what you're doing to any immigration/officials/authorities, simply say you're a tourist which in practical terms you are.

I have a related question, but switched around: I have a US based company that recently started paying an international contractor (individual) for some programming work. He’s not a W2 employee and being that he’s not a US citizen I’ve just been paying him in full and not withholding anything for taxes. This mirrors how I’ve paid other US based 1099 contractors.

As the project has gained momentum and is looking to be something that will continue long-term, it has me wondering about the correct process. A couple weeks ago I spent a few hours researching IRS documents and posts found by googling, but nothing was conclusive. Some of the information I found indicated what I’ve been doing is correct, but I need to have the contractor sign a W-8BEN [1]. Other information indicated that I should be withholding 30% of his earnings even though he meets the standard to be a 1099 contractor if he was a US citizen.

Do others have experience with this and what can you offer as advice?

[1] https://www.irs.gov/pub/irs-pdf/fw8ben.pdf

As someone who has been dealing with this for years and hired a lot of developers/contractors, I would suggest one out of two options:

* Hire them via a proxy, such as Upwork or similar.

* Make sure the contractor spin up a local company and invoice you.

You might be able to do it some other way, but it's likely going go cause you a lot more issues and headache.

If they've established a corporation on their end of things (known as a "sole trader" in the UK), then you can just send them a 10-99 as per usual, because you're paying a corporation, not a person. I have done this with a contractor in the UK and my corporation is in the US and had no problems with it.

--edit: this is my personal experience and may not be used as tax advice in the legal sense--

Step 1: Don't be American. They're taxed on global income so you're pretty screwed there if you are - see point 3 though.

Step 2: Avoid being tax resident in countries. e.g. In the UK you only become a full tax resident after ~90 days (or something like that - I didn't deal with it). The more tax residencies you collect the more of a mess it'll be.

Step 3: Stick to countries with double tax agreements in place ("DTAs")

> In the UK you only become a full tax resident after ~90 days (or something like that - I didn't deal with it).

183 days (Income Tax Act 2007 section 831 (1) (b))

This changed in 2013 when the Statutory Residence Test was introduced.

haha no. If only it were that simple.

The 183 is the point where you're guaranteed to be a resident, but you can become one much earlier based on HMRC6 [1].

My employer brought in tax experts for this & they determined that I'd flunk after 90 days.

[1] https://www.gov.uk/government/uploads/system/uploads/attachm...

The US has a big exemption and credit for foreign taxes.

https://www.irs.gov/individuals/international-taxpayers/fore...

The filing requirements for US expats are onerous, they are hardly "pretty screwed" when it comes to earning income.

The foreign earned income exclusion only applies to salary. Lots of people have their own company and invoice clients. In these cases FEIE may not apply depending on how money is taken out of the company. It gets complicated quick :).

If you've formed your own company you can generally structure it in such a way that you're able to claim the FEIE. Self-employed people can also claim the FEIE even though they're not necessarily receiving a (W-2) salary.

To be a little bit clearer, it's a big-ish exemption (~$100k) OR credit for foreign taxes. You choose.

As an expat let me tell you how screwed I am.

1) Some banks to want to deal with the liabilities of American clients (even dual citizens). There have been many cases were they simply said that all Americans must withdraw all of their money in a month and that they are no longer welcome to open an account [1]

2) I must report ALL of my money located abroad (since I am worth more than $10,000). That includes; bank account, pension fund, joint bank accounts (even with a non-American spouse), tax account after working at least once as a contractor, etc. No free tax software deals with all of that, so I must pay an American tax accountant located in my country a yearly I-am-an-American fee. If there is any mistake I could be fined up to half of everything that I own in America and in my country. [2]

3) Since I am lucky enough to have another citizenship, if I want to get rid of my American one, I will have to pay several thousand dollars to do that. [3] And there have been several cases were it has been more difficult for those people to receive visas to visit America.

[1] http://www.forbes.com/sites/deborahljacobs/2012/07/31/most-f...

[2] http://www.forbes.com/sites/robertwood/2012/06/04/fbar-penal...

[3] http://nomadcapitalist.com/2015/11/16/renounce-fee-relinquis...

I assume you mean "Some banks don't want to deal with". I have also have heard of this problem in some countries. Fortunately I live in the UK and I am unaware of any bank there that is rejecting US citizens.

Since you are referring to a $10,000 limit I assume you mean FBAR (rather than FACTA as that has a $200k limit combined across all accounts for non-residents). If so, have you looked at filing it yourself? It is really quite easy, just a bit time consuming to fill all the address details in the first time ( after which you can just copy and update it every year).

And yes, the increased fee is a joke. Do you have a source for people having visa problems? I've not heard about that but I'm interested to know more.

This (step 1). But keep in mind that even with a double tax agreement in place there are limits. Under the FEIE, salary beyond about $100k will be subject to double taxation (bar deductions):

https://en.wikipedia.org/wiki/Foreign_earned_income_exclusio...

Every country is different. You will have to specify what country you are a citizen to, and where you plan on going.

I know that being an American citizen can make it very difficult to live abroad. I am an accidental American and I have to report all of my money that I earn and keep abroad. That means if I have a job and earn a salary, keep a pension fund, have investments, work as a contractor for 1 job and have my spouse's bank account under both our names, I have to report all of that. Seeing as no free software offers a way to do all that I have to pay a yearly I-am-an-American "tax" to an accountant to make sure that everything is filed properly. If any mistake is made I could be fined up to half of the money that I own (not the money that I have in America, but all of the money that I own). If I want to open a bank account, I better hope that my bank in my country decides to bother with all of the liability involved with having an American customer. If not, they can (and some have) simply close my account and tell me to withdraw everything. If I want to start investing through a company such as Schwab, I must declare exactly how I earned all of the money, be limited in the funds that I can buy, and receive less perks.

If anyone else is an American living abroad or who wants to live abroad, feel free to contact me. On the bright side, we still are allowed to vote. That means that I periodically call my representative and let them know that I don't care whether they are Democrat / Republican, Pro-Life / Pro-Choice, like Trump / hate Trump, if they want to repeal these laws preventing Americans living abroad from living a normal life, I will vote for them.

If you are and American who is interested in leaving America or if you already have, feel free to read more here: https://aaro.org/position-papers-2015/taxation-and-financial...

American Citizens Abroad (https://www.americansabroad.org/) is another non-profit organization working on behalf of US persons abroad. They are doing some great (but probably ultimately quixotic) lobbying work in favor of changing to Residence Based Taxation, and they have also spearheaded a way to have a US bank account even when you aren't able to be physically present.

Their newsletters also have general good advice etc. and are generally a great resource.

You get $100k a year tax free, or a credit for any foreign paid taxes if you are living abroad. Yes it is not the normal tax situation as 99% of other people but most people living abroad are not paying any additional taxes to the US.

You're asking about tax residency which is a hassle depending on where you are or where you're from. I am not a lawyer, just personal thoughts :)

A not bad idea however, is to incorporate a small limited company that can bill your clients around the world. Clients tend to like this as it is simple to declare expenses. Don't take a $50 Cayman-ish Internet registrar; take a reputable one that will act as named company secretary, $200-$500 should be fine depending on where you are. Gives you a registered address and a professional to call if you freak out.

You need to keep books and file tax reports, but is not a hassle and can save a lot of hassle.

Pay yourself from that company and when incorporating it (less than 30 minutes), wherever you are, ask your accountant/company secretary how the company should pay taxes. For your case (wherever you are) they will have heard the question a thousand times before and give you frank advice; this non-charged advice saves them time during busy periods in the year. You still need to do the books and keep necessary paperwork, or send it to them.

Do not do the above and work as a Nomad while receiving income from a client in the same country (unless you're incorporated in that country, or on a business visa but we're getting really case-by-case in this, ahem, case). You'll be treated as an illegal worker, opposed to a cash-injector.

A bit of a ramble. How something in there was useful.

Nobody is mentioning Estonia.. They promote it, but you should be aware of double taxation rules with your own country, in short it means you can be double billed but can ask it back.

I've started my own company there and can bill from there, or pay myself a salary, whatever is most handy.

How is it going by far in Estonia? It is on my radar for a while.

Taxes: It depends on your citizenship, nominal or achievable tax residency status and plans for the future whether you benefit from paying taxes in a given jurisdiction, as well as that jurisdiction's regulations. You can pay in to multiple jurisdictions if you want, and sometimes this may be smart. You can pay it as various corporate taxes, or you can pay it as personal income tax. Sometimes you can avoid tax entirely (eg. structure a company to operate at a loss, and keep profits outside the country of tax residency in a special low or no tax jurisdiction - large companies do this all the time, though it is becoming very much frowned upon it is still pretty damn common). Note that some countries have low or no personal income tax, but have pretty low/reasonable corporate profit tax (eg. Hong Kong), and some waive the latter for a period when starting a new company (eg. Singapore I believe). Moving arbitrary amounts of capital between countries to avoid profits accruing is often achieved using "IP licensing agreements" or similar. Personally I have three citizenships, plus bank accounts in fourth, fifth and sixth countries (shut down a seventh). Sometimes I get paid in Bitcoin, just to keep things interesting. A big issue can be the tax implications of share options, in which case you might conceivably even benefit from changing tax residency specifically to vest. Basically there's as much complexity as you can possibly imagine here.

Tourist visa: You're not working, really. It's a continuation of your established consulting commitments. You are on holiday. There's no law against that.

Question to the crowd.

What if you are not staying more than 3 months in a country, per year?

Where are you tax resident?

Are you even legally resident somewhere?

Should you even pay taxes? Who is going to catch you?

Honest question. I'm not American, part time nomad, paying taxes but thinking about the uselessness of doing so quite often.

I recently read this article [1] from a digital nomad. He founded a LLC in Hong Kong where offshore profits are not taxed so apparently your LLC in HK doesn't pay any taxes. And he is not a tax resident anywhere.

https://wirelesslife.de/unternehmensgruendung-im-ausland-mei...

thanks!

There's something called 'Fiscal nomad' or 'Tax nomad'. This basically means you don't pay taxes anywhere because you don't live anywhere permanently. Since most countries will only allow you to stay for three months per year, this means that you need to rotate through at least four countries per year.

I would imagine that the viability of this largely depends on what country you're a citizen of.

In countries like Argentina you can stay as much as you want without any issue. Just need to travel (and return) to a near country like Uruguay every some months.

I would love to know in a comment why this suggestion is downvoted.

This practice is called border run and many countries in Latin America allow that. Costa Rica and Peru are two of them.

Are you an american, or not? If you're not, there are possibilities of paying (close to) no tax at all if you travel around.

Where are you resident now?

No. I am not American. And I do not fully understand. I will anyways be charged in my home country for foreign income, I think.

>>I will anyways be charged in my home country for foreign income, I think.

For most countries in the world if you are not considered a resident then you usually are not taxed on foreign income. A counterexample is the USA, as Americans are taxed based on citizenship, and not residency[1].

This is a complicated but important topic. Consulting an accountant is your best option for your taxes.

Visas depend entirely on the countries that you intend to stay in. If you're only staying for 2-3 months at a time, it seems likely you will trigger any residency issues so perhaps visitor visas will be sufficient. However, another variable dominating ease of visa issuance is your passport/nationality[2]. I'm not a lawyer, and visas are easy to mess up and cause issues without careful planning, research and sometimes consultation with immigration attorneys (or at least discussing with the embassies/consulates of the countries you intend to rotate through).

Best of luck!

[1] https://en.wikipedia.org/wiki/International_taxation#Citizen...

[2] https://www.passportindex.org/byRank.php

Indeed, the rule of thumb is that you're taxed in your country of residency.

Even US citizens get taxed in the country of residency, except that they need to do a US federal tax return in addition to their local tax return. The get a tax credit of whatever they paid in their residency country, so most of the time they don't have to pay any US taxes.

Of course to declare a job in your residency country you'll need a work visa, and I think it will be very difficult (impossible?) to obtain one in most countries if you don't have a local job.

Long story short, I think people working abroad remotely with a company in their home country are either (1) on a spouse visa of (2) breaking the immigration laws of their residency country.

Not always.

A pilot in France who's British but lives in France, is paid in the UK by the airline, tells me he pays income tax in the UK based on flying time in UK airspace (not much, he flies long haul, though he's restricted on the number of days he spends in the UK before they'd take it all).

The Maire where he lives doesn't require him to pay income tax, I don't know why but presume it's because they consider the tax to be paid in the UK.

You won't have to pay tax in your home country. Unless you spend a significant about of time there to be considered a tax resident

Doesn't that depend on the tax laws of their home country?

It certainly does! In Canada, for example, you have to be a resident _somewhere_. So you cannot just move around from country to country on tourist visas (which obviously do not permit you to declare residency) and claim to the Canadian Tax authorities that you are a non-resident and avoid paying all taxes.

Indeed. In Europe Monaco is a popular place for very rich people to (pretend to) live due to the lack of income tax. You are restricted in how long you can spend in other countries before being deemed to be domiciled there for tax purposes. In Ireland and I think the UK also, it's 183 days a year. And they do occasionally check, if you're rich enough.

> No. I am not American. And I do not fully understand.

American citizens are taxed on their worldwide income by the US regardless of their place of residence. There's a standard taxable income reduction (the Foreign Earned Income Exclusion) but they still have to file taxes no matter where they live.

> I will anyways be charged in my home country for foreign income, I think.

Most places work on the residence principle (following OECD/UN model convention), there's a country of which you are resident (which may be different from your citizenship one, I'm not sure which you meant by "home country") and you pay income taxes in that country. You probably want to talk to the tax authorities and an accountant either way.

to add additional info, americans are taxed on income above 100k roughly per year that is earned from abroad. so if you are having above average success and you are making 200k per year abroad, then you will have a taxable income of 100k (roughly 19% effective rate)

If you are earning income from a US based source, such as payroll earnings from a US company, I believe you will be taxed in full, federal, state, medicare, social security. That's about 30% on 100k income if you are unmarried

I don't know how it works if you want to try to persuade the IRS that even though you are working for a US company with a W2 that lists a US address, you are "not living in the US". Maybe you could get away with it, but technically your company would have some legal problems for not getting you the right visas to "work" in a foreign country

As an American, i'd say its easier just to pay us tax and hop around on tourist visas

For purposes of the FEIE, whether you are being paid by a US company or a foreign company is irrelevant. As long as you qualify for the FEIE under the physical presence test (more common) or the bona-fide residence test (less common), you can claim the FEIE, even if you are working for a US company and the money is being deposited into your US bank account.

Source: https://www.irs.gov/individuals/international-taxpayers/fore...

If you receive a W-2 you'll continue to pay your half of the Medicare and Social Security taxes. Federal gives you an exclusion of ~$100k, you may or may not owe state tax depending on the non-residency rules for that state, or if your state does not have income tax.

From what I can tell, if you receive a 1099, you also have to pay for FICA (Medicare & social security) regardless of your FEIE status.

That's correct, FEIE only exempts income tax.

Wow, thank you very much for this info. How will your employer or foreign country of residence feel if you are not on a work visa?

The world hasn't really caught up with the reality of remote work, but for now, I just pay taxes where I reside most of the time.

I suggest you ask an accountant or some other kind of tax specialist in the country which contains the bank where you will receive your salary. Presumably that's your home country.

As others have said, it's probable that if you are out of this particular country for long enough you will not have to pay tax there.

It depends where you are from, where you are going and how much time you intend on spending there. Anyone giving you answers without knowing the answers to those questions should not be listened to. You probably want to speak to somebody who is actually qualified to give you proper answers.

I'd say generally you are tax resident in your own country until you spend enough time in another country for THAT country to consider you tax resident. At that point a double tax agreement kicks in and therefore you only need to pay tax in your new country of residence. If you move around all the time then you generally have to pay in your own country. This all assumes you are working freelance.

I believe a lot digital nomads actually declare no income anywhere and don't pay any tax. This is obviously risky and illegal and not a great idea.

Another issue is health care insurance.

For example Germany has mandatory insurance. So you cannot cancel your insurance, and even if you travel in another country they still expect you to pay the insurance in Germany. Public insurance for freelancers costs around 350€ / month, and as DN without German employer they will classify you as freelancer.

You probably do not have to pay the full fee while being outside of Germany, but public insurance has various rules which even the insurance providers do not know, because they are set by law/regulations not by the providers themselves and the clerks by the providers rarely deal with DN.

1. If you have no savings, it only costs a reduced rate of 150€ / month. But traveling without savings is risky, too.

2. If they register you as freelancers, you can opt out and get private insurance, which costs between the reduced and the full public insurance rate, while you are young. But it is a market-rate and become arbitrary expensive, if you are old, and you can not switch back to public insurance (except for marriage or a non-freelancing job with a certain inome).

3. Thus you must be very carefully when choosing a travel health care insurance, because they might consider that to be a private insurance, and if you had private insurance, you cannot go back to the public insurance.

4. There was an obscure emergency-like plan, where you register as being in another country and then only pay a minimal fee to be insured, but do not get anything covered and you must be outside of Germany for several months. Hard to find any information about that.

5. The important thing is to do all (un)registrations before leaving. Since insurance is mandatory, you always have insurance in Germany, even though you were away. So when you are back there, the new insurance will not begin in that moment, but begin retroactively when the last insurance had ended. When you are then still doing freelancer work, they will bill you a lump sum of 350€ for every month you were away.

Re the replies that mention the UK.

Since 2014, tax residency in the UK is now quite a complicated algorithm (see https://www.gov.uk/government/publications/rdr3-statutory-re...). Provided you keep your work-days in the UK low, and can demonstrate workdays outside of the UK, it's possible to avoid tax residency.

However, it's worth considering the benefit of being a UK tax resident is that you accrue National Insurance contributions (even if the amount of those contributions is zero!), which in turn qualify you for a state pension.

1. Speak to an accountant. Each country has their own tax regime, depending on your residency status.

The bigger issue is making sure you have the legal right to work where you are going and don't get into double taxation. Everything is country specific. (And see #2, if you are a US citizen there are tax treaties so you need to see).

2. You don't state where you are a citizen of and where you are working but the United States taxes on global worldwide income (only country to do so but there are tax treaties).

3. On an offhand way, it's probably easiest for you to incorporate and work for that corporation but it depends on the nature of your remote work.

as of taxes, i've incorporated a free zone UAE company and it gave me a 3 year residence in UAE. it comes much cheaper than paying taxes pretty much anywhere else. establishing residence in paraguay might be another option

unless you're a US citizen, your country of citizenship doesn't tax you if you live abroad

I do not do this and am not an expert by any means, but I would look into establishing residency in whichever non income tax state is easiest to do so. Then you just have to worry about federal taxes.

> How do taxes work in this case? Am I supposed to be taxed based on my home country, the company's home country or the country I am currently residing in?

I'm not a tax accountant, but I've spent a reasonable while looking at this and talking to various people in similar situations.

Step one: work out where you're tax resident. You're typically tax resident in the place you spend more than 6 months of the year. There are some more complex per-country rules if that doesn't cover you though, and lots of tie breakers on things like where your ties are (where your business/family are located) and how many days you spent working in the countries involved. This can be complicated and gets relatively subjective in the tricky cases. If it's truly ambiguous and you're not a super high earner, you can probably pick any plausible option without much risk.

Step two: pay taxes on income earned in the country(ies) when you earned it (i.e. where you currently are working, if you're working remotely), plus taxes on your whole annual income wherever you're tax resident. There are double-taxation treaties between most nations that allow you to claim it back. If you're American, I think you also have to pay taxes in America, on top of the above (but I'm not American, so I'm not sure on that). An example:

- You live in the UK for 9 months this year, so you're a UK tax resident

- You work from Spain for 3 months (remotely or locally)

- You should pay tax in Spain for the earnings of those three months

- You should pay tax in the UK for the full year, but claim payments in Spain back against that (there's a field for this on UK tax returns).

- That means your total tax bill is the same as if you were just in the UK (this isn't necessarily always true, if you have wildly different tax rates), but there's just more paperwork.

In practice, my impression is loads of people ignore these rules (I personally know large numbers of people doing so), and just pay tax where they're tax resident (or even just where they were last tax resident), and skip the extra paperwork.

Whether you can get away with that depends on your situation, but if you're asking for tax advice on HN you're probably not an individual where it's going to bite you, as long as you pay tax correctly for the majority (i.e. if you just pay normal full tax to the UK, in this example).

This is 'what happens in practice' advice though - it's a good idea to actually talk to an accountant, and take the risks of shortcuts here seriously, especially if your situation is interesting or complicated or you're earning a lot of money. These rules can also vary significantly in other nations, so you'll need to double check them for each of the countries you're planning to visit.

Kind of related:

Is there an easy way to ask the VAT back from each country?

getting VAT back on some purchases is fairly easy. ask them in any store with ''tax free'' tag

I am self employed. My country allows me to declare flat expenses on up to 60% of my income. No accounting or proof needed. Real taxation is around 20% on $100K income (including social and health insurance).

So every year I spend about 2 hours with:

- sum all money that arrived to my account in last year

- fill form on IRS website

- update standing orders for health/social contributions for the next year

- one month latter, ring IRS and other offices, just to check all went through

If you move every two months, I would not worry about it too much. Important is:

- you pay taxes somewhere (preferably in your home country)

- you do not work for locals

Which country is this?

Probably a Scandinavian one. I've heard that forming an LLC there requires filling a single form. Maybe their taxation & insurance is that simple as well.

After researching similar matters in my own country (Greece), where you have to juggle dozens of forms in as many offices and constantly file taxes every month (or 3), I've given up on ever being self-employed.

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