Digital nomads dont pay income tax?
Generally speaking, you don’t become a tax resident of a country unless you live there for 183 days in a given tax year. Even then, getting set up to pay taxes is a challenge, as tax departments aren’t set up to accept money from a tourist who doesn’t have any official ties to the country. It can be done, but it’s a pain.
As a digital nomad myself, I always planned to just never stay in a country longer than six months. As an American, I have the joy of paying American taxes anywhere I live in the world, which makes things extra fun.
For now, it seems systems are not streamlined to handle the burden of a high number of short term residents. Countries will adapt over time, as it seems Portugal is doing now. Some countries issuing digital nomad visas may exempt nomads from paying taxes or make it easier to pay taxes locally.
183 days may indeed be sufficient to automatically qualify you for tax residency, but there are other tests, if you're not careful you may (unwittingly) become tax resident in a country with a stay of less than 183 days.
Perhaps significantly less, depending on where else you've been (and for how long), and what you were doing in the year(s) before the year in question.
See - for instance - the Statutory Residence Test ( https://www.gov.uk/government/publications/rdr3-statutory-re... ) in the UK.
Quite a few digital nomads are tax frauds, though.
So now they are not only potential tax evaders both in their host country and their country of origin, a crime in many countries worthy of lengthy jail sentences, but also tack a visa violation on top of it.
At some point, I think it flips from “a genuine tourist” to “an undocumented worker”, but I don’t think it’s easy to tell exactly when, especially if the actual job isn’t a local one.
If I’m on a tourist visa and taking a local job, the country’s documented workers should rightly feel cheated. If I’m on a tourist visa and brought my own job from outside the country, I’m not sure those workers have nearly as much standing to feel I’m cheating them.
I would not be surprised, but that's a question for the lawyer and the answer may vary by which country you're in under a tourist visa.
And likewise you may be owed overtime ;)
> If I’m on a tourist visa and brought my own job from outside the country, I’m not sure those workers have nearly as much standing to feel I’m cheating them.
Yeah well people are weird and not always consistent. From my point of view, people seem to care more about "immigrants taking our jobs" than they do about "foreigners staying at home and the factory was moved to where they already live" (not zero for the latter, this is just my opinion of the relative noise people seem to make).
Being a digital nomad does open great ways to pay very little tax but to do that legally is a more complicated process than just ignoring tax and not paying any attention to dual taxation agreements.
This is technically correct, but many other countries use a similar principle called the worldwide income principle, in which all your income, no matter where it is being earned, is taxable in the country they originate in / spend most of their time in (rules vary widely, I am not a tax lawyer).
There are a few extremely rare exceptions to that, most notably the US, which wants to tax US citizens on any income generated, regardless of where they live and where the income is from. So a US citizen living in France getting paid from a French company has to pay taxes to France (due to living there) and the US (due to being a US citizen). There are tax treaties so the taxes paid to France would be deducted from what is owed to the US.
A Turkish citizen mostly living in Germany (-> Steuerinländer), but working in France for a French company will pay German and French income taxes (and may get the French taxes back from Germany after handing in his tax forms next year).
It's the same thing, only that nationality does not matter, residence does.
But for example, if you live in Canada and decide to travel to a few countries for a few months at a time as a digital nomad, getting paid in those countries, then come back to Canada, you have to declare and pay tax on all that foreign income in Canada.
You need to actually break tax residency in Canada in order to stop paying taxes. And it's not easy, you need to pay all capital gains tax due as if you sold everything the day you break residency.
Digital nomads are still too new a phenomenon that countries really properly seek to tax them but just traveling like this without being careful or creating a company in a country with low taxation is not necessarily safe.
It's hard to enforce.