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Tax Tips For Digital Nomads

Carlie: Hey there it’s Carlie with the Expat Focus podcast. Remote working has definitely hit the mainstream, and round the world more and more people are taking the opportunity to be temporary locals, combining their jobs with longer term travel, staying in one country for a month, or a few months, at a time, longer than the typical annual holiday allowance. But how do longer stints abroad when you’re working impact your tax situation?

Today on the show, Oliver Heslop joins me again. He’s the owner of GETS, Global Expatriate Tax Services, based in the UK, but he works with tax experts all over the world. He’s gonna talk through some things to consider if you’re living the digital nomad life. I should point out, Oliver’s not giving any specific advice in this episode, but you can ask him directly if you do have a burning question. Just go to the Financial tab at expatfocus.com, and click on ‘UK tax advice’.

Oliver Heslop, we’ve got you back on the Expat Focus podcast, of course our first chat was on common tax issues for UK expats – check out that episode on expatfocus.com or on iTunes if you haven’t, very useful especially if it’s your first time heading abroad as a British citizen. But today, we are talking about working remotely and becoming a digital nomad. Can I work from somewhere overseas, and just continue to be paid in my home country? Is it as simple as that?

Oliver: Yes, you can be paid anywhere, and work anywhere, the two don’t have to be linked. You can come to work in the UK for example, and still be receiving monies in Australia or in America, and you don’t have to be paid in this country, you can be paid into another bank account. And the UK taxman is gonna be interested in where you’re doing the work, so if you’re getting paid offshore somewhere, he’s still gonna ask you about how much you’re getting paid, even if none of the money’s touching these shores, because you’re doing the work here.

Carlie: So basically I have a local tax obligation, based on the country I’m choosing to work from.

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Oliver: The starting point is yes. I think sort of socially and informally or with expat friends, people tend to say “oh I’m not here for very long, I’m sure I won’t be taxed”, but if you’re official, a guide in your head should be “yes, I am taxable wherever I work”, and then there are legal ways to get around this.

There’s a whole network of tax treaties, the UK’s got a good hundred of them I think, which mean that you can pay in another country. A British person goes to France, they don’t go there for very long, you use a tax treaty and you say to France, “I’m paying fully back in my home country, I’m gonna use the treaty not to pay in France”, that’s quite normal, and the idea being that if a French person came to us we’d offer the same benefits and the same concessions. So, tax treaties can help.

Another thing is I see a lot of British people going to the Middle East. You’re going to a low tax country there, or a zero tax country, so that’s another way to get around it, but you must assume as your starting point that you are taxed in the country you’re in, which is a bit of a shock. And people can be taxed on just a week’s worth of labour, and it’s something really to be careful of and to ask questions about, don’t just leave it to chance, ‘cause it’s far better to put your hand up and find out the rules than to get caught after the event.

Carlie: Yes for sure, and I guess it’s something that I naively thought was fine, and maybe it is. Can you talk me through scenarios where you might be working from another country but you are not obligated locally for tax, and scenario where you would be obligated locally for tax?

Oliver: Yeah sure. Let’s take some EU commuters, they’re a classic example. I had a whole group of Spanish guys who came to work on a project, and they were here for just a 6 week period working in central London, and they were not taxed within the UK. They took the argument, they said look, we’re using treaty, we’re not looking to avoid any tax, so therefore we’re gonna pay all of our taxes at home, and the UK government will allow that, because we’re gonna use the agreement between the UK and Spain. So that was just a 6 week example. I mean it can go up to 2-3 months, you’ve gotta be extremely careful, the longer that you’re here, the more conditions there are to sort of stay out of tax.

Then I’ve got another example of engineers working in automotive, who came over here just for a month-long project, they were from Germany and they were all caught. Nothing to do with nationality, it was just the way the project was set up, the UK was paying for various benefits for them, and they were seen to be too connected, or too entrenched in our system, and our tax authorities said well look guys, you’re here, you’ve been using NHS, you’ve been using other benefits, you are far too integral and part of the UK company, so sorry you can’t use treaty to get out of it, you’ve become British for tax purposes.

So, it’s a minefield, and it’s one where, if you’re working for a large company, I would go to HR first and say can you sort this out for me? I mean, you shouldn’t be trying to do it on your own, ‘cause it’s, it’s so complicated.

Carlie: I was gonna say, I guess key here is making sure that before you do do a working stint in another country, that your company gets any necessary paperwork in order so that you don’t get sprung like those workers were.

Oliver: Yes, I think that’s right, ideally come to you first, but you know we’re all, we’re all people of the world, and we know that that doesn’t sometimes happen.

I remember working for a large, another large automotive company in Derby, and people just get a tap on the shoulder and they’re, they’re sent and they’re told to just go, and loads of people going to Florida, and they’re all sent last-minute, and tax would get thought about later, later on down the line, and it, it’s not the end of the world, you can take advice then and get it sorted out further down the line, but the longer you leave it the more complicated it can get, and you have to explain to the tax authorities why you haven’t told them sooner, so even if you’re a year down the line, it’s still worth holding your hand up or asking some questions, and you know, the perfect employer that has the time to set you up properly should be filling out the paperwork beforehand.

Carlie: OK, so ideal scenario is, I work for a company that helps me make sure that I’m meeting any local tax obligation, or I’ve properly declared that I’m not gonna be covered locally, don’t need to be obligated locally while I’m working abroad.

But what happens if I am self-employed, or contracting, and this is a bit of a lifestyle choice, I wanna go and work in another country for 3 or 6 months, and just continue to be paid, or to have my invoices paid to my bank account back home?

Oliver: It’s certainly doable, but I think we’re talking about certain demographics, aren’t we, we’re talking about people in their 20s or 30s, who don’t yet want to settle down, that career, job, and be stuck to one country, or it’s at the other end of the scale, isn’t it, people retiring early, so you’ll have people in their 50s or 60s doing this, so they want to do that world trip, and finance themselves working around as they go.

A couple of ideas on that. A bit of internet research is useful. There’s another classic one that I use, I had a guy last week who said I’m going to Costa Rica, when do I have to register, when do I become taxable? And you can contact their tax authorities on a no names basis, you don’t have to say, give your name, you can just ring up and say, I’m about, I’m considering coming to work in your country, can you spell out the basic rules for me, or can you tell me which site to go to, and they’ll be delighted that you’ve contacted them. So that’s a good way to do it.

I would say that it’s quite a disaster to rely on your expat friends, or to do nothing, because people can be pursued for years. I’ve got clients in Australia who’ve been, who left the UK several years ago, and they are still on the books in the UK, and they’re still getting letters saying why didn’t you tell us about that 6 months’ worth of work?

Carlie: So it is right that countries keep track of you after you’ve left for, you know, a long-ish amount of time?

Oliver: They do, very much. The UK is officially, they look back 4 years, but for people who haven’t filed returns, but they can actually go back 20 if they suspect tax evasion.

But I don’t wanna frighten people here. I think for practical purposes, 5 or 6 years is pretty normal. I mean if you were, didn’t pay your council tax, they just start to send red letters, and credit cards unpaid. I bought a house where this guy hadn’t paid any of his debts, and the Inland Revenue were just one party that were chasing that person. And it went on for years, because it’s all automated, so I mean if that, if I had been in his shoes, I would have just sat down I think with a tax advisor, or the Revenue, and said right, I want to settle.

Of course if you go to an advisor, that person’s not going to blow the whistle on you, you can have an independent private chat with somebody and say, I’m a bit worried here, they’re still after me, and, you know, needn’t, you needn’t take it further, it might give you a bit of peace of mind.

Carlie: Oliver, is country-hopping every few months as a digital nomad a viable way to get around any local country tax obligation? Obviously there’s always, and you have to make sure you’re on the right visa of course to work, but there’s always those few months where you’re considered a tourist or a non-resident. If I’m a digital nomad, is that my best strategy?

Oliver: Yes, it can be done, and I do see it happen. I have a friend who does, who was a bookmaker, and he was based within the EU, UK, Spain and France, but he kept alternating between those countries to avoid tax, or to minimise tax, I think he was saying, I’m happy to pay a bit in your territory, but I am gonna keep circulating. And yes, that can work, and what he did was he, they’d just commissioned a report, because you’re talking about avoiding tax altogether, or keeping it very low, you do need professional help. It doesn’t have to be me, but, that was the only way that he could achieve it without sleepless nights, ‘cause it’s, it’s so complex in a way, you’re playing off three systems against each other. But it can be done. Yeah, and I did …

Carlie: I was gonna say, what if I did want to do it longer term? What is that tax optimal way to be a permanent digital nomad?

Oliver: We’ve got a girl, and I’ve, funnily enough I’m doing a report at the moment for a guy, and definitely, definitely works in technology so he can work from anywhere, and I asked him what his duties would be, and he said I’m paid to think, so I wonder, I think it’s probably legal and technology, and I’m paid to Skype people, which means I can do it anywhere, and I guess he’ll be typing on a laptop as well. And he is gonna have to plan his time, and I think he’s got about five or six countries in mind, and he’s just gonna move around, so for tax purposes it can be done.

But then you have to ask yourself, in terms of lifestyle can you do it? So if you’re retired in your 50s and it’s just you, you two and you’re happy just to rent around as you go, or in your 20s, then yes you can do it. I think one of the phrases they use a lot in our profession is, don’t let tax wag the dog, so we could come up with a scheme to keep somebody on very low taxation, but is it gonna fit in with their family life, their partner or their children? So it can definitely be done at certain stages in life, yes. It’s, you know, will your spouse put up with it, for example.

Carlie: (laughs) I guess there, you know, there’s plenty of digital nomad families and couples, going around now, so I guess it’s possible when you have that extra kind of load with you, in terms of your family life.

But what are some other things that you do need to consider if you are planning to be a nomad for a longer amount of time? I mean, OK you might lower your tax obligation by moving around every few months. You mention renting though, I guess being able to get a home in the places that you move to is an important one. Health insurance?

Oliver: What always worries me with people going around the EU is those that don’t register in the system, so if you’re going to Spain for example, as an EU citizen, which I currently am, I might not be in 18 months’ time under Brexit, but, let’s imagine I go and work in Spain at the moment, I would have access to their national health service, but I think woe betide me if I try and keep out of that system altogether, you, you’ve got to arrive and be bona fide, and say, I am here, I’m joining your tax system, I’m not expecting to pay much ‘cause I’m not gonna be here for long, but I also wish to have access to your health services.

So there’s just always that worry for me that people who try and skate along the surface in various countries, and suddenly need emergency medical care, it would worry me. And then of course you do see a lot of people getting international private BUPA and the like, for that very reason, the complexity of having to try and access different health care systems.

Carlie: Oliver, have your worries been realised? Have you had any clients that have gotten into serious trouble because they have been transient for a while?

Oliver: The classic example I had is a guy that was arrested in India for non-payment of tax, which is just unheard-of really, but, I think because tax evasion in India is so rife, I mean you’ve got a population over, of over a billion people, highly mobile, you know, booming economy and lots of European expats over there, who are just dipping into projects and not paying their taxes. We had a guy that was arrested and locked up by the tax division of the police, because he hadn’t registered.

And it’s a case of, ask no questions, it’s, it’s a very, they use the, the stick rather than the carrot approach. And so that just really frightened him, and then he settled his taxes down at the police station, he was able to return to his role, but I think that’s just the case of a territory like India, they’ve had enough of people just breezing in and out of their country and working there on a short-term basis. So, that’s extreme, but very stressful, isn’t it?

Carlie: So what’s the role of a tax advisor and yourself in these sort of situations, and in this India situation? Should you be able to keep your clients out of this kind of tax trouble, or can you only help them to a certain point?

Oliver: Yes, so I think in that case, if I was able to catch the person before they went to India I’d be helping them with planning to avoid it ever happening. Let’s imagine this person rings me from jail, and they’re already caught, and they’re being asked for unpaid taxes, it would be me and my Indian tax partner would sit down metaphorically on Skype and work out the best strategy to get the person out. So, we would attack the situation on a legal basis, and try and challenge the police over what they’ve done.

I did have another client arrested in Singapore, and again I just used somebody at the other end, ‘cause we’ve got a, our firm’s got a network all over the world, what a blatant plug, sorry about that! And you just use your equivalent tax partner in the host country to try and bale the person out, or try and resolve the legal matters. We do get into that sort of thing. And if things become serious in this country with the police, I do have specialists who deal specifically with that aspect of the law. I don’t do much legal criminal work in terms of tax evasion, but there are people who do only that in the UK. And I work with them.

Carlie: Just checking Oliver, the fact that these two guys were arrested, that’s not necessarily a reflection on your bad tax advice, right?

Oliver: (laughs) No, it happens, I think it’s just a scare story really, ‘cause I think that maybe 20-30 years ago there was just the cliché that you don’t have to pay tax in certain places, and some of my friends still believe that. So, why not give a sharp shock to just one person, and then the word gets out, doesn’t it? But, no, no, the most my clients ever get are standard enquiry letters just generated by a computer, just saying please confirm what you earn, and please confirm what you had in your bank last year. These arrest cases are, two in the last 22 years. So that’s, that’s not bad, is it?

Carlie: No, and I think your ratio is pretty good! (laughs) You know, there’ll be lots of digital nomads listening, and obviously everyone has their favourite countries to work from. I know that for example Indonesia is very popular, Thailand, but is there a perfect mix of countries that you can spend your time in, and a perfect country to be based in, whether it is as a British citizen or somebody else, to optimise your tax situation legally?

Oliver: I’d say probably 50% of my clients are in the Middle East, but some of my female clients say about, that Qatar’s very popular, UAE, I mean UAE is the ultimate expat country isn’t it, I think it’s 90% foreign national, but women clients have said to me that no tax means that there is a social tax on them, in terms of the restrictions of lifestyle, but I don’t mean alcohol, I mean more to do with appearing in public, being allowed to go to certain places, just to different laws that apply to men rather than women in those states. They have said they had, they do find it to be quite a strain, so tax-wise they are very appealing, but I have been told by women that it comes at a price.

Carlie: Are there countries that just immediately raise red flags for you when your UK clients say they’re planning to spend some time there and how do they sort the tax situation?

Oliver: A lot of British expats, Iraq and Iran are very appealing countries for Brits to go to, but if you were looking at going to those countries, that can put up a red flag in this country, and also Pakistan, because those countries are on our government’s radar as being hostile in terms of tax and money management etc.

So, if somebody’s going to work in Pakistan, for example, our UK authorities might be saying well why, why are you going there? You know, it has a prejudice, or a stereotyping about terrorism, so people will get in trouble because of their links or wanting to go to work there. The rates of income tax in Iraq are very good, and the pay, rates of pay are very good, but it is a red country for money laundering, so it, you, you can get other problems would you believe with your, with your banks and with the UK government.

Carlie: So if I’m planning my digital nomad life, is it best that I speak to a tax advisor (laughs), shameless plug, opportunity right here! Is it the best idea to speak to a tax advisor before I set out?

Oliver: I would say so, definitely. A lot of advisors, solicitors and accountants tax advice, should all be giving their free half hour anyway, that seems to be standard practice in our industry.

I do have people just write to me saying, Oliver I’m looking at leaving in 2019, thinking about America, what do you think? And then you’ll just get some immediate bullet points. You’ll get a top, you should get a top 5 of headlines, you know. People will say, how has Trump really impacted on immigration, is it really a problem for me to go there?

I had somebody, a 3rd generation British, of Syrian origin with a Syrian surname, and he wrote to me and said, is it really a problem for me to go and settle there, will I get a working visa because of my heritage? And you can get some great pointers on that sort of stuff.

And then beyond that, if you decide on America, you should say to an accountant, let’s agree a price and can you write me a one or two page report on, on the basics. If you’re self-employed, definitely invest in that short report, because the savings you will make in terms of hassle and tax will, could be quite mighty.

Carlie: Finally Oliver, what happens if I’ve been living my digital nomad life, taking advantage of the tax treaties with the UK, keeping my UK tax obligation but successfully not paying tax elsewhere, or minimising my obligation elsewhere for a while? I’m in a certain country and I want to set up there permanently. Is there a way I can switch my tax obligation to that country, and lower or eventually cut any tax obligation back in the UK?

Oliver: Yes, that’s very common actually, and people, we’ve just had a guy write to us today saying, I want, I’m going to Singapore for 8 months, that’s fine isn’t it? And unfortunately it isn’t. You’ve got to be out of the UK for a complete UK tax year, so this is quite an interesting time of year, so we’re in February 2018 now, so I’d be saying to that guy, please go out for the whole tax year, we’ll send you out now, February ’18, come back May ’19, and you’ve broken residence for that year, so most of your UK tax obligations will stop for a whole UK tax year.

But you were talking about permanent settlement, and we’re just saying to somebody, well yes, you can switch off. There’s a form to send into the Revenue, and you just say, I’m now leaving, I may or may not be selling my house, right let me tell you about my address, I’m gonna leave a small bank account, but I’m gone, and I don’t intend to come back for several years. And that’s a normal process, I think it’s called Leaving the UK, Stopping to Pay UK Tax form, and we do that for clients, or we show them where the form is, and we give them a little guide on how to do it, so you, you can even do it yourself, with a bit of hand-holding, but yes, you can switch yourself off.

Carlie: Well that’s it for this episode. If you want to ask Oliver any questions or share your own experiences as a digital nomad, head to expatfocus.com and follow the links to our forums and Facebook groups. Remember to check out our previous episodes, they’re at expatfocus.com/podcast, or you can listen through your favourite podcasting app, and I’ll catch you next time!

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