Digital nomad tax residency

What does tax residence mean, exactly?

The concept of tax residence pertains to the place where an individual pays their income taxes, which depends on their place of residence and employment. Usually, this is straightforward as most individuals reside and fulfill tax obligations in their native country.

Tax residency for remote workers is a complex issue that involves various factors, turning it into a precarious situation. Simply put, paying taxes in the country of income or permanent residence does not necessarily dictate your tax status.

It is important to understand that determining tax residency for digital nomads is a highly intricate matter, as every country has its own elaborate system of rules, exemptions, requirements, and circumstances.

It is crucially important to conduct thorough research on the regulations of both your home country and destination before departing from home. In case of any uncertainties, seek assistance from the Relocate Antigua team to clarify intricate details.

Despite that, a handful of fundamental ideas will repeatedly appear.

The 183-day rule

Almost all nations globally follow the 183-day principle, except for the United States. This commonly accepted principle indicates that your legal tax residency is the location where you spend a minimum of 183 days throughout the year. Some digital nomads exploit this loophole.

Unlike most countries that use a straight-forward 183-day calculation for residency determination, the United States uses a complex set of factors. Nomad Capitalist, a strategic website for digital nomads, provides a comprehensive and excellent guide to avoiding being classified as a US tax resident. Experts from the website reveal that the American Internal Revenue Service (IRS) verifies that individuals:

1) Have been in or will have been in the US for a minimum of 31 days within the ongoing year; and

2) Are required to be physically present in the US for a minimum of 183 days within a duration of three years.

Residency testing

Known as the Statutory Residence Test in the context of digital nomad UK tax, and the Bona Fide Residence Test for digital nomad US taxes, these assessments aim to examine your personal and business situation looking for connections to outside countries, if you’re a citizen of either of the two.

The concept is to provide you with a waiver from your income tax obligations to either the United Kingdom or the United States, given that you can demonstrate your substantial connections with a foreign nation. Hence, verifying that your individual and commercial interests are strongly rooted elsewhere will exempt you from paying taxes in your country of origin.

If you’re an American citizen or permanent resident/green card-holder, you’ll be forced to follow the United States’ citizenship-based taxation regime: meaning you’ll need to file annual tax returns, irrespective of where you live or make your money.

Fortunately, American digital nomads can benefit from the Foreign Earned Income Exclusion (FEIE) scheme, which offers some tax relief. The IRS official website provides more information about this program, but essentially, the FEIE allows you to subtract a specific portion of your income earned outside the US from your American tax obligations – a significant amount of up to USD $105,900 for the year 2020.

To be eligible for the FEIE tax exemption, you must satisfy the physical presence test, which is comparable to the bona fide residence test. Unlike the latter, the former only considers the duration of your stay in a foreign country and does not attempt to evaluate your level of affiliation with it.

Basically, the only requirement is that you demonstrate being outside of the United States for 330 days during a rolling 365-day period, without the need for presenting evidence of your level of integration in your new place of residence.

As we had informed you earlier, tax residency can be quite challenging. To ensure your success and contentment as a financially stable digital nomad, we strongly advise seeking guidance from licensed experts in the field such as an accountant or a tax lawyer.

Antigua Relocation specializes in handling paperwork and administrative tasks that could disrupt your routine. We provide a tax residency service that simplifies the process, enabling you to unwind and discover without worrying about your tax status. Feel free to contact us if you have any inquiries, and we’ll evaluate your situation to determine how we can assist you.

Living the zero-tax dream

While regulations remain unchanged, tax authorities are becoming more aware of previously utilized loopholes by digital nomads and are increasing their efforts to catch them. Despite numerous countries strengthening tax evasion restrictions, digital nomads can still choose to go tax-free.

Drawing on the 183-day rule

It is theoretically feasible to reside without tax obligations under the 183-day rule where one avoids being claimed as a tax resident by any country by changing locations periodically. However, the downside to this method is the lack of stability if one decides to settle down in the future. This brings us to the other alternative options, which are more acceptable.

Setting up a base in a low- or zero-tax country

One popular tax-saving method that many digital nomads adopt is to take advantage of tax havens, which are countries that provide favorable tax incentives to individuals working remotely and seeking a permanent residence. For ease of operation, it is advisable to establish your company in the same location as your intended physical base.

Portugal often features among the top countries for digital nomads due to its non-habitual resident simplified tax regime which offers a range of advantages such as a complete exemption on foreign income, a 20% flat-rate tax on income obtained in Portugal, zero wealth tax, and no minimum stay obligation. Along with Malta, Portugal is recognized for its low digital nomad taxes in Europe.

Lisbon has gained a notable status as a favorable location for digital nomads – the energetic city offers a plethora of state-of-the-art coworking and coliving facilities, and boasts a thriving community of remote workers.

Thailand has become a popular choice among travelers worldwide and digital nomads for more than just its coastline lifestyle. One of the reasons for this is that the country does not levy taxes on foreign earnings unless they are brought into Thailand in the same year. Fortunately, the 30% tax bracket for locally-generated income was broadened in 2019. However, it is important to note that to qualify as a tax resident of Thailand, one must spend at least 180 days per year in the country.

If glistening skyscrapers and the mystical charm of the desert are more your thing, you might be interested to hear that Dubai has just launched its new one-year virtual working program for digital nomads and their families. The remote-working scheme costs just shy of USD$300 to buy in, and gives you access to all facilities, including schooling, utilities and super-slick digital and telecom set-ups, provided you can prove monthly earnings of at least USD$5K.

For further ideas on where to go next, be sure to peruse Relocate Antigua’s specialized article on the most favorable cities and prime locations for digital nomads. Additionally, we suggest consulting our guide on the digital nomad visa to assist you in streamlining your choices.

For digital nomads who want to save on taxes and enjoy a sunny environment, the top-three destinations are highly recommended. However, we have a personal favorite which is Antigua and it’s an unparalleled destination for nomads. It boasts of being clean, secure, breathtaking, and has a visa program tailored to digital nomads’ requirements and concerns. Continue reading to learn about the latest updates for nomads traveling to the island.

Tax residency in Antigua

Antigua and Barbuda have a well-established reputation among the location-independent community as a popular destination. They offer the allure, prestige, and breathtaking scenery of the Caribbean while also being relatively safer than other exotic locations. Antigua, which is renowned as a tax haven, is the epitome of idyllic. Furthermore, the country is continuously embracing digital nomads, enabling them to participate in the fervor.

The Nomad Digital Residence visa

Antigua, an island divided between two countries, had already successfully drawn in remote workers with its sunny beaches, tropical climate, amiable community, and lively nightlife. However, Antigua is stepping up its game with their recently launched “Nomad Digital Residence” (NDR) visa program.

Some key takeaways from this pioneering tax residency program are:

Two years’ residency, giving you the freedom to work remotely from anywhere on the island
Application fees of USD$1,500 (single applicant), USD$2,000 (couple) and USD$3,000 (family).
ZERO income tax to be paid in Antigua.

The best digital nomad visas in 2022

Several digital nomad visas facilitate the process by letting you carry on paying taxes in your native land without any extra charges in the place where you’re employed. Nevertheless, to be eligible for a digital nomad visa, you typically have to demonstrate proof of medical insurance and satisfy a specific income criterion. These prerequisites differ by nation, as do the costs of obtaining the visa. Below are some of the most desirable visa bundles for those pursuing a digital nomad way of living.

Barbados’ Welcome Stamp Visa

Barbados introduced the “Welcome Stamp” visa in June 2020, making it one of the earliest countries to do so. This visa enables digital nomads to stay in the Caribbean nation for up to a year without being subject to local income tax. To be eligible for the visa, applicants must earn at least €50,000 per year, with an application cost of €2,000 for an individual and €3,000 for a “family bundle.” Although you will not have to pay local income tax, you will be required to pay 17.5% VAT on any products or services purchased on the island.

In case you’re not working while enjoying the beach, there are a number of coworking and office spaces available on the island, along with dependable fiber-optic internet coverage. You may also have the option to extend your visa and continue staying on this lovely island after a year.

Malta’s Nomad Residence Permit

The “Nomad Residence Permit” of Malta is comparable to Barbados’ Welcome Stamp, as it also grants a twelve-month stay on the island without paying local income tax while allowing you to work and live there. Malta has excellent internet connectivity and 5G coverage throughout the island. If you wish to acquire the Nomad Residence Permit, you must have a minimum gross income of €2,700 per month (equivalent to a gross annual income of €32,400) and pay the €300 visa administrative fee.

Malta, an island of stunning beauty and English language proficiency, is strategically located in the Mediterranean sea, providing an ideal starting point for venturing out to explore Europe and Africa. Non-European individuals holding a Nomad Residence Permit are permitted to travel and stay within the Schengen zone for a maximum of 90 days out of 180.

Croatia’s Digital Nomad Visa

Croatia has been granting temporary residency permits to digital nomads since January 2021. This permit enables you to reside and work in the country without paying local income tax for a maximum of twelve months. However, if you want to prolong your stay beyond twelve months, you’ll have to depart the country for a minimum of 90 days and reapply for a new visa.

The income requirement for Croatia’s temporary residency permit for digital nomads is €2,232 gross per month or €26,790 annually, which is lower than many other similar visas. If there is a family member or partner who wants to join, the income requirement increases by 10%. Applications can be made in Croatia, online, or at a Croatian embassy.

Bermuda’s “Work From Bermuda” Visa

Bermuda’s “Work From Bermuda” visa stands out from the other digital nomad visas mentioned in this list because it does not require a minimum income and is available to post-secondary students. Nevertheless, applicants must pay a €263 application fee and present proof of a steady income stream for the visa to be sanctioned. With the Work From Bermuda visa, individuals can reside, learn and labor in Bermuda without worrying about income taxes, except for what they are required to pay in their country of origin.

With more than 181 islands, this English-speaking nation has pleasant subtropical winters and summers, but it has also topped Switzerland by being the priciest country globally! As the US supplies most of Bermuda’s products, the country imposes high import taxes, leading to an astronomical cost of living on this stunning island chain.