What is a tax nomad?
A tax nomad is a person who does not pay taxes in any country. By moving from country to country they are able to avoid becoming taxable citizens. Tax nomads are usually very wealthy people who can affoard to travel a lot and hire expensive expert tax consultants. Being a tax nomad has not been an option for the hard working entrepreneur but this is changing. Due to dropping prices for airline tickets and increased internet connectivity around the globe, the option to become a tax nomad is opening up for more people.
The basic rules for being a tax nomad
- Do not spend more than 180 days during a 12 month period in any country.
- Do not spend more than 90 days a year on average in any country.
- Do not have any major interests in any country.
Explainations of the basic rules
The excact rules you need to follow depends on your country of origin. Before taking the leap, consult a tax expert from your country.
The first rule is simple to understand. Avoid being more than 180 days during a period of 12 month. Achieving it should not be so hard either. A few three month trips to different low cost countries, such as Thailand, Vietnam and Bali, should do the trick.
90 days on average
The second rule, the 90 day rule, is not as simple to understand or achieve. The rule is that you do not get to spend an average of 90 days in one country. The average is calculated on the last five years. This means that if you have spent more than 450 days in one country during the last 5 years that country can tax you. This is a hard thing to avoid, especially when getting started since you probably have spent more than 450 days in one country already. When getting started it could be good to first reside in a low tax country for the first five years.
Don’t have major interests in any country
The third rule, don’t have major interests in any country, is also the rule of residence. If a country can state the case that you have major interests in their country they can claim that you are a resident. The meaning of “major interests” is hard to define but there are a few examples. If you have a house, wife and kids in a country it would be fair to say that you have major interests and thus resides in that country.
In order to achieve a tax nomad status you will need to make a clean break from your country, the cleaner the better.
Having a company in a country is another example of a major interest. This is why you will need an International Business Company, also known as an IBC. Get one of those from a juristiction with low taxes and high financial privacy (also known as a “tax haven”). This will enable you to operate more freely.