5 ms·

It might be off topic, but I read some posts about people working while traveling around. How does that work with taxes? I am currently working in another count

by phaer 13y ago

It might be off topic, but I read some posts about people working while traveling around. How does that work with taxes? I am currently working in another country, but still in the european union, and quite a hassle to get all that bureaucratic stuff done for just 3 months. I imagine it must be more complicated if you don't even have a work permit at start. Do you just do it illegal/unregistered? Are tax laws more tolerant at the places you choose? Doesn't it matter?

toomuchtodo 13y ago
Depends on how you do it. Are you working for yourself? Or for an employer? If its an employer, yes, you're going to have to handle a bunch of tax red tape. I'm a US citizen. Assume I have a webapp. I develop this app as I travel, have paying customers, etc. It doesn't matter I'm in the middle of nowhere Africa, because I'm accepting payments with Stripe into a US-based business checking account, which I then run payroll from into a US-based personal checking account. I then pay my taxes electronically from this account. In that case, your taxes are pretty straightforward.
- gamblor956 13y ago
  I hate to burst your bubble...but it does matter. Not for purposes of U.S. taxes, but for purposes of whatever countries you are in while you were traveling. If the app is even moderately successful, those countries could treat your app's income as wholly or partially subject to their income taxes. (This is not much of an issue with Canada, EU nations, China, Hong Kong, Taiwan, or S. Korea. It is very much an issue with most other countries, especially South American and African countries.) It depends heavily on the tax laws of the countries in which you are traveling, the type of work you perform, and the amount of such work in proportion to work performed elsewhere. There's a reason that so many multinational companies hold their board meetings in the Caymans, with a quorum of directors physically present. It's not because the Caymans are a great vacation destination (they are) but because they must hold the board meetings there to satisfy location requirements arising from the company's tax structure. (See e.g., the Dutch Sandwich structure and the Double Irish structure.)
  - toomuchtodo 13y ago
    > If the app is even moderately successful, those countries could treat your app's income as wholly or partially subject to their income taxes. How would you suggest they treat it as income if your business is incorporated in US (Delaware preferably)? It doesn't become foreign income based on where you wrote the code. Also, how are countries in South America or Africa going to know where your business income is derived from when all your financial transactions occur with the US?
    - gamblor956 13y ago
      The issue is that performing business activities in a country, under current intentional tax conventions, gives that country jurisdiction to tax the income arising from that activity. So yes, under international tax law as it currently stands, your app's income does become foreign income based on where you wrote the code. In practice, most countries require a certain "level" of activity to subject a foreign enterprise to taxation (i.e., the US and all EU nations). And at any rate, we have treaties with most countries worth visiting which generally define the type and extent of activities that could give rise to taxation in the foreign country (see, e.g., "permanent establishment"). Thus, it is unlikely that simply writing some code for your app in the EU would result in an EU nation trying to tax your app's income. However, not all nations require a substantial threshold before they try to tax business activity. Such countries will tax income arising from any activities performed in that nation by a foreign entity. (For example, Peru and Venezuela have both generated headlines about this recently.) Worse, these countries will frequently try to lay claim to all of the income that arises from the activity, even if only a minor portion of it can be "sourced" to activities performed in that country. This isn't usually a problem for a US resident/company--U.S. courts won't enforce such foreign tax levies--however, many nations are willing to enforce the tax levies of other countries. Netherlands, in particular, is a danger on this front. The Netherlands has friendly relations with a good many countries which the US is not friendly with, and a Dutch judgment enforcing a foreign tax lien stands a good chance of being enforced by other member nations of the EU. As for your second point: say you blog about how you traveled while coding the app...or you give an interview to that effect. All it takes is one person in that country's tax authority to stumble upon the blog post/interview, and they'll try to go after you. (This doesn't mean they'll go as far as seeking a judgment, or that such a judgment would succeed, but foreign legal difficulties aren't something you'll ever want to deal with if you plan on letting your app get acquired.
ebiester 13y ago
That's basically it. You stay for three months at maximum, you pay taxes in your birth country, and your official address is usually that of a family member's when abroad. Some places are pretty easy to get extended visas and they look the other way if you have money in the pocket.
- dublinben 13y ago
  As I learned on HN a few weeks ago, you can essentially 'buy' EU residency from Latvia. I'm sure there's similar deals in other EU countries. https://www.rietumu.lv/en/residence-permit https://www.rietumu.lv/en/residence-permit
jotm 13y ago
Correct me if I'm wrong, but I believe this is how it goes: you have an LLC in the US, use it for your work, pay taxes there. You travel on tourist/business visas and work on your laptop. No taxes in the countries you work out of. I guess it might seem a bit shady, but since you're working on your laptop with no help/input from the host country (consider the laptop a "tunnel" back to your home country or wherever your company is registered), why would you bother to go through all the bullshit required to get actual work visas everywhere (the bureaucracy is really nuts). Besides, you pay local taxes when you shop, rent an apartment, etc.
- gamblor956 13y ago
  You're wrong. Depending on the laws of the country in which you perform the work, you could be liable for taxes on the income attributable to that work. Location in this context is defined very simply: the physical location of the employee performing the work (see, e.g., the OECD Model Treaties). This definition avoids all of the technological complexities of remote working (i.e., VPN into another country, or through multiple countries). It has also been adopted by the vast majority of countries which you would want to visit. I.e., for example, if you code a $1 million project for a client, half in the US and half while traveling in France, you could owe France income taxes on 50% of that 1 million. (However, if that income is also taxable in the U.S., you generally would be protected from double-taxation by virtue of the tax treaty between the two nations.) Moreover, depending on the amount of time spent working in a country, you could be in violation of your visa, which could result in civil or criminal sanctions (most likely fines, but possibly including revocation of your visa). This issue is a very real concern, and multinational companies go to great lengths to avoid dealing with it. The EU has been aggressive about auditing companies on this issue, going so far as to demand detailed records about the physical location of directors during board meetings or about company operations conducted by traveling employees.
  - jotm 13y ago
    Yes, that's all true if you go by the law - in reality most freelancers working and traveling do what I said and don't declare anything to the customs/host country. It is harder to do if you're employed by a relatively large company, though...

by phaer 13y ago

toomuchtodo 13y ago

Depends on how you do it. Are you working for yourself? Or for an employer? If its an employer, yes, you're going to have to handle a bunch of tax red tape. I'm a US citizen. Assume I have a webapp. I develop this app as I travel, have paying customers, etc. It doesn't matter I'm in the middle of nowhere Africa, because I'm accepting payments with Stripe into a US-based business checking account, which I then run payroll from into a US-based personal checking account. I then pay my taxes electronically from this account. In that case, your taxes are pretty straightforward.

gamblor956 13y ago
I hate to burst your bubble...but it does matter. Not for purposes of U.S. taxes, but for purposes of whatever countries you are in while you were traveling. If the app is even moderately successful, those countries could treat your app's income as wholly or partially subject to their income taxes. (This is not much of an issue with Canada, EU nations, China, Hong Kong, Taiwan, or S. Korea. It is very much an issue with most other countries, especially South American and African countries.) It depends heavily on the tax laws of the countries in which you are traveling, the type of work you perform, and the amount of such work in proportion to work performed elsewhere. There's a reason that so many multinational companies hold their board meetings in the Caymans, with a quorum of directors physically present. It's not because the Caymans are a great vacation destination (they are) but because they must hold the board meetings there to satisfy location requirements arising from the company's tax structure. (See e.g., the Dutch Sandwich structure and the Double Irish structure.)
- toomuchtodo 13y ago
  > If the app is even moderately successful, those countries could treat your app's income as wholly or partially subject to their income taxes. How would you suggest they treat it as income if your business is incorporated in US (Delaware preferably)? It doesn't become foreign income based on where you wrote the code. Also, how are countries in South America or Africa going to know where your business income is derived from when all your financial transactions occur with the US?
  - gamblor956 13y ago
    The issue is that performing business activities in a country, under current intentional tax conventions, gives that country jurisdiction to tax the income arising from that activity. So yes, under international tax law as it currently stands, your app's income does become foreign income based on where you wrote the code. In practice, most countries require a certain "level" of activity to subject a foreign enterprise to taxation (i.e., the US and all EU nations). And at any rate, we have treaties with most countries worth visiting which generally define the type and extent of activities that could give rise to taxation in the foreign country (see, e.g., "permanent establishment"). Thus, it is unlikely that simply writing some code for your app in the EU would result in an EU nation trying to tax your app's income. However, not all nations require a substantial threshold before they try to tax business activity. Such countries will tax income arising from any activities performed in that nation by a foreign entity. (For example, Peru and Venezuela have both generated headlines about this recently.) Worse, these countries will frequently try to lay claim to all of the income that arises from the activity, even if only a minor portion of it can be "sourced" to activities performed in that country. This isn't usually a problem for a US resident/company--U.S. courts won't enforce such foreign tax levies--however, many nations are willing to enforce the tax levies of other countries. Netherlands, in particular, is a danger on this front. The Netherlands has friendly relations with a good many countries which the US is not friendly with, and a Dutch judgment enforcing a foreign tax lien stands a good chance of being enforced by other member nations of the EU. As for your second point: say you blog about how you traveled while coding the app...or you give an interview to that effect. All it takes is one person in that country's tax authority to stumble upon the blog post/interview, and they'll try to go after you. (This doesn't mean they'll go as far as seeking a judgment, or that such a judgment would succeed, but foreign legal difficulties aren't something you'll ever want to deal with if you plan on letting your app get acquired.

ebiester 13y ago

That's basically it. You stay for three months at maximum, you pay taxes in your birth country, and your official address is usually that of a family member's when abroad. Some places are pretty easy to get extended visas and they look the other way if you have money in the pocket.

dublinben 13y ago
As I learned on HN a few weeks ago, you can essentially 'buy' EU residency from Latvia. I'm sure there's similar deals in other EU countries. https://www.rietumu.lv/en/residence-permit https://www.rietumu.lv/en/residence-permit

jotm 13y ago

Correct me if I'm wrong, but I believe this is how it goes: you have an LLC in the US, use it for your work, pay taxes there. You travel on tourist/business visas and work on your laptop. No taxes in the countries you work out of. I guess it might seem a bit shady, but since you're working on your laptop with no help/input from the host country (consider the laptop a "tunnel" back to your home country or wherever your company is registered), why would you bother to go through all the bullshit required to get actual work visas everywhere (the bureaucracy is really nuts). Besides, you pay local taxes when you shop, rent an apartment, etc.

gamblor956 13y ago
You're wrong. Depending on the laws of the country in which you perform the work, you could be liable for taxes on the income attributable to that work. Location in this context is defined very simply: the physical location of the employee performing the work (see, e.g., the OECD Model Treaties). This definition avoids all of the technological complexities of remote working (i.e., VPN into another country, or through multiple countries). It has also been adopted by the vast majority of countries which you would want to visit. I.e., for example, if you code a $1 million project for a client, half in the US and half while traveling in France, you could owe France income taxes on 50% of that 1 million. (However, if that income is also taxable in the U.S., you generally would be protected from double-taxation by virtue of the tax treaty between the two nations.) Moreover, depending on the amount of time spent working in a country, you could be in violation of your visa, which could result in civil or criminal sanctions (most likely fines, but possibly including revocation of your visa). This issue is a very real concern, and multinational companies go to great lengths to avoid dealing with it. The EU has been aggressive about auditing companies on this issue, going so far as to demand detailed records about the physical location of directors during board meetings or about company operations conducted by traveling employees.
- jotm 13y ago
  Yes, that's all true if you go by the law - in reality most freelancers working and traveling do what I said and don't declare anything to the customs/host country. It is harder to do if you're employed by a relatively large company, though...