List of Territorial Tax Countries with formal and de-facto treatment of foreign income

[JustAnotherNomad]

We should probably create some sort of FAQ somewhere that‍ explains basic concepts like this...
Some countries consider your tax resident after as little as⁠ 30 days in the country, and even more countries consider you tax resident after 90⁤ days per year in the country.
And short absences are typically also counted as spent⁣ in the country.
So you just spend a couple weeks in a country, boom, tax⁢ resident.
"But I spent 200 days in Panama!"
"Well, who gives a s**t. Our law︀ says 30 days per year and you're tax resident. We don't care about Panama."

So in such a case whether you have no tax residency or you have such a︁ tax residency without a tax treaty is worth just the same.
You have to be︂ careful all the time to never accidentally trigger a tax residency anywhere else. But if︃ you're tax resident in a country with a lot of treaties, you have protection.

That as well.

Panama is quite bad. It's blacklisted︆ in several jurisdictions, invoices from Panama may not be tax-deductible for your clients. That won't︇ change if you use a transparent entity like a US LLC or UK LLP.

 

[Cloudbanck]

How is foreign sourced defined? Like if you own‍ a US single member LLC and work from a laptop in Panama or DR. Is⁠ that formally foreign sourced or not?

 

[saintjohnny]

What do you mean exactly?

 

[JustAnotherNomad]

If your client is in‌ a country where invoices from Panama are not tax-deductible (because the country is blacklisted), and‍ you bill them from a Panama company, then they cannot claim the payment as a⁠ deductible expense.
If you use a transparent entity like a US LLC or UK LLP⁤ and you are tax resident in Panama, then the same thing applies - since your⁣ company is effectively based in Panama - so they cannot claim deductions for your invoice.⁢
This may go unnoticed since there's a US/UK address on the invoice - but your︀ client may get into a lot of trouble if this is discovered later.
It's just︁ not a good setup.

 

[saintjohnny]

Ah got it... well this doesn't apply to DR since it's not blacklisted.

 

[JackAlabama]

Any sources to that happening on a bigger scale?

 

[JustAnotherNomad]

What happening on a larger scale? People being causing issues for their clients?

 

[sergeylim88]

DDT makes sense in case 2 countries consider you a tax resident, and then you‌ can see tax treaty to determine where you are tax resident in fact (usually in‍ country where you have permanent home available, or closer ties)
so JustAnotherNomad is right, it⁠ can play a significant role

 

[JackAlabama]

This:

If you use a transparent entity like a US LLC or‍ UK LLP and you are tax resident in Panama, then the same thing applies -⁠ since your company is effectively based in Panama - so they cannot claim deductions for⁤ your invoice.
This may go unnoticed since there's a US/UK address on the invoice -⁣ but your client may get into a lot of trouble if this is discovered later.⁢
It's just not a good setup.

 

[JustAnotherNomad]

No idea. But why would you choose such a setup if you could choose something‌ better?

 

[88mdok]

Is it possible to:
A. Set up UAE company.
B. Trade Shares/options/Crypto Globally in the‌ UAE company name.
C. Not pay tax in UAE if I don't wish to live‍ there and am not physically there when I trade.
D. Not pay tax in Thailand,⁠ if that's where I want to live.
E. Have no obligation to declare incomes/profits of⁤ UAE company to any authority globally, assuming I am not a "resident" of any authority⁣ globally.

The complication for Thailand is "Remitting" the funds to yourself in Thailand. Even if⁢ earned profits outside/offshore from Thailand it may still be taxable within Thailand if you remit︀ the profits/income/salary to yourself within Thailand and are deemed a tax resident with the 183︁ day rule.

So perhaps a dimension of the spreadsheet should include "is taxable/non taxable when︂ you remit offshore profits to yourself within country X".

Australian citizen. Not wanting residency within︃ UAE. Visit once or twice a year for a few days for whatever reason is︄ ok. Live in Thailand 4 to 5 months of year. Live globally/transient otherwise.

 

[JustAnotherNomad]

Until last month, yes. Now not anymore as the UAE has introduced a 9% corporate‌ tax.
Well, actually, maybe trading would count as a qualifying activity, then it might still‍ work.
But if you want to live in Thailand, I would go with something like⁠ a US LLC. Cheaper and simpler.

You can remit the money to Thailand tax free,⁤ but you have to wait for a year after earning it.

If you spend less⁣ than 6 months per year in Thailand, you won't be tax resident in Thailand. You'll⁢ want to check the Australian rules (or wherever you are living now) to make sure︀ that won't cause a problem there.
Some countries require you to take up tax residency︁ somewhere else, before they "let you go".

 

[Juleski70]

I'm hesitant to jump in, as I'm extremely grateful to @backpacker, who is extremely‌ knowledgeable on the Philippines.
I'm not here to refute any of facts he's stated, but‍ maybe add a different perspective/interpretation that others can consider (or not), re: risk & certain⁠ outcomes.
From my⁣ research (including reading some of @backpacker's past links to legal interpretations), I'd rephrase that:⁢
If you generate active foreign-sourced income, including receiving income from your foreign corp, in the︀ unlikely situation the BIR found out and decided to prosecute, there is some possibility ,︁ after a long time coming to trial , that a number of legal dominos could fall not-in-your-favour. But I don't know personally know of any such stories; there certainly isn't︂ an epidemic of them.

More than in the average western country, Philippine law and policy,︃ as well as different government bodies, are often at odds with each other. Ask 10︄ people with exactly the same jobs in different regional offices what any given law means︅ and you will get at least 5 different answers. With respect to some things @backpacker has written in other posts, there are indeed some interestingly-written sections in the law that︆ could question where business is conducted, and a few tax lawyers have written their opinions︇ on what they could/might mean. On the other hand, I think it's obvious that the︈ government has made some very clear policy choices: in my opinion, the Philippines more-or-less markets︉ itself as a jurisdiction with very little interest in the foreign income of resident/non-resident aliens.︊

I am not aware of any arm of the BIR that sends agents out to︋ find foreign digital nomads getting paid by european clients for building websites in Filipino coffee︌ shops. I am not aware of any large campaign to crack down on foreigners and︍ their offshore companies managed from a laptop in their Philippine home. Almost all stories I've︎ heard of foreigners getting into trouble have been around Philippines-sourced income, or questionable domestic activities;️ and they almost always have other mitigating circumstances (already doing other illegal/suspicious activities, or they've‌ seriously pissed off someone powerful). As always, if you and your offshore corp are worth‍ 10s or 100s of millions of US dollars, the risks and optics may be different⁠ for you.

Although I haven't tried, I suspect if you were a non-resident alien extending⁤ their tourist visa year-after-year, and decided you wanted to voluntarily pay taxes on your active⁣ offshore corporation, the BIR would have no idea how to assist you, and you would⁢ have a very hard time fulfilling all the requirements to submit a valid tax return.︀

Culturally, there is little expectation of voluntary tax compliance in the Philippines at the individual︁ level. Even for successful filipinos, their company withholds the tax on their salary; upon sale︂ of real estate, capital gains are paid at time of land transfer; investment capital gains︃ are withheld by the brokerage… very, very few people voluntarily file personal returns or tell︄ the gov't anything about their activities. The BIR's main strategy for tax revenue: only expect︅ to collect tax if you can get someone else (employer/broker/bank/etc.) to be a gatekeeper.

 

[backpacker]

That's individual risk assessment. If‌ somebody wants to go down that route it's his/her own decision.
I explained official regulation‍ (i.e. law).
I suspect⁣ this to be a typo: You probably mean "resident alien".
The other constellation is n/a.⁢ Such a person would have to enter/leave the country constantly (and soon run into questions︀ of a completely different nature).
Moreover, renewal of tourist visa is limited. We had that︁ in another thread. Depends largely on your age (and on the mood of the office-in-charge).︂
True. That's the same in every developing nation.
The problem starts when a foreigner is involved and this foreigner gets into trouble (which happens︄ more often than not, mostly due to the nativity of said foreigner).
------------------------------------------------------
It puzzles︅ me why people want to do certain activities in countries where they -by law- will︆ have to pay taxes when they do not want to pay taxes on that activity.︇
Every participant of this forum should know that countries with territorial taxation are extremely tricky︈ when it comes to anything other than passive foreign sourced income.
Why not pick a︉ zero-tax country ...

 

[Marzio]

Because the list‌ is shrinking:
Antigua and Barbuda
Bahamas
Bahrain
Brunei
Cayman Islands
Kuwait
Monaco
North Korea
Oman
Pitcairn Islands
Qatar
Saint Barthélemy
Saint Kitts and Nevis
Turks and Caicos Islands
United Arab‍ Emirates
Vanuatu
Vatican City
Wallis and Futuna
Western Sahara

You are forced to live either⁠ in a desert or on a island or to shell out 1M beforehand or to⁤ become Pope.

 

[JustAnotherNomad]

@Marzio You forgot Sark on that list.
https://www.offshorecorptalk.com/threads/moving-to-sark-best-tax-structure-for-uk-income.35081/

 

[Marzio]

I copy / pasted the list from Wikipedia so maybe there's some other country missing‌ too.

Updated list:
Antigua and Barbuda
Bahamas
Bahrain
Brunei
Cayman Islands
Kuwait
Monaco
North Korea‍
Oman
Pitcairn Islands
Qatar
Saint Barthélemy
Saint Kitts and Nevis
Sark
Turks and Caicos Islands⁠
United Arab Emirates
Vanuatu
Vatican City
Wallis and Futuna
Western Sahara

 

[Fred]

We all got it that UAE is now the bad guy on this forum⁤ but it's just wrong that UAE is crossed out here.

UAE is in the same⁣ way zero-tax country like Moncaco, Kuwait, Qatar and Antigua.

All of them have a Corporate⁢ Tax while they have no Personal Income Tax.

Maybe you are confusing the list with︀ the context of countries who don't impose any of the classic taxes at all like︁ the Cayman Islands and Vanuatu?

 

[Marzio]

You're right UAE should be considerd a tax free jursidiction in this specific list because there's‍ no PIT.

Antigua and Barbuda
Bahamas
Bahrain
Brunei
Cayman Islands
Kuwait
Monaco
North Korea
Oman
Pitcairn Islands
Qatar
Saint Barthélemy
Saint Kitts and Nevis
Sark
Turks and Caicos Islands
UAE
Vanuatu
Vatican City
Wallis and Futuna
Western Sahara

 

[88mdok]

I was under︂ the impression the UAE 9% corporate tax was on any profits made within the UAE︃ itself, or if you are performing the work within UAE territory, or for a UAE︄ "onshore" company?

Would a RAK Offshore company achieve this ?

I'm not interested in UAE︅ residency or owning property there.

I am hesitant to do a US LLC simply for︆ the fact that the instruments traded are all US based. Also I like to spend︇ time in the US every now and then. I don't want to get into any︈ hot water for spending too much time in US and have them lay claim to︉ paying tax there.

I don't think Australia has a problem with letting go. They do︊ however have a two dimension test for residency: The good old 183 day rule plus︋ also the very ambiguous "Prove to us you are REALLY resident somewhere else, and clearly︌ not Australia, even it is that you have spent less than 183 days a year︍ here". So there is no hard and fast rule for what constitutes this proof, but︎ if you still have a house in Aus, bank accounts, a car, kids at school️ etc then can you really claim to have disconnected from Australia? The more you can‌ do to provide you have departed good and proper, the better.

So I think I'll‍ be fine with the "getting the hell out of Australia" part.

It is the living⁠ in Thailand for 4 or 5 months a year and then having a company somewhere⁤ else globally (and not Australia or Thailand) such that I can then trade globally and⁣ not pay tax anywhere, that I need to work out.