[ HTJ Podcast ] Taxes For Digital Nomads/Location Independent Entrepreneurs 19th January 2021
This podcast channel is about you. Successful international entrepreneurs, successful expats, successful investors. Sponsored by HTJ.tax
Derren Joseph: I'm going to be pretty simple, I'll just run through a really short deck. Probably, it's not going to take more than 15, 20 minutes. And what I'm going to do is focus on six things that I believe you guys as location Independent Entrepreneurs should keep in mind. And that freezes up for at least the last, the second half hour to engage in Q and A, because I think that's where the real value as you guys have come in here with questions. And while we may not be able to get into answers that you can act upon immediately, at least you will know how to look for the right team of advisers there to help you do things in the right way or the most tax efficient way. So with that in mind, I will start my deck. Okay. Wonderful. So as I said is going to be super quick six things you guys need to know as Location Independent Entrepreneurs or Digital and Nomads some people referred to that lifestyle, that preference, right.
So first thing would be a bit of background as to who we are. All right. So my name is Derren Joseph, I'm a member of, well my team there are one or two members of my team also in the virtual audience there. So our team is a member of a small regional practice called Moores Rowland Asia Pacific. I have spent the last seven years being based in Asia and Morres Rowland is a practice with the regional presence out there. I actually sit in Singapore, I'm not in Singapore right now, but I'm in, based in Singapore for the past seven years or so.
And because I am licensed by the US department of treasury, you know how this thing goes, I'm legally required to say that anything that we discuss here should not be construed as advice. We were having a general conversation about general principles. And what I hope you walk away with is an appreciation of the key concepts that you need to keep in mind, as you find a consultant that can help work with your specific needs. But again, general principle, general advice. Nothing I say here should be construed as encouraging you to be paying less than your fair share in taxes. So the usual disclaimer that keeps me out of jail. Thank you very much.
So six takeaways, here we are. And I'll just, just jump in, right? So the first takeaway is a concept known as Flag Theory. And again, this is a concept that I think is relatively well known, and I'm aware that there are some companies that are actually carried with the name Flag Theory. So they have incorporated it as their, as their brand name, as their trading name. But it, as far as I can tell, is a concept that dates back to the 1950s, and essentially it's about having a diversified lifestyle, not having your, all your eggs in one basket. And especially right now with things being a bit unusual, or perhaps this is a new normal, I think more so now than ever before it's important.
Now this is something that we can jump into later on in the Q and A should anyone require it, but it was just one of those powerful concepts that I think is worth keeping in mind.
And next thing is, this is one of my favorites, fake news. And what I mean by fake news is that when you go onto the online forums, the online groups I, myself and my team keeps me up to date. Still what's being discussed is amazing to me, at least to me or amazing to us that people put something as profound and as important as the as their financial well-being and the well-being of that company and the well-being and the employees in the hands of random strangers who will respond to a biggie where the question in a Facebook group. Even though you may think that that person has a similar situation to you, you'd never know whether there is something different about this, something slightly different about their situation, whether they be, they have to have an extra residence or a long-term resident or a passport. Did you, I don't know about our parents or a key employee in any given jurisdiction, which you may mean that, that advice is relevant to them, but may not be relevant to you. And, you know, and it just, it cannot be overemphasized that you need to speak with someone who knows your situation and say that.
Well, some of the things that are often misunderstood is the place of effective management. What I mean by that is a concept called nexus, which we were going to be in a bit more detailed later on, but it means that even though you may incorporate in jurisdiction X, because you are spending time with, because you are exposed to the jurisdiction Y, you may inadvertently bring your company in to the task then in another jurisdiction. So I can get into it later on. I know that sounds a bit esoteric but we will dive into it later. And then, you know, as Estonia, I just used Estonia as an example, there are schemes at a well-marketed and perhaps not so well understood. And there's sometimes marketed as a catchall solution that will solve any problem, it's a panacea, it's you know, it's not a magic pill that would solve every problem. But the reality is it's hardly likely that there is one solution to fit everybody.
A third point and I wanted to raise on this heading his immigration rules. And now-a-days this is perhaps the lesser of an issue because immigration rules, all of the immigration rules that we knew from 2019, they have a more or less, there are more or less completely disappeared in his jurisdiction is almost writing the script from scratch. And I think, I don't need to say that, these new rules, the new rules have been drafted jurisdiction by jurisdiction, they've been viciously enforced. So yeah, it's just that sometimes people make suggestions or take advice or devise plans without regard to the actual rules and the laws are the jurisdictions that they want to spend time in. And when it comes to taxes, of course that's all a sweet spot that people paint with the really broad brush saying things like I can stay in Portugal for example, if I'm in Portugal right now, just outside in Lisbon. So you can stay in Portugal, you go and work and it will be tax free. I know there is something called the non habitual residence program, but it doesn't exactly mean tax free. Or if I fall, if I had a former company in Cayman BVI or in search of Caribbean Island here, it means that I will live tax free. Not exactly. And again, it is a bit later now when we talk about people who have structured a lifestyle in which they pay no tax, it's possible with, it can be tricky. It can be quite difficult, but I've seen it done and I've seen it done in the right way. But what most advisors and most location independent professionals forget is that yes, you are thinking about tax rules, but they are also banking rules. And the way the world of finance is evolving right now, banking rules are often trumping, no pun intended, tax rules. So banking rules are something to pay attention to so we can get into that a bit later, but they buy the takeaway from this one slide is please be very, very cautious when it comes to taking advice from random faceless strangers in social media groups.
Okay. Yeah. So now we get into the third one. I remember I'm saying that I just want you to take away six points, right? And this is number three. Number three is direct versus indirect taxes. People are pretty clued up for the most part when it comes to direct taxes. So they understand that, hey, I have a company that often has to pay the corporate tax. That's pretty vanilla. That is pretty generic right. And people appreciate it. You know what? I spend more than 183 days exposed to the jurisdiction X or Y, I need to pay whatever employment-related taxes or individual taxes and that's something, it doesn't shock anybody. It shouldn't really, but I think one area that kind of slipped through the cracks as indirect taxes. So especially for people who are into drop shipping or have some sort of e-commerce store, they are sometimes unaware of the complexity of indirect taxes. So like the VAT in Europe or sales and use tax in the United States or GST in some jurisdictions and SE Asia or even people who just provide services online, depending on which jurisdiction they're in there may be exposed to some of this tax like in Malaysia. So indirect taxes again, the takeaway is when you are putting together your plan, when you are working on wether, certain businesses are viable. I get that, you know, to direct taxes and takeaway is to remember that they are indirect taxes as well.
Now we take into deeper dive into the place of effective management? So basically what we're trying to say here is that when you incorporate company in one jurisdiction, but you as the key decision-maker or wherever your leadership team may be, if they are doing business in another jurisdiction to jurisdiction, other than that of the company's domicile, you may have inadvertently pull your company into the tax of the country in which you a based. So let me give you an example, is everyone that's pretty aware of certain jurisdiction with low or no taxes so for example, or a Caribbean Island, right? So let's say a BVI or a Cayman.
That took ok right? So it's zero tax. Okay. But if you are the key decision maker, you have to be somewhere, right you are not going to be suspended in space. So wherever you are, chances are, it is a jurisdiction that recognizes a concept called an NEXUS, which means that you are making decisions from within their borders. So you have your BVI company and you may be in Portugal or may be in Bali, or you may be in Thailand. The point is, you are in Bali and you are running your company from Bali, even though the company is in another jurisdiction, technically your company should be taxed in Indonesia and your company or your former company in the SE shells and your base in Australia. Okay. And I understand it's incorporated in SE shells, but it's being run from Australia. And so therefore the ATO will want a tax. It is just being aware of not just where you incorporate, but when you choose to spend time. If you become a tax resident of another jurisdiction, there is a strong possibility that your company may be drawn into that Tax net.
Okay. So that's your takeaway, that's number four. So yeah. I promise you six points to takeaway we're number four, let's move to number five.
Ah, okay. Well before we moved to number five. Yeah, I will get to the US soon. I know somebody mentioned the U S in the chat box below. So S stayed with number four. So next is so when we spoke about the place of effective management, we're talking about physical nexus, but nexus does, I'm seeing here and the slide is a generic term, meaning just connection in general.
So depending on the jurisdiction, it might not be necessary for you to be there for a nexus would be constituted. And that is the typical example that we come across on a day to day or a day to day basis. So today I was speaking to someone in a Southern European country. So I'm in Portugal, he's next door and it's been, and he is running an e-commerce store that targets the U S there's no staff whatsoever. And the US but he is selling through Amazon. So therefore the passes through as products go to Amazon warehouses that constitute nexus. So in the States, in which Amazon warehouses its products on its way to the final consumer taxes are going to be triggered in those States. And then some States you have 50 different States for a few different rules. Some States have economic. I mean it's more or less if I'm generalizing and I know it's dangerous to generalize, but most States are in the process of, If not having already shifted that concept of nexus to, to embrace economic activity and not just physical presence. So historically you need it to be physically present. But right now I know just by having sales have a certain threshold in a given state, you create a taxable presence. Generally speaking, I know it's not every state, but in many States that is the case and those that are not yet on board, they will be on board soon, especially as budgets need to be balanced. So be aware of wherever jurisdiction you are selling into, be conscious of the need to inquire and understand what's nexus. How is the nexus defined in that jurisdiction to make sure that you don't fall a foul of those rules?
No. Yeah. Number five. Let's let's get into the US and yeah. Okay. All right. So what I'm going to do is touch again, generally on three, how do I divide the world into three? This is what I'm dealing with private clients. So people like you guys who are in Digital Nomads, so Location, Independent Entrepreneurs I put you in either in the category of those that are U S exposed. And what they mean by that is you'll have a US passport or yes green card, or trigger what we call a substantial precedence, which means you spend one 83 days and the way the U S Co calculates it. It's not just one of the three days in one year. It doesn't look back to the period of two years, but let's say somehow you trigger US tax residence. These are the things that you need to be conscious of.
There's an opportunity to benefit tax-wise from being outside of the US or spending time outside the us. And that's in the form of the foreign earned income exclusion, which I reviewed as FEIE, this is a section 9 11 of the US tax code, which means that depending on what your goal may be, the first 100, 150 $160,000, of your earned income would be sheltered from US taxes down. So this exclusion, so this is something definitely to speak to your advisor. You know, people are talking about moving within the U S so people are moving from California to Texas or New York to Florida, and the tax benefits that come with that consider moving one step further outside of the U S and your not just moving from, let's say the 18% Tax in California to zero and taxes, but at the, at the Federal level as well. And, and you can eliminate state taxes completely potentially and protect the first 100, 121K of your earned income, it could be sheltered from US Taxes. So it's a powerful incentive. The nominees I mentioned nominees is because people have this, there's still this myth that, and this, unfortunately it is understanding that yes, you know that if you have a company, if you are US exposed in, you have a company outside of the U S that company needs to be declared on your US tax returns and your personal returns you also have to include the corporate returns. So we know that, and unfortunately, some people are seen to that by using nominees. We see that, especially in the Philippines, especially in Indonesia, you know, South America, wherever the case may be, you've tried to use nominees, but US tax rules. They are not that that strategy is that that's like decades ago, that's like eighties or something. You know, they are, there are many rules in place to catch you up on that. So nominees do not shield you from US Tax responsibilities. IE declaring the existence of the company. And in some cases paying taxes on the revenue of that company, even though it is not distributed to a uniform dividends. So nominees do not work for us tax purposes.
Next, banking, the US tax code, it seems counter-intuitive. But if you don't pay your taxes, then yeah, you have interest and penalties. But if you don't declare the existence of bank accounts outside of the US, you are looking at not just a civil, but a criminal charge as well. And what I mean in civil, it could be as high as 50% of their own reports and balance and a criminal charge can mean jail time. And, and this is a very, very real, there have been cases where people who have been prosecuted write. So remember, you need to report those back accounts.
Estimated taxes, when you are in the US especially if you're a W2 employee, you’re taxes are withheld every month or every fortnight, or however often in your period when you are outside and you are a freelancing, or you are working through your offshore companies, remember that you still need to report to the IRS quarterly. The IRS does not like to wait until the following April to get your taxes. They want to get it along the way, at least in quarterly installments. Otherwise you'll be hit with underpayment penalties. Next will be State taxes. Most states in the union are domicile States, which means that even though you may not live in the state, but at the time, a year for years on, and there are certain circumstances where you are still trapped within that tax net. So you must take specific steps to set a tax resident with your state before you go abroad. And that's something you'll speak with your consultant about. And yeah. You know, yeah. I have some examples of how seriously the US government is taking it a couple years ago. And my first client whose passport was seized by the US embassy. So she has been traveling and she has not been so diligent when it comes to paying taxes. And unfortunately, when she went to renew her passport at the U S embassy and KL, they said, oh, you are in our system. We will hold on to this password, which will soon expire. And we will not issue you a new passport until you correct your situation with the IRS. And so she was all obviously panicky without a travel document in a foreign country. And our team is rushing to get her up to speed. So don't let that happen to you as of two or three years ago, the state department does speak to the treasury. So if you have any problems with the tax side, they will tell the state and your passport will be in jeopardy, it's real.
And another case study, so that's Malaysia another is in Bali. I was speaking to someone at a bar in Bali and he was explaining that, okay, well, he's trying to catch up on his US Taxes. And he met a guy in the bar who says he knew that he knew a guy. So a guy who knows a guy, right? I mean, please share it as that. So he knows a guy that we'll do his taxes for cheap. Yup. You got it done on the cheap, but it was the guy that allegedly messed up. So whatever the, I mean, I don't know, but whatever, whatever it is that was submitted to the IRS was deemed to be so egregious that the IRS came after him. And he was scared to go back to the US why? Because he tried taking a shortcut. Don't take any shortcuts guys, make sure whoever you are dealing with is qualified and understand your situation. And remember taxes are like medicine, you just because someone has a medical degree doesn't mean they can deal with your condition. So, you know, if you use a virologist, maybe not necessarily be able to do cardiac surgery. So, you know, you need someone who is specialized in whatever your areas of practice and that this, there are some other examples as well, but I won't get into that. And I'll probably get into that in the Q and A. So, the rest of, of what I call in Kansas, so Canada or Australia, New Zealand, UK they, I mean, obviously they are common law jurisdictions, which is a very, very similar tax codes. Both of us are UK common law. So they have the takeaway is that for all of these jurisdictions, as a fallback position, by merely leaving Canada, the UK, Australia, and spending lots of time outside does not mean that you set a tax residence with the relevant tax authorities. You need to establish tax residency in another country in order so that they have their own jurisdiction does not pull you back into its tax net.
So being a perpetual nomad on a Canadian passport, Aussie passport, a UK passport, it may not work because of the fallback positions again in Europe though. So when it comes from Europe, not all European countries have, but some do some don't, but even those that do with one or two notable exceptions, there are ways of working around it and registering as non-resident. But you have, of course, you need to speak to an advisor who is qualified, who is so qualified to make sure that you don't get any surprises later on, right? Again, I gave some examples of, of different European countries, but the takeaway here is that you need to go through the proper steps to serve tax residency in your European country of origin. And it's advisable that again, I know that there are some exceptions that you'd do establish residence tax resident, somewhere else. Okay. I'll leave it there.
Rest of the world. Okay. Well, You may think, hey, I'm not European. I'm not from, you know, from Kenzo because I'm not an American that I'm free and clear. It could be perpetual, no matter and pay nothing. Well, you can,
But you know, there's always a button. And remember earlier on, I mentioned that you need to be cognizant of banking. So I'll give you lots of examples that we were, we had a client in SE Asia he was, he was, he is a DJ and he's he does EDM. I'm not in TDM. So, but a practice that he's, he's somebody he's, he's famous, so popular all or whatever. So to me, he has done pretty well for himself and he has decent bank balances outside, up in a certain balance. And SE Asia now his mom became unwell and he wanted to return to his European country of origin. Just a random example. That's no problem. He still has a US passport, a passport as valid is he needs to take care of his mom. He wants to be close to home. He wants to transfer money back to get her proper medical Private medical attention. And if he wants to do it, you want the best for his mother. Right? And you know, he's been banking with this one particular bank since he was a kid. And yet when he tried to repatriate his money back to his country of origin, it was denied. I mean, they basically told him we were going to have to send it back because most banks have pretty strict AML rules, anti money laundering rules, which means that once you will be posting money and that you will have some, somebody was going to ask, well, what's the threshold. It varies by bank. And it varies by circumstances. Anything that's unusual. So if you have a bank account that has been barely used for years and suddenly does at 10,000, a hundred thousand dollar or Euro or pound Sterling, or whatever, a deposit coming in from overseas, even though it's from you. The question the bankers are going to ask is prove to me that this money is legit and what are you going to do? So in his case, he says, we'll do it. You know who I am, check my website and somebody or whatever, and a bank who is saying well, yeah, but that still doesn't prove to us that this money is his as clean, as much as, as legit as been earned in a legitimate way, some people would say, well, then I'll show them some invoices. But, and I say, come on, give anybody five minutes on Microsoft Excel. And it will show you invoices. Invoices don't prove anything. What balance and various by bank, of course each bank has its own policy. But what I would dare to say is that most banks would accept a tax return from another country because it's a government document that says that this money has been earned in this way. And it has been legitimately taxed and it's pointing to my region. So there are going to be no problems on the road. The bank is not going to be exposed to any reputational risk or worse yet any fines for facilitating money laundering. And that is if you've been following the financial news for the past few years, you'd know that every major bank has had problems with us and huge fines have become the norm. So even though you may find a way to move around the world and earn money without paying taxes legitimately, remember the banking rules where however you earn that money and wherever your bank, it Offshore, it may be frozen there. You may be unable to move that money into another jurisdiction. Why? Because you kind of prove that it's not, you know, not caught as Netflix it's done. It's clean. You need to be able to prove that the money has been legitimately earned. So please keep that in mind. So, and number six is you need a team with all this stuff that we have discussed in the past few slides. I think it should be pretty clear to you that it's impossible for one person to know everything. And if that, if you meet someone claiming to know everything, then I would run because nobody definitely, nobody knows everything. So what are you looking for? Ideally is a team that understands your situation and that has exposures and the jurisdictions in which you'd be likely to be exposed to. And that's it. Now what I will do is I'm going to stop sharing and we can go to the Q and a session. So there are some questions here. I think walk through the questions, please feel free to take a right.
Somebody moving to Portugal next month. Definitely Portugal is quite popular for, for a number of reasons, but do keep in mind that when they say, especially if you're going to enroll in the NHR program, they are not habitual residents and many countries now have some variance of it, especially in European countries, a few do not, but many do a PR a scheme where you can live there, but your money is not being taxed. Understand that it's nuanced pay attention to the fine print and some sort of financial planning or tax planning might be necessary. Please keep that in mind, if it is that you intend to work remotely and you are working in that jurisdiction, remember the place of effective management, that slide that we had to keep in mind that your money may probably still be taxed. And most of European countries, they tax you on your worldwide to come. So please, it was a, so it's always worth having an advice before walking in terms of the jurisdiction, a scrolling down now, okay, as a U S citizen, but new Portugal as a resident, do I have to pay us? Taxes turn it on. And the tear tax rates. And Portugal definitely, regardless of what it is, where you reside on planet earth, you must, and you are U S exposed by virtue, a passport or a green card, or having substantial presence.
Because we spent a lot of time, which has been happening a lot, right? Because of the disruptions and travel and flights, many people have spent more time in a jurisdiction. And they plan to simply because they could not travel, they could not leave. That can not return to the country of origin. So there are quite a few people that spent more time in the US last year in a plan just because they could not get home. It was listening to the news that the 8,000, they were like a few months ago, they were a hundred thousand Australians who could not return to Australia.
Now that's down to about eight, eight 30, 8,000 Australians from Canada to return home. And it's not just Australia. It's not just New Zealand. There are countries all over where people can get home and that exposes them to being caught in another country's Tax net. But anyway, as a us person, however, you are exposed regardless of where you reside in a world, you will be subject to taxes and you will have a wide income buy the United States, even if you were a national and a space shuttle mirror, and you'd been in space for a long time, you're still subject to Taxes.
So yes, you must file and pay taxes as to how much you're going to be paying. And Portugal, it really depends on your situation and in the nature of your income. So Portugal has the NHR, which is really popular, but there are also nuances within it. So it depends on the nature of the income. So whether it's self-employed income, if it's in a field that is Portugal, identify it as high value and they publish that every year or every half. And they did that list. It's treated differently. You know, if it is that you are traveling and then returning to Portugal that income to be treated differently as well. So again, you need to speak with a Portugal a tax professional and we actually do a webinar. We have a webinar coming up, a repeat on Portugal and I think this is going to be the third time we have done it. I do it with my colleague who is a, Portugal a tax attorney. And we do the whole, we do the tax team thing for people who, both of us and Portugal expose. So maybe you can join us on that or you can reach out to me privately. And I will, I, I can obviously speak to you about the US side, but he can speak to you. Of course it will be a consultation. It's not going to be free. You tend to get what you pay for in, in this line of work. If you go online and you get something on Facebook for a free ticket. So, you know, caveat, inventory buy, be aware. If you go to someone who is properly qualified as a tax professional in Portugal, you are going to get a different answer. Somebody who is the thing is when we as professionals, we give advice, we put all the licenses on the line, which is different from someone who is a YouTube influencer or an admin and a Facebook group. They have no license. If they get something wrong, oops, you're a problem. And that sounds like a problem, deal with it whereas if we get something wrong, a license is in jeopardy, we can be sued. So we carry a professional liability insurance or just in case we mess up because we are held to account. So it's, that's why we always need to proceed very cautiously. And you can tell those people who are very liberal with their advice because they have no license or to protect. And just to be double Shaw, they always do their YouTube videos or whatever. From a, let's say a less developed jurisdiction from a Billy's from a Malaysia somewhere where it's not policed, where you can see whatever you want and you can give whatever advice you want. And there are no consequences, but you know, take it as you will.
I work remotely earning and come from the US. Okay. Portugal all right. I'm starting an online business. Selling digital courses. I'm particularly concerned about indirect taxes. As far as I understand, it doesn't matter where I set up. My company, that company we'll have to pay a local sales tax is what sells US courses and from Columbia. So even if I set up a company and a little test or a section BVI, Delaware, the company has to pay indirect Taxes in each country in which it sells courses. How does a small company pay taxes and dozens of countries simultaneously went up a huge bureaucracy. And unfortunately, I mean, to be fair, people fly into the radar when it's a small number, but you know, most people that I talk to, they go to get into business because they are passionate about what they do and they hope their businesses are successful. So even though it starts off small, you do it with the drive and a passion that you hope that it goes somewhere. So at some point in time, you will pop above the radar. So it's unfortunately there is no easy answer to that.
You have your business plan, you have your pitch deck, you have whatever you need to speak to an advisor or a team of advisors who are not just aware of, but hopefully qualified within the jurisdictions in which you're exposed. And you need to take advice from them. And unfortunately, good advice is not free. So I wish I could tell you something else, but you know, from, for the most part, most of the businesses that we work with, they approach things incrementally. So you may start off in Spain or you might start off in Columbia and then you move, okay, I'll move into Panama or I'm moving to Venezuela. And that is expanding gradually. So that alone, that incremental approach allows you to, to do things in a measured way. So you still have a jurisdiction. One makes sure you get things. Are you building a foundation to make sure you get the right advice and you're fully compliant and you have no surprises down the road, which you were a section one as they expand to the next jurisdiction again, as part of the market entry process. I mean, I know it's a digital product and digital products, the rules, a brand new, because most jurisdictions are playing catch up where, when it comes to digital products, the rules of brand new. So sometimes even tax professionals who've been in the game for a while. They may not be aware of the brand new rules. They need to make sure that whoever it is, you're dealing with him up to speed. And as part of the market entry process, I mean, you are looking at payment platforms, you are looking at distribution, you are looking at affiliate S, whatever links you are doing.
Part of it, part of that due diligence process must be a need to speak to a tax professional to make sure that I'm on the right side of the tax authority there. So that's just the way it is now scrolling down and yeah, that's it. Oh, another big question. I am attached to a company I don't own, it will have some level of freedom to choose between some places of work in a year. And I'm able to choose between Singapore, Malaysia, Indonesia, Australia, and New Zealand. Is there a tax advantage to moving around? Well, okay. So it depends on the first thing, you know, you have a tax professional, wanting to know is, okay, you don't own the company. You will, are you an employee on an independent contractor? That makes a difference, right? So then you need to look at all the jurisdictions you had looked at there. You have mentioned Singapore well, I know Singapore in Malaysia. I know Indonesia and I'm familiar with Australia, New Zealand, all of those jurisdictions.
If you spend enough time, they're, you will be subject to taxes on the work that you're doing remotely. It's just as a UN, you know, just roughly speaking, it's one 83 days. So if you spend one 83 days plus in a calendar year, and that includes visa runs as well. Back in the days when there were visa runs, is that that's a, that's a 2019 thing that no more of these are. And if it is that you have given permission right now, you need to seek permission to enter Singapore and Malaysia and UW. It's a very short list of people who can get in and Indonesia. They were letting foreign as in, but like the other thing is that last week they had zero foreigners. People who have been paying agent's have lost their money and people are complaining online. Indonesia I said the 38,000 Australian citizens starting to get into Australia. So, and good luck as a non Ozzie getting in a similar view in New Zealand. So let's assume that you do get in, it will probably be, be on a long stay basis because that is the new normal, there is no more hopping around it. I think that that is 2019 in 2021, whichever jurisdiction lets you win it's for the long it's for the long hall. By the time you'd do your two or three weeks quarantine in Thailand or whatever. I mean it's a long stay you are going to be there for. So it's not impossible to imagine that you can easily hit one 83 days and a calendar year. And therefore you will be subject to taxes on the money that you earn. Even if you are doing it online, you will be subject to the taxes of that.
Given jurisdiction. In this case, Singapore, Malaysia, Indonesia, Australia and New Zealand. This is nice. So there is no tax advantage to moving around not anymore. And even when there was, it was dicey at best. It is it. A lot of people were surprised. As I mentioned the case of the, the DJ. At some point in time, you would need to prove that the money that you have gotten in wherever it has been accumulated, even if they were paying it into your bank account back in Europe, at some point in time that bank and say, Hey, can I see a tax return for that?
You know? And we were just doing just usual checks on our clients, making sure that I'll find it. So, you know, satisfied with a service. Can we prove that money is legit? You can have a problem. And the next question for us as citizens and the IRS. I heard a lot of 35 rules and one of the three at one 80 to two day when it comes to the front of them, go, can you clarify the difference if you are US exposures, we talking about the session on 11 foreign earned income exclusion were the first 100 K or up to 150 K of your income is excluded from US Tax no, you can qualify for it.
In one of two ways, one would be a base on it. The easiest one to understand is a physical presence. So basically you don't spend more than 30 days on US soil, spend the rest outside of the United States and you will be able to benefit from the fine and income exclusion on the basis of physical presence, the physical presence test that is relatively objective. Everybody gets that. Now the second basis for qualifying for the foreign and income exclusion is a bona fide residence test and that is subjective and that is more difficult to grasp.
Why? Because essentially it's a test of intent. So what you need to prove to the IRS when you're filling all of that or whoever is working with you to fill out your form 25 55 is that your center of life has shifted from the US to a foreign jurisdiction. So when you have a visa, it allows you to stay long-term in that jurisdiction, ideally paying taxes. They're you may be members of your family there, you either rent or own a home there that proves that you have a bonafide, a resident of Bali and a bonafide resident of Singapore you would, if a resident Portugal to Spain or whatever, therefor, you will benefit from the foreign earned income exclusion.
So those are the two ways scrolling down. Okay. All right. I think that's it. And any more questions
Okay. Thank you for your time. And just remember the six ways in which the six things that you should think about as you continue all begin or continue on your journey as a Location independent professional, we are at HTJ.tax. Hannah, my colleague, she put our coordinates for our social media or in the chat. Feel free to reach out to us with any questions that you may have a if you want to consult or if it's, I mean, as I said, I don't know everything, but if it is a, a jurisdiction we have, which I'm unfamiliar with, which I'm not qualified, I will introduce you to our colleague hand Portugal in Singapore, Bali Indonesia or Malaysia, Thailand, Australia, New Zealand, wherever the case may be.
So thank you for your time. Have a good night, have a good day. See you guys next time.
Here are 4 ways we can help you -
1. SIGN UP for free webinars on US Expat Taxes and International Entrepreneur Taxes at www.htj.tax
2. STREAM premium educational videos at www.htj.tax
3. CONTACT us for tax optimization consults over Zoom
4. High Net Worth? We can QUOTE for doing your "US - International" tax returns
Our books and upcoming events are available at HTJ.tax. Please subscribe, like and share and comment below or email us at email@example.com to engage us to advice on international tax or business matters.