Alright, good evening. Good morning. Good day. Depending on which time zone you were in. Good to see you and get to see you again for those who have been in one of our live streams before. So, my name is Derren Joseph, and we’re going to talk about taxes for location, independent entrepreneurs or digital nomads. So how we normally deal with it? Oh, just a little bit of housekeeping. This is being recorded, which means if you do not want your image to be recorded, you can keep your camera off. In addition to which in the lower, well depending on which platform you’re in, because this is also being a live stream on Facebook, and LinkedIn and YouTube and Twitter as well.
So, depending on what platform you’re in, if you’re on zoom, that’s pretty easy. You can just type in the box below. Yes, Dave, we will be recording it. And the recording will be on a website HTJ.tax, as well as all YouTube channel, as well as on iTunes and SoundCloud on wherever you prefer to get your favorite podcasts, that’s where it’s going to be. So, it’s going to be pretty much everywhere, so you can look for it in a few days’ time. So, so yeah, if you have any comments you can do like Dave and you can type in the chat below. If you’re in one of the other platforms, feel free to type in the comment box below and I will be checking it periodically.
So, the way we normally do this, for those who have not been here before, is that I’ll just go through a few slides to call out a few concepts. We’ll have six concepts, basically that I think will be useful takeaways. And then we go into Q and A which is more or less a discussion. So, as I go along, feel free to type your comments, or if you comment, some people feel, you know what, it’s kind of hard to type it all out. So, I’ll just talk. So, once we get to the Q and A section, you can just unmute yourself and you can explain what your thoughts are or what your comments are. And then we just take it from there.
Okay. So, without further ado, I will share my screen. All right, here we go. So, my name is Derren Joseph, and my colleague Hannah and I were part of Moores Rowland Asia Pacific, which is your usual full-service accounting firm. We do all the boring stuff that you would expect an accounting firm to do, right? No need for overplaying that. I have been based in Singapore since 2013, since October 2013 now, because I am US qualified. I’m legally required to remind you that nothing I say here should be construed as advice, consider this an educational or perhaps in entertainment live stream.
If it is that you’re looking for actual tax consulting advice, and you’re going to close this window and then go off and make a financial bind indecision. No, no, no, no. I may be a tax consultant, but I’m not your tax consultant, which means I know nothing about you and your unique circumstances. So, you should not take advice unless someone is qualified and has been retained by you and understands your situation inside out. So, nothing we say here should be construed as advice. Nothing we say here should be construed as encouraging you to pay less than your fair share of taxes in any jurisdiction, which you are exposed.
In writing, right? So, six takeaways, but you know, it’s just conversation started as more or less and as I said before, as thoughts come to you, feel free to just type it in the comment box below. So, flag theory, some aware that in some jurisdictions, for example, Singapore, Malaysia, London, there are companies that call themselves flagged theory. But originally our understanding is that flag theory is a concept that started in 1950s, where this guy who was writing about basically diversifying your lifestyle and what does that mean?
It means not having all your eggs in one basket. So, where you may be a citizen may be different from where you are actually resident, maybe different from where you store your wealth, maybe different from where you’ve incorporated your company and so on. So, it’s about having that diversified lifestyle. So, but you know, it isn’t meant to be prescriptive because I’ve heard people say, well, you know, there’s six flags. What is your fifth flag? You know, no one size could never fit all. So, for some people, you know what two flags are good on one flag, maybe, okay. For some people they may need seven or eight. So, it’s about understanding what your unique circumstances are and crafting a plan to suit what your situation is and what your ultimate objectives may be. And your situation is always different from the guy.
Next fake news. Well, we never grow tired of going into, especially like some Facebook groups and watching people taking binding legally binding advice from others who may be well-meaning. These people really have a big heart, but they’re not qualified to do so. And they have neither licensed nor have any professional liability insurance. And they put a lot of people in trouble. They put a lot of people in trouble, but you know, that’s just the way things evolve, I guess.
But I think anybody who’s properly qualified cautions against it, but they do so with sort of like mixed emotions because you know, anybody who’s being completely honest with you, they’re going to any professional tax professional. They’re going to tell you that, hey, we probably make more money from cleaning up a mess than we do from helping people do things. The right thing in the first place do things the right way in the first place. So yeah, I mean, a common misconception is going to talk about place. In fact, in management leads, but like e-residency programs, you know, despite the name is not really an immigration program. It’s not residency it’s e-government. So, there’s a lot of misunderstanding around jurisdictions, like Estonia with Eagleman. They are those who give and talk about tax planning with total disregard to immigration rules. For example, we see that in jurisdictions like Bali, Thailand, when Thailand used to be open anyway. So, you know, you need to pay attention to immigration rules and then sometimes tax games. There’s a reason why, like, for example, the us tax code, the federal level is like 8 million words. And then you have 50 different states. Would each state be having hundreds of thousands, if not millions of words, per state, similarly in most countries, a simple task code is hundreds of thousands of words, but the basic ones are millions of words.
So, if someone could summarize that in a paragraph good on them, because that board is impossible. So, we see a lot of misunderstanding around, for example, Portugal, NHR, Spain, Beckham law, or, you know, the new situation in Indonesia, Bali with the Omnibus bill. So, you know, people, I guess someone may have seen a sound bite somewhere and they think that, okay, well, you can live in Portugal and pay no taxes or, I can live in Bali. And only once I bank outside of Bali, I don’t have to pay taxes in Indonesia.
There’s a lot of misunderstanding, but that’s what I think is super important to always consult some professional. So anyway, and of course that long running debates as to whether you can just keep moving and pay no taxes, the quick answer to that, and we can discuss it later is yeah, you can, I’ve seen it done, but it is extremely difficult. And most people get in trouble because it’s not about balancing only tax rules but also banking rules and banking rules are becoming more and more sophisticated and aggressive as well.
So, you need to think about things like FATXA if you’re US exposed or CRS, Common Reporting, Standard automatic exchange of information, AML, KYC rules, which means for those who prefer to try to not pay taxes, they’re going to get in trouble at some point in time, but, you know, teach her own or his own whatever. So, moving on when we come to taxes, I think everyone is pretty clued up on direct taxes. So, if you, if you have a company, a company may have to pay corporate tax, if you, and when you as an individual get a distribution from that company, then you pay personal income taxes based on that. But what is less well understood on indirect taxes? So, like a VAT and the EU sales and use taxes in the US, GST in Singapore. So basically, sales taxes in Malaysia. So basically, taxes that you as a service provider or a seller of a physical product need to collect from your clients or customers, and then pass on to the tax authority in the relevant jurisdictions. So, you know, just a heads-up double check it, make sure that you are compliant if needs be.
Place of effective management. And I promise that we will take a slightly deeper dive into the, and here where we are just because you’re a resident in one jurisdiction, doesn’t necessarily mean that if you incorporate a company somewhere else, income derived from that company is tax-free most companies, most jurisdictions have a test around management and control of mind and management. Basically, that means that if you’re sitting in Bali or if you’re sitting in Thailand and you are running a company that made me incorporate it into Hong Kong or the UAE or whatever the point is that you’re running that company from within their borders and most jurisdictions reserve the right to tax that company as if it were domestic.
So, they looked through the fact that it was incorporated elsewhere. They say we don’t care. You’re running that company from within our borders. And therefore, their place of effective management is within our borders. And we want to tax that company. We reserve taxing rights on that company. So, so please keep that in mind, as you do your own tax planning, and we can talk, we can talk more on the concept of nexus later on if that’s of interest to people. But what I’ll do now is talk about the just high level on the rest of the world. The US is always a special case.
We don’t need to say that. So, the US has perhaps that one stands out jurisdiction aside from Eritrea, that it is basically impossible to break tax residency without giving up your passport, without giving up your green card, just in most other countries, by virtue of taking certain steps and being outside and doing certain things. When you’re outside of their country, you set up a tax residence with your country of origin. Now with the us, it just doesn’t happen. And you know, people talk about there’s a lot of misunderstanding around the foreign income exclusion and stuff like that. No, it doesn’t work in some circumstances. If you make as little as $5 outside, you need to file a tax return.
So many people, especially lower income earners don’t have to pay, but you certainly have to file. So, I’ll just leave that there for those who are from Kansas. So, Canada, Australia, New Zealand, UK now, you know, there’s certain fallback rules or center of life rules, and that are really tightening up. What, what that means is that the kind of heading in the direction of the US so, you know, Canada, the Canadian revenue authority, or the Australian tax office, you know, the HMRC in the UK, they’re taking the view that, we understand that you have not been on US soil for months, if not years, but under certain circumstances, we used to reserve the right to tax you.
So, it’s heading in the direction of the US so again, get professional advice, you know, double check it don’t think just because you’re outside that you’re freeing Claire, because there may be a big surprise waiting on you. Should you ever decide to visit or to return home, right then there’s EU. And again, they all have fall back rules and mainly center of life rules. So even though you may not be in your country of origin again, that doesn’t necessarily mean that you automatically cease to be tasked resident there. So, it’s always, we’re double checking just to make sure the rest of the world might be laughing.
They might be thinking, I’m not European. I don’t believe I don’t belong to, you know, in the US or Canada, Australia, New Zealand, you can good I’m clear, right? Well, not necessarily because of what we mentioned, right? Banking rules. So even though you’re the tax rules of your country of origin mean that you have done the right things, you’ve checked all the right boxes and you’re free and clear. There are still a lot of other rules that mean that it’s typically in your best interest to choose another jurisdiction plan to flag there, remember five theory and declare tax residents there.
And I like to give the example of we’re a client who was, I guess he’s a popular DJ, but I’m not into techno. So anyway, so he made decent money playing in clubs in certain parts of Asia, wouldn’t be too specific just in case somebody here knows who he is, but he is not originally from Asia. He’s really from Europe and something happened, and he needed to go back home to his European country of origin, take care of his mom, his mom wasn’t doing too well. So physically he can return because still has a passport, right?
He has a valid passport. He couldn’t fly back, but he had a problem that when he tried to remit money back to his country of origin, for whatever expenses that he was incurring, his bank blocked it. And his bank that he had, like, since he was a child, then knew him all his life, but their position is we understand, we know you, but we don’t know where this money has come from. Prove to me that this money is clean. So, so he’s like, well check my website. I, you know, I’m real. I, you know, I don’t do anything illegal, you know, they understand, but there’s little that it can do because the banks are becoming increasingly constrained and how, you know, how they allow especially flows from outside of their, of their borders, or even sometimes transactions within borders.
They want to see not just obviously some sort of invoice or some sort of receipt, but if it’s outs from outside, you know, prove that it’s taxed, you know, show me a tax return. Show me something that evidence is that this money has been legitimately earned and, you know, give anybody five minutes and it can go on Microsoft Excel, and they can create a receipt or an invoice. So that’s not good enough. Sometimes they want to see a government document. So, yeah. So anyway, yeah. So, we can get into that if there’s any interests later on. So obviously, well, I think obviously what it should be pretty clear is that it’s really unusual that you get one person who knows all this stuff inside.
I don’t know everything. And I think anybody who claims to know everything is being seemingly dishonest, right? So, I’m fortunate enough to be part of a great team. And what, I don’t know, one of my colleagues may know, you know, one of my associates would know, so we will lean on each other. And especially for those people who may be exposed in multiple jurisdictions, it’s important that your team has expertise in multiple jurisdictions to be able to address what those cross-border tax matches. Maybe now, now we get into the fun part, the discussion part. So, I see people have been writing comments below, so yes. I will answer them in the order in which I’m seeing them right now.
First one I’m seeing; do you have to be tax resident of a particular country, or can you be tax residents of no country? So yeah. Good question. This is exactly what we’re talking about. That’s a huge argument and I see people go on and on and-on-and certain forums and good for them. You know, it’s really up to you as an individual. What I can tell you is you need to understand not just the tax rules. So, for some countries there are fallback rules. So, like certain European countries have an extreme case like Italy, for example, I have an Italian client. And it’s only recently they pass a rules that say, you know what, if you go and you live in a tax-free tax Haven, like if you’re in the UAE, in Dubai, or if you in Malaysia and under let say MM2H or a similar program, something that means that you’re living tax-free somewhere, the Italian government reserves the right to tax you just as if you were still in Italy, even though you’re not in Italy, you have not been back. You’ve been outside for a number of years. Similarly, the ATO in Australia will say, okay, we understand that you are you outside? You’re doing your thing but prove to me that your property domicile somewhere else, let’s see a rental contract. Let’s see utility bills, let’s see a tax. You know that you’re paying taxes somewhere else. Some proved to me that you’re properly settled somewhere else. And if you can’t, your country of origin reserves the right to, to continue to tax you. So, that’s one thing, the fallback rules, the second thing you need to consider is if you’re independently wealthy and you know, live off a trust fund or whatever, that’s fine. We do have clients that are so fortunate, but for most people, they have to be working and they have investments, and they need to be doing something. So even though you may be not in any one particular country, that money is being earned somehow somewhere and chances are, it needs to be taxed. So, you need to pay attention to the rules. Remember we spoke about the place of effective management of mind and management. If you’re running a company from, within somebody else’s borders, even though it’s incorporated somewhere else, even though it’s been banked somewhere else, chances are they’re going to want to tax it. Right. And then to two, the rules around tax residency and counting days and stuff like that before in the pre-I can’t say the word otherwise it gets edited, right? So, before the health crisis, and you know what I mean by that? So, before the health crisis, people could be doing visa runs and it could be moving frequently and whatever.
So therefore, technically they can legally avoid triggering tax residency, but now not so much, right? Most people can’t move around that quickly. So therefore, by default, you must be deemed, you may be deemed to be resident somewhere. So, and then of course, you’re the banking rule. You have the bank rules, which we discussed, which means that yes, even if you beat all those issues of fact, as a criteria that I mentioned previously, banks want to see tax documents to prove to me that this money has been in legally. And I know you have a website. I know you can show me receipts, sorry, you don’t trust them. Give anybody five minutes on WordPress. And they have a website, two minutes in excel, they have receipts, right? So, we need something more substantial. Show me a document. That evidence is that this money has been taxed. And if you can’t, your money can get frozen. So, the loan short of that is you can try to be tax resident nowhere, but in 99.999% of the time, it will eventually bite you. So, hope that helps you and making that decision.
Moving on. How do you become tax resident of another country does get a tax ID from the authority of that can now each country has its own rules? I know people speak very generally and they painted with a really broad brush, 183 days. Yeah. But you know, as we said is a reason why bureaucrats sit down, and they write millions of words about tax codes to make them very nuanced. So therefore, they are very nuanced. So, I think you’d need to pay attention to the rules of the country that you seek tax residence in. So, there are countries where, you know, you can, for example, trigger tax residency in Australia, or yeah, let pick Australia. You know, you may be an Australian permanent resident. The Australian PR you may have an Australian passport, but you’re not there, but you can still remain resident in Australia, right and similarly in Europe, you can still remain tax resident that even though you’re not there just file returns. And you already have legal status there. So, you can, even though you’re not there, whereas some countries require at least some physical presence, depending on your visa category as well, depending on, you know, whatever your status is, your legal status is in that country. So, stepping back, I’d say, yeah, 183 days, but one size confit, all you need to figure out the nuances of this specific country in which you would like to be tasked resident.
0Next question. How do you get the tax authority of the previous country to allow you to, just to be a non-resident? Whether you show them your new country’s tax ID. That’s a great question. That’s a, that’s a really, really great question. It really depends. Sorry to say that, but it, it really does. Right? So, every country, again, they write hundreds of thousands, at least if not millions of words about tax code and it would vary. So, some countries are stickier than others. So, like on one extreme, we have United States where they’re not going to give you up, unless you give up your passport and no green card, right. Or green card or whatever it is you have, you must sever immigration on tax residency, and then they’ll let you go. And even, so you may have to pay an exit tax depending on your situation. And then the other countries like say in the EU, various European countries or Canada, you need to just file certain paperwork with the tax authorities to say, hey, I’m no longer here, but more specifically, like, let’s say Canada or wherever you may need to indicate, where are you all Australia rights. We talk about Australia, where are you? I mean, okay. You know, I have a, where are you? Where are you going to be? Right. So, and the burden of proof, again, it varies by jurisdiction. Some of them would just, you know, just fill it on the form and you sign it a penalty of perjury and they accept your word, but they do reserve the right to audit. So, this, anyone that looks a bit funny, or they take a random sample, and they just double check to make sure that you’re telling the truth. And so, you know, show me some proof, but often enough just indicating where you new residences would be enough. But the point is that paperwork needs to be filed and certain procedures need to be followed, especially around those countries that have center of life test to make sure that you can demonstrate that you have properly severed tax residency with that country that’s you leaving and establish residency in the country that you moving to.
Next question, if you have e-residency in Estonia, you pay 20% corporate tax, but then what about in your home jurisdiction? Right. So, Estonia is always a funny one, right? It depends on your facts and circumstances obviously. If it is, you know, most people that you would speak to who have the residency and have an Estonian company, they don’t necessarily live in Estonia full-time. So, then it led yourself to that question. Will, where are you? If you’re not in a student, where are you? And you need to understand that because remember I’m management and control, minded management, if the place of effective management, you know, that, remember we discussed that a bit earlier. So where are you running that company? Well, you’re running that Estonian company. If you’re running that Estonian company from Bali, for example, then Indonesia reserves the right to tax that company as if its run as Indonesian company. If you’re sitting in Malaysia and running that company, even though Malaysia is territorial tax, and you may think to yourself, oh, I’m going to go chill in Penang or whatever, Langkawi, I’m going to run my company from there or KL I understand that. But if you ma you know, the income tax act in Malaysia, us about management and control and management and control of that Estonian and company is in Malaysia. So, Malaysia reserves the right to tax that company, even though the proceeds from that company never come into money, Asia, they reserved the right to tax it. Or you go to, I don’t know, anywhere, most places and this is a particular exclusion carved out. Most places they’ll ask the question where is that company running. And from, you know, and for many people that we would meet they’re entrepreneurs. So, or even though they may have employees in don’t really have employees, they call them employees, but they’re independent contractors, right? So, you have people that work for you, but they’re not your employee because there’s no contract for employment valid under the local legislation. So that what you have. So basically it, chances are it’s you alone in this Estonian company and you have no what we call substance in Estonia. There’s no economic substance in Estonia. So therefore, to make argument that it is just an Estonian company becomes tenuous, if not impossible. So, to answer your question, I’m sorry, I’m being so long-winded to answer your question. Yes. It would be assuming, because you know, it’s still new. It allows you to carry forward without, unless you’re going to take a distribution. You don’t need to do the audit and you don’t need to pay corporate tax. Right. But assuming that you do want to take money out and you want to take a distribution, then it won’t only be subject to taxes in Estonia. You need to think about corporate taxes, wherever you have been running that company. Assuming that it’s not from Estonia. In addition to which if you’ve been based somewhere is not just corporate tax, the personal tax as well. You know, because it depends on how you took it out of this doing company, whether you took it out as a salary, whether you took it out as dividends or whatever, it may be taxed there as well. So, you’re looking at personal and corporate taxes wherever you are in addition to taxes in Estonia.
Okay. Going down the list, US green card holder is a tax in their worldwide income. What about US V1 visa? So, the United States is always sort of like a tricky place right there over like a hundred and eighty, a hundred and thirty-five visa categories and each firm. And that’s an immigration. Cause remembers in most countries; immigration law is separate from tax law. So, each immigration status may or may not have tax implications. So generally speaking, V1, V2 would not automatically trigger US taxes unless you have what is called a substantial presence and a Section 7701 of the tax code. So, assuming that you stay out of the US, there’d be V1, V2 visa category. Normally doesn’t trigger a US tax liability. But if you do have a us green card, which is a common name for a lawful permanent residence. So, if you’re a lawful permanent resident of the US even though you may not, you may have been outside of the US for 10, 15, 20 years you have the green card, you’re still subject to US taxes, and you will light income, even though that green card expired still subject to taxes in your worldwide income, even though you lost it, it was stolen. You’re still subject to taxes to your worldwide income. We’ve heard it all. And the answer is the same, unless you properly relinquish it and you have an I407 evidence that you have, you’re properly relinquished it. Your chances are you may be still subject to us taxes in your worldwide income, okay?
Moving down the list, the possible scenarios and the implications legally and tax wise to conducting a program that involves five expats working together to share the profits. I’m an American currently living in Oman, and we’ll be repatriating next year. The other’s a Brazilian living in Italy, British living in Mexico, Germany, living in Germany, blah, blah, blah. I thought about setting up a single member, LLC in the US and having freelance contracts with each of tentatively a multi-member LLC, a partnership with setting it up in another country. Many. Thanks.
Okay. You know what I’m going to say, come on. You know what I’m going to say? It depends. So, it really does depend. So, what is the nature of this trade or business? So, okay. What is the nature of the trade of where the customer is going to be? So, remember we talked, we are thinking about taxes in general. So, you have direct taxes and the indirect taxes. I noticed that some people may or may not be exposed to certain European countries. So therefore, there may or may not be social charges around their involvement that may or may not be VAT around their involvement as well. Their clients in certain jurisdictions there may be social charges that may be VAT. If it is a physical product in the US, there would be sales and use taxes as well. Let us see what else. So, it, it, it really, it really depends on what the business model is. And if you have a single member, if you have an LLC and having freelance contracts at each that, I mean, it depends on what the end game is. So, then you, as the us person, you’re going to pay taxes on that, and you lead them to manage their tax situation on their own. You can do that. So, it really depends. So, in a situation like this, you know what I would say, that we need to see ideally, a pitch deck that says if, because it looks like a startup, right? So, what exactly is the business model? What are your projections are where your customers likely to be? You know, what is nature of the physical product or service? And then once we see that and we understand which jurisdictions are in play, we’d be, we all, whoever it is, whichever team that you decide to work with would be able to advise accordingly.
But with countries that you have called the us Germany, Mexico Italy as well. These are countries that are pretty clued up when it comes to tax. So, it is no, it’s not easy to fly under the radar. You want to get this right? So, I’d say, put together your plan, get something in writing that struck these out exactly what it is you’re imagining and what exactly you want to achieve, what your goals are, especially. And then once you have that drafted, then you take that to a tax team with tax professional, and you start the conversation there. So, I know it sounds tenuous, but get it in writing first and then take it to someone because then you get the best out of them too. I’ve had at someone in Bali a couple of weeks ago, he said, you know, he gave me two lines of what he wants. Can you help me save on taxes? Yeah. But we need to understand, look, what are you doing? Like, what is the nature of your business? What are your goals? What are the objectives? How much is it? Cause the different thresholds on whatever, where the customer is, where your supply is based, you know, what is the nature of the shipping arrangements? But yeah, so, it really, it’s a lot more evolved. People think it’s like Harry Potter, you know, you just wave a wand, and you say a magic word, and then you save on taxes. Now the devil is in the details. The more detail you give to your tax professional, the more they’re able to help you, the less you tell him or her, the more likely you are to have problems later on. Hope that helps.
Next one, I’m Canadian. I’m not a tax resident, Canada. Good. I trade stocks for a living. It’s not a company. And I never stay more than three months in, in the same place with the best place to file your taxes. Well, it come, let’s say up to me, it depends, right? So, most countries, if you, if you are trading equities, right, and you they’ll be the, the income is going to be taxed at source. So, for example, I guess the, the most lucrative equities market in the world is a US, right? So, if you’ve been investing as an investor in the US, then, you know, if when you get your dividends or your interest as a non-American, there’ll be subject to 30% withholding. So that’s what you’re paying taxes. They’re going to keep it; they’re going to withhold before it gets to you. And I imagine same in most European countries that Australia, New Zealand, there’s going to be withholding before it leaves the country. So, before it’s remitted to you, there will be holding withholding. So that’s it’s going to be taxed at source under certain circumstances, like in the US capital gains. If it is that you, it depends on what you are, you, are you investing for the dividend yield or, you just want to flip, right?
So, you want to invest, and then you watch it go higher. And then you sell, and you enjoy that, that Delta between what you paid for it and what the profit may be. So that capital gains. So that is actually tax-free to non-residents. So, okay. So, it depends. So just generally speaking, more often than not, your investment income will be taxed at source. Now, from a Canada perspective, we mentioned that the CRA is particularly, and I haven’t, you can visit our website HTJ.tax click on blog and then type in Canada, because what I did is I had not just quoted some of the CRA rules, but some of the recent cases in Canada, because you may think, oh I looked at the CRA website, I’m good. And I filled in the paperwork, I’m done. No. So it may be, you may be Canada, not Canadian tax resident at that point in time. But then the, the case, then the cases suggest that if you then start moving around and then you’re not tax resident anywhere else, the CRA can take the view that, you know, the invoke, what is modern as a fallback rule. If you cannot demonstrate, you’re not tax resident somewhere else, you by default the tax resident in Canada. So, stepping back just summarizing, if your investment income more times than not going to be taxed at source, depending on where you’re investing in the world, that’s the first thing. And then secondly, be wary of the CRA, even though at the point of leaving Canada, when you first left, you fill on the bus, you fill out the right forms or whatever. And at that point in time, you will not tax resident. They may not deem you to be not tax resident. Now, if you kind of demonstrate that you’re a tax resident, you’re properly resident somewhere else. So just a heads up. So, in a situation like that, we would always advise our client, hey, pick a place, plant a flag, establish residence there, just in case the CRA comes knocking on your door later on, you have something to show them. You have something to demonstrate. So yeah, next question.
Right. Oh, someone is saying, yes, US charges 30% withholding on it dividends. Is there any situation where I can get some of all this back? I already have a W810 form. Okay. So, two separate questions there. So, right. So yes, the US does charge 30% FDAP withholdings. So that’s fixed, something annual and periodic. I think, I do not remember what the D stands for, but there’s 30% of that, but holdings, yes, it can be lowered. And here’s the catch if you a resident in a country with a double tax agreement. So, you know, that’s where, you know, and that’s why we say, you know, you need to come up with a strategy. I think gone are the days when you could just be random. you know, I feel like going here, I feel like doing this and that because the implications are so vast right now, given the health situation and, and whatever else we’re dealing with. So, the answer is normally, no, you can’t get up 30%, but yes, you can get it back. If you can claim on a tax treaty, you can file a us return and claim tax treaty benefit. And you may be able to get a refund, but just because let’s say, for example, you have a UK passport, right? Or you have an Italian possible just calling around Australian passport. I’m calling countries with a DTA, with a double tax agreement with the US right hook. Listed in the US website, the US IRS website. So, let’s say you are a citizen. That doesn’t mean that you can claim that doesn’t necessarily mean that you can claim the treaty. Why? Because the treaty has a limitation of benefits clause, all treaties have an LOB limitation of benefits clause to prevent treaty abuse. So, if it is that you are not resident in that jurisdiction, in which you’re going to claim the treaty benefit, you may not be able to claim a treaty benefit and get that any portion of that 30% returned to you. So, the answer is yes, but you need to be resident in a jurisdiction. To the follow-up question that you asked about the W810 form. Okay. So, there W eries of forms, W10, the W9 is a whole bunch of WE’S, ECI they are all meant to, they’re not going to any tax authority, would they require their requirement from the financial institution that you’re dealing with. So that’s to indemnify them, should RS come knocking on the DOJ? The US department of justice comes knocking on their door and accusing them of encouraging tax evasion or facilitating tax invasion as happened with Switzerland, right? So that’s to indemnify them. That is not a tax document. That’s a document to, as part of the record keeping or the KYC, or the know your customer procedures of the financial institution you’re dealing with. So that doesn’t help your situation. If you want to reduce that withholding, is you need to be resident in a treaty jurisdiction. Hope that helps.
Next question. I’m a Singaporean working for a us MMC, I guess you meant to say MNC, multinational company in Singapore. If I’m assigned to work in the US where my company typically give me a pay package to compensate for the US taxes. Well, that’s up to you, sir, or madam. That depends on whether you a good negotiator too or not. So, this is where you put your skills to the test. It does happen, obviously we’ve seen it happen. And in some cases, we’ve helped clients put together calculations that will help them in their salary negotiations. But yeah, you can ask, you can ask, and you can negotiate. So, it’s up to you, but there are no hard and fast rule. This that’s a company policy. There’s no legal requirement for them to bump up your pay.
Okay, next question. It’s a long question, but I’m going to read it for those that are on other platforms and can’t read what I’m reading. So, their health crisis, I can’t say the word because then we get whatever. So, the health crisis has meant that I’m truly roaming as my home country. The UK is in a mess. Okay, that’s this person’s comment, that’s not us. Right. I’ve lived in 10 countries. So can I settle anywhere as a new home and move residency there also after Brexit, I know how I don’t much want to be in the UK and waiting for my Irish passport and marrying a Dutch person. I have many options open right now to make a change was thinking and choosing a new base, buy a property and plant a flag as you say, considering Malta as it’s EU and great weather, and seems to be a popular place to base. What do you think? Certain countries, more prince, a new tax resident. If you can pick anywhere, what would it be and how does one go about choosing a new home? Okay. So, a number of points there. So, let’s first talk about the UK. I haven’t been in the UK for a while because of the health situation. And I’m moving around now. HMRC, if you go to HMRC’s websites, probably hmrc.gov, that UK there’s a statutory residence test. And you can do that yourself. You can type in whatever you can. It’s a series of questions and answers. And then at the end, it says, whether you’re a tax resident or not. So that’s an objective test. Now there’s also another test. That’s not easy. It’s not easy to follow like a Q and A on their website. It’s the center of life test. So, if it is, I know you physically have not been in the UK, but as a UK citizen moving her on is your family still is your center of vital interest still in the UK? Do you have, maybe you have a condo or your apartment that may be empty and available for your use. Maybe you’re still keeping your job and working remotely for a company in London. You know, so it really depends whether you have severed all ties with the UK, otherwise HMRC does take the view that I know you’re outside of the UK, you’re living in Monaco or wherever it is you’re living with you S still UK tax resident, because your center of life is still in the UK. So, you just need to make sure that is sever.
So now going down the list, you can, you, you’re waiting for an Irish passport and you marrying someone who’s a Dutch citizen, right? So that of course opens up the EU. Of course, you know, we can talk about the entire world, south America, south Asia, Africa, you know, Japan, whatever China. But if it is that you want to be in the EU, then you, yeah, absolutely. Right. The Republic of Ireland is still in the EU and there still is freedom of movement. So, you can technically, you have the right. Once you get that passport, that Irish passport, you will have the right to settle anywhere in the EU. So that can open those options. Similarly, once you married a Dutch partner and you get Dutch residence, and you know, that gives you the opportunity to move to Holland, right? So, to answer your question, all countries in the EU, once you have that EU document, or as Irish passport, for example, you are legally entitled to freedom of movement, or that I know because of the health situation, some borders have been temporarily closed, but in our reopening, which is a good thing. So just generally speaking, health crisis aside, you are entitled to move and settle anywhere. And once you settle, you go to the local tax office and you register, you get the equivalent of a local social security number, whatever they call it in that given jurisdiction, and you plant your flag, and you are a tax resident there. Of course, some jurisdictions are more attractive than others. There’s let’s see the Ireland has a similar scheme to the UK. And it actually in a few hours, we’re doing a webinar on our Ireland taxes with my colleague in Dublin.
So, Ireland has an option where you can be there, but that you can settle under certain circumstances. You can be taxed in the UK you call it res non dom, you can be resident, but non domiciled. So not tax domicile. Similarly in Ireland, you can be resident, but not be taxed domiciled in Ireland. And therefore, the money that you earn outside of Ireland will be untaxed by Dublin. So that’s an option. The Northern European countries don’t tend to have that as far as I’m aware, not Scandinavian on Germany, but the Southern European countries do have it. So, there’s the NHR, non-habitual residents in Portugal. There’s the Beckham law in Spain. Italy has something. And I believe Malta has something as well, but it’s very, very, very nuanced. So, anyone who says, oh, you will live in Portugal for example and live tax-free, wrong. There are lots and lots and lots of exceptions depending. So, you’d want to check with Portugal or Maltese, depending on where you you’re exploring a tax professional, explain to them your sources of income and your situation and see whether it’s to your advantage from a tax perspective. Obviously when you are deciding on a new home, there are a lot more non-tax factor. Like what does your partner want to be? Where do you want to, you know, family stuff? But if it is that you’re completely open to anything and it’s just purely tax, then you’d, you do have some options. Ireland, Spain, Portugal, Malta, Italy. Okay. Hope that helps.
Moving down. I do not pass the HMRC tests. So, I feel a bit lost right now. So, if you don’t pass the HMRC tests, whether it’s the statutory residence test or the central live tests, you can work with a tax professional. And if you want, you can email us. Not, not me, I’m not, but I can introduce you to one of my colleagues in London and they can work you through the steps needed to properly sever tax residence to the UK. So, it’s, it’s fixable, blah, blah, blah. So, the link for the Irish zoom meeting. Yeah. Just email Hannah and Hannah we’ll provide the link to the Ireland one. Okay. And I’m going to just double check on other platforms to see and any questions that may be coming in as we enter the last nine minutes. So, so, okay. Yep. Dealt with that. Okay. Dealt with that.
Okay. So that looks like it, then. Oops. As it, someone asking something, okay. Seems like we are done. Thank you for sharing some of your time with us on today’s live stream. It will be posted in a few days on HTJ.tax, on YouTube, on LinkedIn, on wherever you get your favorite podcasts, because we put it on over 20 podcast platforms. So, wherever you get your favorite podcasts, look out for it. And we have enjoyed spending time with you today. And we look forward to seeing you last time, upcoming events on HTJ.tax. Enjoy the rest of your evening. All enjoy the rest of your morning or afternoon, depending on where you are. Thank you. Bye.
Here are four ways we can help you.
- Sign-up for a free webinar on US Expat Taxes and International Entrepreneur Taxes at www.HTJ.tax
- Stream premium education or videos at www.HTJ.tax
- Contact us for Tax optimization consult via zoom
- High Net Worth. We can quote for doing your US International taxes returns.
Our books and upcoming events are available at HTJ.tax. Please subscribe like, share and comment down below or email us at email@example.com to engage us to advice on international tax or business matters.