Double tax digital nomad
Double tax digital nomad focuses on providing people with a way to reduce their tax liability. This is done by taking advantage of exemptions available to foreign nationals, some of which are not available to people who live within their home country. These exemptions can be claimed on worldwide income and reduce the tax liability for those who earn an income outside their home country.
A double-tax digital nomad is a person who's able to take advantage of this exemption by living outside their home country for at least six months per year and conducting business internationally. This affects both citizens and residents holding said citizenship or residence permit.
There are two types of double taxation treaties: bilateral and multilateral. Bilateral double taxation treaties are agreements between countries negotiated directly between the governments of those countries. Multilateral double taxation agreements refer to agreements that involve more than two countries, such as those signed by members of the OECD: the Organization for Economic Cooperation and Development.
Double Tax Digital Nomad has designed a tax reduction system that minimizes or even eliminates the client's tax liability while considering the complexities of international law, foreign residency requirements, and citizenship by investment options. Clients retain ownership of their assets and have all control over the legal structure they choose to use for their business, investments, etc. Double Tax Digital Nomad works with its clients to help them reduce their tax liability without leaving them without any legal protection.
The primary benefits of double-tax treaties stem from reducing or eliminating double taxation. For example, a U.S. citizen living in Los Angeles would be subject to a 15% federal tax on their total income earned worldwide (after-tax income). However, that same U.S. citizen living in Los Angeles would only pay 4.5% tax (15% x 35%) on their income earned in Japan because Japan has a Double Tax Treaty with the United States. Additionally, if that U.S. citizen began earning $20,000 of income in India, that amount would become exempt from any tax (i.e., no taxes would be due to the U.S., Japanese or Indian authorities on the monies received).
Double tax treaties are also beneficial in instances of "portability," which refers to how an individual can transport their income across national borders without incurring additional taxes. Double taxation agreements reduce the costs of moving capital or capital gains between countries and simplify income tax rates.
Double-tax treaties benefit individuals and businesses because they allow investment capital from one country to be reinvested in another country with a lower tax rate. Although any individual or business planning to move overseas should consult their accountant, vital considerations play a role in determining if an arrangement is feasible.
The primary disadvantage of a double tax treaty is that certain restrictions may exist on the amounts or types of income exempt from taxation. For example, a U.S. citizen living in Japan may only contribute $2,500 of their income to a U.S. tax-exempt retirement plan, but they would be free to contribute $5,000 towards a tax-exempt foreign retirement plan. Additionally, suppose the individual has an excessive income subject to taxation in multiple countries (i.e., capital gains in the United States and Japan). In that case, they may be forced to pay taxes on that income in multiple countries. This is considered a disadvantage because individuals must be aware of their total income earned worldwide and how much will incur a tax liability.
Double taxation countries are not always evil or willing to exploit loopholes to raise taxes. It is up to each digital nomad to decide whether they think the higher tax bills are worth it. If you feel that your digital nomad business will be low-tax, you must decide whether or not you want to leave your home country and settle in other double-tax countries. If this constitutes selling out and going against your better judgment, do so.
W8ben
Since the start of 2018, companies from the U.S. can now apply for a w8ben. This means that you can avoid double taxation on your digital nomad income.
The w8ben is a certificate of non-residence from the IRS, which is why it's known as a "certificate of non-residence." It allows U.S. companies to issue W-2 forms without worrying about sending them to the IRS. This gives more flexibility and saves time and money for U.S. residents and digital nomads.
U.S. companies can apply for w8ben online. The non-US company will have to generate this form and give it to the employee. The latter will then have to send it back to the company, which will then be able to send a W-2 form without having to worry about sending these documents to the IRS.
The important advantage of the w8ben is that it allows companies to avoid double taxation. Non-U.S. companies can continue to pay U.S. salaries without withholding IRS taxes. The employee will then be able to file the tax return directly.
The w8ben is an excellent response by the IRS to issues faced by digital nomads and U.S. residents who earn digital nomad income abroad. However, digital nomads still face other difficulties like banking, healthcare, and housing issues.
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