Whenever we talk to entrepreneurs, remote workers or freelancers who are about to embark on their Digital Nomad journey one of their main concerns is ‘international tax law’.
Therefore, before you start reading the content of all different sorts of online forums and before freaking out when googling ‘international tax laws’ I want you to know a thing or two about it on here.
Our goal is to inform you about the realities of international tax law, highlighting that there isn’t a singular ‘international tax law’. Instead, there are various countries each designing competitive tax laws to attract individuals and companies.
This article aims to broaden your understanding of these complex and varied tax regulations across different nations.
Table of Contents
- 5 Elements That You Must Know About International Tax Law
- Conclusion – International Tax Laws
5 Elements That You Must Know About International Tax Law
Let’s start this guide with the main topic, which are the things you should know about international tax law, and I can assure you, you didn’t know some of them!
International Tax Law Keeps Constantly Changing
When I mention to people that I work in taxes most think about how boring that must be. But the truth is there is no other legal field where change is as constant as in international tax law. That’s what makes it so fascinating to me.
Governments are constantly creating new tax incentive programs to try and attract more money into their countries.
For example, Serbia just recently announced a tax program for digital nomads won’t have to pay any taxes for up to 90 days.
With every new presidential campaign, there appear to be more changes in tax law. We all know that citizens want lower taxes so if a party promises lower taxes after their election it is often likely that those changes will be implemented with the new government in place.
Therefore, it is important that you consume your knowledge from sources that stay up to date because international tax laws keep constantly changing.
Not Everything is Regulated
Most of the time legal systems leave room for people to interpret the laws.
Think about it. If everything was regulated there wouldn’t be any need for judges, prosecutors nor lawyers who interpret the law and who can argue one way or another way.
The same is true, especially about international tax law. The law leaves room for a lot of interpretation.
Especially when it comes to concepts such as what is considered to be ‘reasonable’ and what makes ‘economically sense’ one can easily argue one or the other way.
Even when it comes to tax residency questions it is debatable whether a cabin on a yacht can constitute a ‘home’ or how long ‘permanent’ or ‘temporary’ is.
The law requires a lot of interpretation. Even if concepts are backed up by precedent cases one can argue one or the other way, especially as everyday people like digital nomads.
If you are unsure of how to interpret the law, then make sure you have help from a professional such as us who can guide you through the legislation.
Enforcing Tax Laws is Different than Writing Them
Having regulations and laws in place is one thing. But making sure that the laws are enforced is another story.
Some countries claim to have Golden Visa programs which allows wealthy people to obtain citizenship. However, the reality is that it is nearly impossible to obtain such a Golden visa.
Sometimes the administration burden is simply too high to bother to actually take advantage of such tax incentive programs.
Other times immigration won’t collaborate with the internal revenue office or vice versa and it just becomes a nightmare to even bother to take advantage of those tax incentive programs.
On other occasions putting international tax law into practice means that you will have to hire a lawyer not only in your home country but also in your new destination and potentially also an accountant in both places.
Many countries implement a self-assessment tax system. This means that you are responsible to figure out how much taxes you own the government.
You are also responsible to lodge your tax returns in time. If you don’t comply with tax laws, you can receive a fine from the revenue authorities.
If you engage in tax evasion practices such as not paying taxes or hiding your income by falsifying a return you risk a fine or even imprisonment.
Even though there can be many players in the international tax law sphere you have to remember that you are the main player and the main person that is responsible to figure out what you are allowed to do and what is prohibited.
Tax Laws Differ from Country to Country
You have to always keep in mind that there is no such thing as ‘international tax law’. The truth is that every country has its own tax laws. Some countries have even different state taxes or municipality taxes.
The tax rates that apply in your home country can be completely different from the tax rates in your new destination country.
The number of days necessary to become a tax resident in one country can be 183 days and its neighbouring country might categorize you as a tax resident from the day you move there, or after 90 days.
Just because tax incentive programs for wealthy people can be categorized under the term ‘Golden Visa’ doesn’t mean that the Golden Visa requirements in Malta are the same as they are in Cyprus.
Even when you hear that 100 OECD countries have signed an agreement – those agreements will still have to go through the national legislative system to become laws in that country.
Oftentimes they will have to be adapted and changed before they will be accepted into the country’s system.
International Tax Law Don’t Always Make Economic Sense
Keep in mind that just because one country has attractive tax laws, doesn’t mean that it will make economic sense to you.
If your business doesn’t need an Asian base, then why would you go and set up in Taiwan even though their low taxes are very attractive or they have a digital nomad visa?
Or simply because a country is offering residency permits in exchange for some economic investment doesn’t mean that obtaining that country’s residency will benefit you in the long run.
For example, if you obtain a European residency, you’ll also have to think of other things that will add up such as Social Security Contributions, possibly registering your business for VAT, etc.
Therefore, you might want to do your proper investigation, find out where you could possibly set up a company based on what makes economic sense for your business before you decide to simply incorporate a company in a country based on its low tax rates.
Conclusion – International Tax Laws
In conclusion, international tax laws represent complex regulations that vary significantly from one country to another.
This complexity reflects the diverse approaches nations take to balance attracting businesses and individuals with the need for equitable tax contributions.
Ultimately, while international taxation law is complex and ever-evolving, it plays a vital role in shaping thr global economy and fostering international cooperation and development.
Do you want professional help with your own International Tax Law International Strategy and Corporate Structure?
Check out our current services. We are here to guide you and help you navigate through the complex world of International Taxes and Business Structures.
We hope you have enjoyed this article. If you have any further questions please leave us a message below and we’ll get back to you as soon as we can.
NOTICE: The content of this article is not to be considered as a legal opinion or tax advice. Wanderers Wealth does not hold itself out as a legal or tax advisor. If you want to receive a legal opinion or tax advice on the matter in this article please contact us directly and we will refer you to a legal practitioner.