If you are currently travelling as a freelancer, you probably have a lot of questions about whether or not you need to pay taxes back in your home country of the UK and the country you’re currently staying in.
Do you need to pay taxes at all? Does it depend on where you live, or if you are travelling across the world? Does it depend on your industry, or have anything to do with your nationality and home country?
A Few Common Myths
Here are two very common myths that you might hear:
- If I am in a country on a tourist basis, I don’t need to pay taxes
- If I set up or own an offshore company in a foreign country, I don’t have to pay taxes there
Both of these are simply untrue. First of all, if you are in most countries for more than 183 days (that is, more than half the year) then you are likely considered a taxable individual in said country, and you need to file taxes there. The solution? You should spend less than 5 months in each country in order to avoid owing them money.
As for the second myth, you always need to pay income taxes on the salary that you issue for yourself (the director’s salary).
So, When (and To Whom) Do ‘Digital Nomads’ Need to Pay Taxes?
Well, you might think that you can simply sell your property in your home country (if you own any), and then deregister your domicile. Then, all you have to do is start bopping around the planet to countries for which you can get a tourist visa, stay for less than 5 months’ time, and boom! You don’t owe any taxes. Great, right?
Wrong. As a UK citizen, you have to be aware of the following: you are a tax resident if your home was located in the UK for more than 91 days during the past tax year (that is 6 April to 5 April).
So, if you go home to spend 3 months with a relative or friend? You owe UK taxes. In this case, the 183 day rule doesn’t matter – you owe, and you could end up owing heaps over the years.
Remember This: The Most Important Key Point
Just remember – no matter where you are from, the minute that you spend more than 183 days in one country, you likely owe that country taxes (or have a tax liability somewhere). Be sure to check with the specific country in which you are located in order to learn more about what it is, how much it is, and when you have to pay.
If you have an accountant, you can discuss this with them, although they may be limited in the advice they can give on different tax systems in other countries.
Are you planning to become a travelling freelancer? What are you most excited/worried about? Let us know your thoughts.