From a co-working space in Bali, a coffee shop in Lisbon or simply from your own little attic in Utrecht. Remote working is increasingly common nowadays. As long as your wifi is good, a lot of work can be done remotely. But what about your taxes? Because what if you don’t live or work anywhere really permanent? What should you think about then?
In this blog, Anjo of Digitax Nomad gives you more information about the tax side of working remotely. Anjo is a tax specialist and helps Dutch people abroad with their taxes. Where do you have to pay taxes, what are the risks, and how do you avoid double taxation?
Want to know more about Anjo and about this topic? You can! In fact, on November 23, she will give an online guest lecture ‘Living and working abroad’ together with The Happy Financial . Use the code‘workingremotely‘ for € 5 discount. Read more about it and sign up!
Where do you pay taxes when you work remotely?
Basically, you pay taxes in the country where you are a tax resident. That is usually the country where you live, work, and your economic and social life takes place. It becomes more complicated if, for example, you barely reside in the Netherlands but work remotely for a Dutch employer. Or have your own business and change countries frequently. In such a case, how do you determine where to pay taxes?
Unfortunately, this is not that simple and really needs to be considered on a case-by-case basis as to one’s tax residence. This both privately and for business purposes. Of course, a registration or deregistration with a Dutch municipality is a first “hook” to assume that you are or are not living in the Netherlands. But the tax authorities look much further than that. And, for that matter, so do the tax authorities in other countries!
Decisive factors include where you are insured. Where you have a home available to you. Where your family lives and friends live. Where you go to the gym. Where your income comes from. Where your assets are stored. What market you target. Where you have a phone number. Where you have subscriptions running. All of these circumstances (and more!) combine to determine whether or not you live somewhere for tax purposes.
How does it work with deregistration in the Netherlands?
People often assume too quickly that when they deregister and are in the Netherlands for less than a few months a year, they automatically stop being taxable in the Netherlands. Very often this is unjustified, especially if they then continue to move and settle nowhere. And that can lead to additional taxes and fines.
I therefore recommend that you check with your accountant, tax specialist or a specialist like me before you leave to make sure everything is okay in your case. Coordination with the Tax Office is also possible, so you know in advance where you stand. It is better to arrange things well before departure than to be faced with surprises afterwards.
What if I continue my employment abroad?
It is important to check with your employer to see if anything will change for you as a result of your going abroad. This depends very much on where you are going to be based and whether that is permanent, or whether you are going on an occasional week-long “workation. In the latter case, there won’t be much of an issue. After all, most of your time will be spent just working from the Netherlands.
However, if you start working permanently from another country, that does shift things. Chances are that taxes and possibly social security contributions will have to be paid locally. And that responsibility lies not only with you, but also with the employer. In addition, think about liabilities and insurance. A lot can change when you work from abroad.
Use code ‘workingremotely’ for €5 discount
I want to start my own business. How do I do that if I go abroad?
This is always a tricky one. If you deregister privately from the Netherlands, the Chamber of Commerce is not very flexible with keeping a sole proprietorship. They assume; you are deregistered so you and your business are gone. As a rule, they then proceed to terminate your business. If you are deregistered before you start a business, it is not at all possible to start a Dutch sole proprietorship.
Paying taxes when working remotely from abroad
The crazy thing is; the Tax Office may assume that despite your stay abroad you still have to pay tax in the Netherlands. In a worst case scenario, you can then not keep a business but you still have to pay tax. What then?
There are solutions to this, depending on your situation. You can see if you can organize your travel plans so that you are still in the Netherlands enough to be registered (4 months or more per 12 months). In such a case, keeping a company is not a problem.
Here’s how to avoid penalties from the IRS
Some choose to register with family despite not actually being in the Netherlands much, if at all. This is not my preference, because you are in fact wrongly registered. Municipalities can still deregister you during inspections and impose fines of several hundred euros.
Don’t forget the countries of residence, either. Usually, you automatically (“by operation of law”) become a taxpayer somewhere if you are there for more than 6 months a year. And in many cases even earlier! An establishment in the Netherlands then sounds like a fine solution, until the tax authorities in the country of residence change their mind. And that can lead to double taxation. You definitely want to avoid that! If you stay longer elsewhere, chances are you will have to establish your business there.
After all, a business is where the work is done. And therefore not where the customers are.
Will you be traveling for a limited time only? In such a case, it is best to get in touch with the Chamber of Commerce. For world travels up to one year, it is possible to keep your sole proprietorship, even though you deregister from the BRP. There are also opportunities in choosing another legal form, such as the BV. A BV is usually easier to leave behind in the Netherlands, despite a deregistration of the founder. However, this needs to be handled properly and carefully, and it also means being back in the Netherlands at least several times a year.
So there are options. Which one is right for you depends on your situation. Again; get it right up front and get informed.
Are there opportunities abroad?
Yes indeed, there are. If you want to live and settle in a nice country with sunshine, you can! For example, I myself lived in Spain for a time. But beware… Don’t take this too lightly. An emigration must really be an emigration. It should not be an administrative settlement elsewhere.
I know that many people today can arrange to set up in countries like Dubai, Estonia or Cyprus quite easily. This is even actively offered. But an emigration is not just something. You will really have to move your life.
What about tax treaties when working from abroad?
Maintaining a base in the Netherlands can lead to two tax residences. Which in turn can lead to double taxation. Of course there are double taxation treaties that prevent this, but such a treaty does not exist with every country. And in doing so, you never really want to have to actively invoke such a treaty. After all, if you have to invoke a treaty, two countries already believe that you should have paid tax there. And then prove otherwise… This can be a long process.
So yes; emigrating to another country is possible. Even if the tax climate is better there. But the Dutch Tax Administration has a “long arm” as we call it. So they can hold you for a long time if ties to the Netherlands are maintained. Plan an emigration carefully and stay far away from paper constructions that are offered with plenty of nice talk online. If something sounds too good, it often is.
Want to know more? Then follow the online lecture ‘Living and working abroad’ by Anjo of Digitax Nomad for The Happy Financial in November. Use the code‘workingremotely‘ for €5 discount. Or schedule a one-on-one interview with Anjo.
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