Digital nomadism is trending and with all the changes we’ve witnessed in the last two years, more and more people are considering taking the plunge. With world economies struggling to cope, many countries have set up digital nomad visas and various benefits to attract additional tax payers, so if you’re thinking of trying your hand at becoming a digital nomad, the time is ripe.
However, not many people can just simply up and leave as they please; there are things to set in order first.
Let’s take a look at the most important of them.
1. Gathering the Proper Documentation
Documentation gathering is always a taxing task, but even more so when you’re planning to relocate abroad. That’s why it is recommended to make copies of all important documents and also keep copies with a friend or family member back home. You never know whether some additional documentation may be needed later on and it is easier to have a family member send it to you than travel back home to deal with the matter.
Of course, you should make certain to check your passport validity and visa requirements beforehand. Renew the passport if its validity is less than one year.
Another document that may come in handy is an International Driving License if you’re planning to use a car abroad.
2. Filing Your Taxes Will Change
The matter of taxes is rather complicated for many digital nomads. It’s only natural because, depending on the state you’re from and depending on the country you’re relocating to, different rules apply.
First of all, the U.S. is one of only two countries that applies taxes to all of its citizens. Simply put, this means that no matter where you relocate to, you are obliged to file annual income tax returns. That is to say, taxes for digital nomads do apply in the following cases:
· If you lived in the state for any duration during the tax year
· If your immediate family lives in the state while you’re abroad
· If you have a permanent place of residence in the state
· If you keep your voting rights, ID card, or driver’s license in the state
As for the income state tax, you are eligible if you’re earning income in the state (pension and retirement income and other government benefits also apply). Only a handful of states don’t levy state income taxes, namely Alaska, Florida, Nevada, South Dakota, Texas, Washington State and Wyoming.
There are several ways to mitigate income taxes while working abroad. Look into entering the Foreign Earned Income Exclusion, Foreign Housing Exclusion and Foreign Tax Credit.
Next, there are taxes of the country you’re relocating to which you’ll need to consider. While different countries’ taxation systems can vary greatly, the general rule of thumb is that if you stay more than three or six months in the country, you’re obliged to pay taxes. This is common practice for residential taxation countries that include Australia, China, Japan and Mexico. Other countries impose tax only on income earned in their jurisdiction; some of the countries following this rule include Costa Rica, Hong Kong and Singapore.
3. You’ll Need the Right Tools
Digital nomads are, as a rule, tech-savvy and well-versed in the tools of the trade. It goes without saying that you must be familiar with project management tools, communication tools and, in some cases, workflow automation tools (examples of workflow automation tools).
While different tools are trending at different times, some common ones include Asana, Slack, Trello, Zoom and Skype.
4. Take Your Health and Insurance Into Consideration
U.S. residents won’t have health coverage in the EU, unlike other country-hopping EU citizens. Some countries have health insurance requirements, so make sure to familiarize yourself with them and choose the best plan for you.
However, what is often overlooked is that it is advisable to undergo any health treatments back at home, and don’t forget to put saltwraps for injuries on the list. Little things can make a huge difference later on.
5. Consider If You’ll Continue Your Education Abroad
Finally, digital nomads are life-long learners. For some, it is a sustainable option to continue education abroad. For others, eLearning is often easier, especially when they’re moving around.
With the rich choice of courses available to anyone anywhere with internet access, it’s no rocket science why eLearning works. This is also a cheaper option than traditional learning, so look up the opportunities.
Conclusion
Digital nomadism is an exciting calling, but as you can see, there are numerous factors to consider when planning your future. The good thing with this life choice is that nothing is set in stone — you can simply move to the next country every six months to avoid staying too long in residential taxation countries.
Overall, do your research before setting out and adjust your plans as needed. Digital nomads have the freedom of choice not many other people do, after all.