“A rolling stone gathers no moss,” according to an old proverb. Broadly, it means that a person who does not settle in one place will not accumulate wealth, status, responsibilities or commitments. Some of that might be considered a distinct advantage.
But what about a “fiscal rolling stone” or a tax nomad? Is it possible to be one?
Who is a tax nomad?
Traditionally, the tax nomad model has been to split one’s time between several carefully chosen countries, moving on before being resident for tax purposes in the current jurisdiction. This has become more accessible with technology advancements and remote work – ideal for an overseas digital entrepreneur, investor or worker.
In theory, it is possible to wander the world, moving on before the relevant tax authority asks you to join their tax club. One can be resident nowhere (and in multiple places) for tax purposes. However, there is an inherent risk of multiple jurisdictions chasing you for their “fair share” despite you arguing that you are not resident for tax purposes in any jurisdiction.
My preferred route instead is to find a low-tax jurisdiction to make your home base and establish residency there for tax purposes. This is likely to help with tax and more mundane tasks such as opening a bank account, as financial institutions usually dislike those with “no tax abode”. To summarise, the plan is two-pronged:
- Break residency in previous home country (“old”) by reference to the statutory residence test; and
- Create a new home base (“new”) in a favourable jurisdiction.
Break “old” residence
The first step is to ensure that one is no longer a resident for tax purposes in the “old” country. This process varies between countries, with the UK having the statutory residence test that would be claimed on the next relevant tax return. There is no formal notification process for this, though it would be sensible to provide written confirmation to the HMRC (His Majesty's Revenue and Customs). In contrast, other countries like South Africa might have a more formal process.
Tax implications of breaking “old” residence
If one wants to reduce taxes, their position depends on the old country and where their income and gains arise. US citizens and green card holders will be taxed worldwide, regardless of whether they break US residence.
However, unless a country is a low-tax jurisdiction, it is likely to continue to levy tax on any income and gains arising from there.
director and founder, Mosaic Group
There are some exceptions, but one example is the UK, which disregards most dividends paid to non-resident recipients.
To avoid suffering from “out of the frying pan, into the fire” syndrome, where the “new” country charges higher taxes on income and gains than the “old”, it is important to choose a tax base and plant a flag.
Choosing a “new” home base
Assuming one does not continually move from one jurisdiction to another, you need to choose a tax base.
Of course, this can be used as a point to visit other countries, however, constructing a tax base where one is liable to pay tax does not necessarily mean that your “rolling stone” dreams have been thwarted.
For example, the UAE has been a popular choice for people moving from the UK, but it is not a no-tax jurisdiction. Gulf countries have been paying value-added tax for a few years now.
The UAE introduced corporate tax in June 2023. But there is no personal income tax – ideal for nomadic world citizens. The UAE’s connectivity to the rest of the world also offers non-tax, practical benefits for globetrotters.
However, there are other popular jurisidictions. Portugal’s Non-Habitual Residents' regime attracted many entrepreneurs who were effectively offered a 10-year tax holiday on overseas income and gains. Although this has recently been narrowed, it still offers benefits for a more select group of people.
Also in Europe, both Italy and Cyprus provide attractive tax regimes for those who might be fiscally fleet of foot.
Of course, other places might fit the bill, too. However, I’m not a travel agent, so I’ll stop there.
To conclude, it is certainly possible to be a tax nomad. However, for the reasons set out above, my preference is to plant a flag somewhere and create a tax home base. It will have tax and other benefits.
Andrew Wood is a tax barrister and the director and founder of Mosaic Group
