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| ▲ | closewith 3 days ago | parent | next [-] | | No, that's not the case for the most part. For example, the Croatian digital nomad residence permit that this article is about provides an exemption to income tax for earned income while working for a foreign company and living in Croatia. This means that most digital nomads can work tax-free in Croatia. This contrasts with, for example, Ireland, where not only does a digital nomad's income become subject to local tax on day 1, so does their company (if they are the beneficial owner). Croatia's approach is excellent if you want many wealthy (compared to local standards) people to bring an influx of hard currency into your economy, at the cost of inflation. Eventually the benefits outweigh the costs and the government begins to subject digital nomads to local taxation and stricter visa rules. | | |
| ▲ | oytis 3 days ago | parent [-] | | What's the benefit to have rich people in your country if they don't pay taxes and don't create any meaningful amount of jobs? | | |
| ▲ | closewith 3 days ago | parent [-] | | The benefit is similar to remittances - you get a huge influx of hard currency as digital nomads freely spend their high salaries. That does create jobs and raises tax revenue through consumption taxes and downstream employment. It's very similar to tourism - digital nomads are effectively semi-permanent tourists. However, like tourism, it causes inflation, prices out locals, and can detract from more sustainable, natural economic growth (the so-called tourism curse). So like tourism, developed economies inevitably place limits on digital nomads. That can take the form of stricter visas, capped numbers, or by implementing tax reforms. | | |
| ▲ | FirmwareBurner 3 days ago | parent | next [-] | | Since digital nomads use the same public infrastructure and amenities as the people who live and work there, why shouldn't they also pay the same taxes? | | |
| ▲ | techcode 2 days ago | parent | next [-] | | Nomads and even more permanent expats use less of the infrastructure and amenities. Not just for periods before and after they are living there - also during their stay. For example. If they (nomads) lose their (remote) job - they won't get social benefits payments like the "locals". They (nomads) also don't accrue retirement/pension which is usually part of income taxes. And of course they pay all the other "taxes". If they rent/buy anything - there's VAT. If they drive around in their car - they pay registration, insurance, road tax, highway tolls. Pretty sure they also need to purchase some sort of health insurance. | | |
| ▲ | closewith 2 days ago | parent | next [-] | | I think it's pretty clear that digital nomads, like tourists, use _more_ taxpayer resources because they use public infrastructure much more than the locals, who like most people globally live simpler lives mostly at home. | | |
| ▲ | techcode 2 days ago | parent [-] | | It's not clear to me. Perhaps we have different ideas about what "taxpayer resources" and/or "public infrastructure" is? I was highly skilled migrant/expat, now "naturalized Dutch", and work for Booking.com - so I know a thing or two about tourism (beyond just traveling myself). Tourists least, digital nomads a bit more, and expats even more - use public infrastructure. But over lifetime, locals use order of magnitude more than expats. | | |
| ▲ | closewith 2 days ago | parent [-] | | > I was highly skilled migrant/expat, now "naturalized Dutch", and work for Booking.com - Interesting. We may know each other. Are you C-suite? > so I know a thing or two about tourism (beyond just traveling myself). Appeals to authority are always suspect, but it takes staggering arrogance to claim employment at Booking.com as your authority on the economic impact of tourism. But you know the old saying about making a person understand something when their pay cheque depends on them not doing so. > Tourists least, digital nomads a bit more, and expats even more - use public infrastructure. You have this order exactly backwards, with tourists using proportionately the most public infrastructure, and residents the least. | | |
| ▲ | techcode 2 days ago | parent | next [-] | | While I agree that appeals to authority are suspicious - no idea how "I know a thing or two about tourism" could be interpreted as claiming "authority on the economic impact of tourism". So far your views/opinions seem to be very "black and white". And beyond stating them - I'm yet to see anything to support or even just explain/elaborate them. | |
| ▲ | techcode 2 days ago | parent | prev [-] | | I'm not C-suite - I gave up on management track long time ago. I'm still waiting to see how/why my order of who's using public infrastructure is wrong/opposite. Care to explain? |
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| ▲ | FirmwareBurner 2 days ago | parent | prev [-] | | >Nomads and even more permanent expats use less of the infrastructure and amenities. So what? Public/societal services aren't pay-as-you-go. For example, I also never used any public schools in my current country nor do I have kids of my own who use them, but I still pay for them via my income taxes because that's what's necessary for a functioning society. You're not exempt from paying taxes just because you use less public services. So why should digital nomads be exempt from contributions to the society they enjoy living in? | | |
| ▲ | techcode 2 days ago | parent [-] | | I'm not saying that digital nomads should be completely exempt from contributions. I am saying that over their lifetime - they use much less of the societal services in their "remote/nomadic" locations compared to lifetime-permanent/locals. And governments calculated that in. | | |
| ▲ | FirmwareBurner 2 days ago | parent [-] | | >I am saying that over their lifetime - they use much less of the societal services If you put it like that, other groups of people also use less societal services. Why aren't they getting the same tax exemptions too? | | |
| ▲ | techcode 2 days ago | parent [-] | | That's something for regulators, politicians and society overall to figure out. Personally - I'm happy for my taxes money to be used for police or firefighters (and other things) and I still hope I never really use/need them. At the same time. If The Netherlands hadn't had 30% tax ruling for expats, wife and I would've went back after my initial 12 months contract. Back in 2010/2011 - even with software engineer salary, until 30% tax rule was granted for me - we were chipping away money we saved up living in Serbia. Back in <=2010 wife and I were earning €1500~€1750 in Belgrade. Saving at least a third of that. In the NL the ~€45k gross (before 30% tax rule was granted) was not enough for rent, food and other normal (no car, not eating out ...etc.) costs. But Dutch had 30% ruling, so even with one newborn we could still make ends meet. And 15 years later The Netherlands has 2 adult tax payers (at 0 prior cost for NL), and 2 children (born there, so same societal/taxpayer cost as any other NL citizen/child). | | |
| ▲ | FirmwareBurner 2 days ago | parent [-] | | >Personally - I'm happy for my taxes money to be used for police or firefighters (and other things) and I still hope I never really use/need them. Then .... we agree? >At the same time. If The Netherlands hadn't had 30% tax ruling for expats, wife and I would've went back after my initial 12 months contract. With all due respect, working for Booking in NL you were not a Digital Nomad, you were a local resident and local worker. While you did get the tax reduction during that time, a local company in NL made use of your labor and not some foreign company like in the case of digital nomads. It's apples to oranges | | |
| ▲ | techcode 2 days ago | parent [-] | | We're mostly agreeing. And while digital nomads and expats are indeed apples and oranges. It seems you're missing the parts where they are the same? Both digital nomads and expats didn't cost the country anything while those nomads/expats were growing up, got education ...etc. Perhaps it's USA centric vs the rest of more "socialistic" countries POV? Outside of USA - (specifically in Croatia, but also many other countries) child birth, subsequent parental leave, daycare, school, college/university and children healthcare are subsidized or even "free". Of course "free" means paid by all the taxpayers of that country. And yes - I think that bringing in expats (implying there being more local business/employers, more corporate and income taxes) is better for a country/economy than bringing in digital nomads. However when economy is heavily relying on seasonal tourism (and it seems like most of countries with digital nomad visa programs are), they also tend not to be the most suitable for other types of services/innovation/manufacturing/etc business. They usually still need to spend more money on building office spaces, change the laws to make it more attractive for business to incorporate there...etc. And overall not feel like a ghost town outside of tourist season. Perhaps Croatia (and other countries with digital nomad visas) are counting on digital nomads leading to more office space being built, some of nomads staying and starting a business, etc | | |
| ▲ | FirmwareBurner 2 days ago | parent [-] | | >Both digital nomads and expats didn't cost the country anything while those nomads/expats were growing up, got education ...etc. Yes. Then why should expats pay taxes and digital nomads not? Especially given that digital nomads will be the first to leave the moment the shit hits the fan and go to another country, while expats are more likely to stick around for various reasons like family, community, kids, familiarity, etc. It feels like the incentives are totally backwards unless your goal is more wealth inequality for the locals, more expensive housings, etc. You're screwing over the people who contribute the most while giving tax breaks to those who will leave on a whim. Also, regarding your previous comment, your example with NL is an outlier in the EU. There's no way other countries here could give expats tax breaks and not collapse their welfare systems which are built on the socialist principles of having people constantly paying in the system, so they can't just do what NL does without going through a revolution. The example is also survivorship bias since plenty of other people moved to NL to work on poverty wages initially lower than in their home countries, and then left because they didn't get to those magic six figure Booking wages. So the expats and the NL government got scammed, and the only winners were are the NL corporations exploiting cheap labor selling them the dream of potential future high wages that might not happen. Not exactly a society I dream of. >Perhaps it's USA centric vs the rest of more "socialistic" countries POV? What does this have to do with the USA? I'm talking from an EU point of view on what other EU countries are doing. >when economy is heavily relying on seasonal tourism Maybe it shouldn't. Because that only leads you into the tourist trap branch of Dutch diseases. Maybe it's best to build an economy on more tangible things that have some trick down effect, and not that only benefits landlords and hospitality business owners. > digital nomads leading to more office space being built How many digital nomads do you know who travel the world only to work in the same office spaces they try to escape from, and not from cafes and beaches? |
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| ▲ | closewith 3 days ago | parent | prev [-] | | I think it's up to each country. Some jurisdictions have done very well from allowing digital nomads. Personally, though, I think they should be subject to local taxes and I'm glad they are in my country. | | |
| ▲ | FirmwareBurner 2 days ago | parent [-] | | >Some jurisdictions have done very well from allowing digital nomads. Which? How did they "do well? |
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| ▲ | jurking_hoff 2 days ago | parent | prev [-] | | [dead] | | |
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| ▲ | mschuster91 3 days ago | parent | prev [-] | | > As opposed to say Germany where it's close to impossible to work for a overseas company even as a citizen That's by design of our employment laws. We are the ones whose social security system will have to pay up when the employer closes down shop or fires their remote employees over night, and we are the ones whose health system has to take care when people burn out from being overworked, so we demand that employers create a local subsidiary with people and bank accounts we can hold accountable when laws are being violated. Oh, and we also want to make sure that people and companies pay their taxes. | | |
| ▲ | oytis 3 days ago | parent | next [-] | | I wouldn't say it is necessary by design, as it is not forbidden and definitely possible. It's just Germany can't handle the complexity of its bureaucracy. Every new government promises to alleviate the bureaucratic burden, but in the end only adds exceptions on top of exceptions making the burden even heavier. So for remote work setup either the worker or the employer should carry it, and it's rarely worth it. | |
| ▲ | pjmlp 3 days ago | parent | prev [-] | | As someone working mostly remote across DACH, it is possible, but naturally the official residence and taxes have to be here. | | |
| ▲ | mschuster91 3 days ago | parent [-] | | Well, that's what the problem is. When all you as an US startup want is to hire a single or maybe a dozen Europeans, you can either go and pay them in cash or as sole-proprietors and leave the employees to deal with the rest (as long as the US gov't gets its taxes, you're in the clear from the IRS point of view), you hire some intermediate body-shop, or you do it the proper way and pay a loooooot of money for a subsidiary. | | |
| ▲ | StopDisinfo910 3 days ago | parent [-] | | I think it makes a lot of sense personally. You can contract with companies wherever you want as a company but you can only have an employment contract with a company based where the employment laws of your country applies. | | |
| ▲ | oytis 3 days ago | parent [-] | | It does make sense, but it also is pretty hard to work as a contractor being located in Germany. The main issue is that contractors don't by default pay pension contributions, so the pension fund hunts down those it considers "fake contractors" under a complicated and ambiguous set of rules. | | |
| ▲ | mschuster91 3 days ago | parent [-] | | > The main issue is that contractors don't by default pay pension contributions, so the pension fund hunts down those it considers "fake contractors" under a complicated and ambiguous set of rules. It's not that complicated. The rules are relatively easy: as soon as you're embedded into the organization of the client (aka, you get laptops/desktops from them, get directed by their staff what you have to do) and/or the dominant part of your time / income is one single client, the assumption is that the client only does "contracting" to avoid the obligations (in wages, social security contributions and employee protection laws) that regular employment would bring with it. The only issue that I have with the current regulatory framework is that the individual "sole proprietors" are held financially accountable for the social security contributions, not those who actually profit from this kind of abuse. | | |
| ▲ | StopDisinfo910 3 days ago | parent [-] | | That seems extremely backward to me. Is that specific to certain contracting status or is that the case for any kind of contracting? People should be free to contract if they want. Obviously that means they are now acting company-like and have to pay social contribution like a company would but that should be on the contractor not on the client. That’s how things work everywhere in Europe I had to deal with contracting. Germany really is a puzzling country. | | |
| ▲ | mschuster91 3 days ago | parent | next [-] | | > Is that specific to certain contracting status or is that the case for any kind of contracting? It's specific for "sole proprietor" contractors. Multi-person operations, consultancies and bodyshops are exempt as long as the employees get their contributions paid. > Obviously that means they are now acting company-like and have to pay social contribution like a company would but that should be on the contractor not on the client. That is possible, indeed, you can voluntarily pay pension contributions (and that's the stuff that the pension fund claws back). You can also voluntarily contribute to the unemployment benefits. As long as you at least pay the pension contributions, you're fine. The unemployment benefits is voluntary, no penalties if you don't pay these, but also, no payouts when you gotta close down shop. The problem is, good luck finding a client willing to pay appropriate rates - too much unfair competition from those who just hope that neither they nor the client end up in a colonoscopy-level tax audit in 10 years (the time frame in which the statute of limitations for tax crimes expires), and the sad reality is that this gamble often enough pays off. | |
| ▲ | pjmlp 3 days ago | parent | prev [-] | | Not really German specific, this is also the same situation in many European countries. The main goal is to prevent contracting with a single client as means for companies to get rid of employees and their social security responsabilities. Anyone contracting with a single client can eventually go to court and demand to be employed by the client, proving that the relationship has been one of employee/employeer, even though the contract was a freelance one. |
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