As an e-resident keeping order in the complex nature of cross-border taxation might be a little challenging. For that, you might require some legal assistance to asses where you need to pay your taxes. In some cases, it might be more than just one country, here can help tax treaties.
Many countries have entered into tax treaties to help avoid paying double taxation but not all, that’s why it’s wise to look into regulations before deciding where you travel and work.
Where to Pay Taxes
To understand where and how much taxes you need to pay, first you need to look into a country’s tax legislation. Every country has its own unique tax laws and legal requirements which you will need to follow.
Where to pay your taxes depends on various factors. Like where you spend most of your time, which citizenship you have, which countries you travel to, for how long and how often, how much you earn, and where you have permanent residence.
In some cases, you own personal taxes in a country where you are a tax resident, which means usually where you spend most of your time. In other cases, you are expected to pay taxes in the country of your citizenship, no matter if you live there or not. As an e-resident, figuring out where you owe taxes can therefore be complicated and require specialist knowledge.
Tax Treaties
As an e-resident who travels a lot or spends most of the time in multiple countries, you might trigger a situation where more than one country claims that you own them taxes. In that case, if two of those countries have signed a double taxation agreement you might be able to avoid paying double taxes.
Estonia has signed over 60 treaties, including all EU and most OECD countries, to avoid double taxation.
You should look closely into the legal system of the countries you intend to live in and work to understand the legal system for avoiding paying double taxes or any penalties. Even if it’s just for a short period, you may be tax liable as an individual or business owner. The easiest way is to hire a tax professional to provide you with advice.