Tips & TRAPS (Ouch) for Acquiring Residency and Companies in New Countries as a Digital Nomad

One of the magnificent parts of being a digital nomad is the freedom to explore so much of the world and engage deeper in new cultures and peoples.

But over the past 100 years governments have tried to restrict the free movement of people.  So, we digital nomads need to become experts in geo-arbitrage in order to stay a while longer or operate our businesses in new places.

IN recent years various governments have tried to tap into the digital nomad movement to attract both migrants and longer staying visitors to their economies.

The rise in so-called digital nomad visas is evidence of this.

But. But, but, looking under the hood of the marketing machine can reveal a much different picture than you initially thought.

As a Founder of a multi-national digital nomad business, I’d like to share some of my experiences around the ‘gotchas’ and ‘tips’ on how to improve your geo-arbitrage.

Does A Digital Nomad Visa Require You to Stop Nomadding?

Imagine our surprise when the Portuguese government invited us to migrate our business to Portugal.

The weather is stunning, the people are fantastically friendly, English language is spoken widely, and the taxation of expats is to die for.

And then they told us we had to stay in Portugal 9 months of every year!

Yes, small detail for most expats, but major news for a digital nomad.

Whoa. Why 9 months? Well, it turns out that the visa renewal rules (that kick at the end of your first year) require you to show you’ve been in Portugal for a 6-month unbroken period. And if you took a trip out of the country, maybe for a business meeting or to see your family back home, and break your 6-month unbroken period then your requirement goes up to 9 months.

Ouch!

No thanks.

This sort of restriction means we could have put weeks of effort and thousands of dollars into become resident for only 1 year. Not a great investment in my books.

So what do you do when confronted with a truth that doesn’t match up to the marketing efforts of attracting people to the country?

TIP: Always have a Plan B. In this case nearby Spain has both digital nomad and startup visas. The startup visas in particular are multi year visas and designed for business people.
TIP: Enjoy your time in the country and look for alternatives. You can always return as a tourist to explore more. Maybe not all in 1 go as Plan A had you dreaming of.

VISA FROM 1 EU COUNTRY IS NOT EU-WIDE

For some reason we non-Europeans get very confused about EU/Schengen Visas. When we talk with EU citizens we get mixed answers as the rights of an EU Citizen are quite different to an EU Resident, or a Visitor from a Visa-free country.

At the basic level if you get a residency visa from one EU/Schengen country you only have rights to work/do business in that specific country.

As soon as you leave your new residency country you are using a different visa in the next country – probably a tourist visa. In the Schengen Zone this means you can stay roughly 3 months out of every 6 months using a tourist visa, or using one of the bilateral visas if you’re from one of the lucky countries.

My head is starting to hurt now. I’ve still got to count days even if there are no border checks.

Actually, there are border checks. Almost every border in Europe has police and maybe customs inspectors on them. During the covid era there were health inspectors too. All points of contact that might be registering your border crossing. And if you’re crossing a border in an EU registered vehicle there are automated camera recognition devices. If you cross a non-Schengen border you’ll also be ‘stamped out ‘of the Schengen zone. If you exit from a country you’re a visitor in you may find you get flagged as unusual. If you are exiting from the country you have residency in then everything appears normal to the authorities. And we still don’t know what the new ETIAS arrangements will mean later this year or next when they get rolled out.

The point of all of this is that you may not want to make it obvious that you are working in other countries you don’t hold explicit residency permits for.

TIP: When in other countries and people ask you what you’re doing here either say you’re on holiday or making a business trip. (Why business trip – see the next section)

Tourist visa including some business activities

It’s a little known fact that most tourism visas also include the right to do certain business activities. This ‘business concession’ has been inserted to allow the ‘tourist’ visa category to also be used for things like trade fairs, conferences, sales calls, and marketing events.

Back in the day it wasn’t like this. My first trip to the US as an Australian (ie – 2 countries with very friendly relations) required me to front up at the US Embassy in Australia and get a specific B1 visa that allowed me to ‘work’. Work being attendance at a conference.

These days these specific work visa’s aren’t required for many ‘marketing’ and ‘sales negotiation’ type work.

Why? I guess because foreign business people are encouraged to pitch their wares in a new country and negotiate deals etc. but not to actually perform ‘work’ associated with delivering a product or service. In short – you can use a so-called ‘tourist’ visa to sell your services to locals but you can’t do the work in country.

TIP: When talking about business in a country you’re visiting under a tourist visa talk about ‘pitching’, ‘selling’, ‘negotiating’ or ‘attending conferences’ etc. Those items that fall within the ‘business’ section of the tourist visas.

Extra taxation in new countries

Tax. Tax. Tax.

Tax is such a pain for digital nomads.

Each country has its own rules. It’s easy to be caught by 2 or more countries thinking you should pay tax there, like twice. Yet, most nomad circumstances haven’t been tested in court, but who wants the hassle of being the test case.

The 180-day rule is myth in most countries. Example, if you are in say Italy or Greece for 1 day and happen to hold a meeting between board directors, both of these countries have laws that say your total annual global earnings are caught withing their tax systems. Ouch!

Tax is one of the big reasons for setting up a company somewhere tax-friendly.

And even if you don’t choose an obvious tax-friendly country you should be aware that different countries apply VAT/GST/Sales Tax rules differently. In the case of traveler accommodation we find that EU companies need to add VAT yet most non-EU companies don’t.

Another example, when we travel in France for business we can’t claim the VAT on accommodation but when we travel in Germany we can. When VAT is over 10% all these technicalities can add up to significant savings when done right.

TIP: As you narrow your countries of choice down go the extra mile to investigate the major issues of your work and significant costs.

TIP; The UK and former UK colonies (including the US) tend to have some of the best tax systems around.

is it time to stop paying yourself a salary

Most Income Tax issues are centered around your earnings. Now, as an employee there’s not a lot of options. But as a business owner you have more flexibility.

Imagine if you stopped paying yourself a salary. Suddenly there’s no income tax to pay in many countries.

Side Note: There is a widespread body of law known as ‘Controlled Foreign Corporations – CFC. CFC rules are designed to allocate the profit of your business to you personally if you ‘control’ the business. Luckily each country that has CFC rules tend to implement them differently. Many only apply between companies for instance.

OK – back on the topic. So you might ask how do you live if you don’t earn a salary. And the short answer is that to pay for your lifestyle you may just require a way to get the money out of your company tax free or with little tax.

What are those possible ways? The 2 most common methods are.

• Borrow money from your business and never pay it back
• Take dividends that may be taxed lower than salary

You’ll need to look into the details in each circumstance of course, like checking what happens if your company ‘forgives’ a debt down the track, but the bottom line is that there are big differences between countries.

TIP: Be ready to answer questions from authorities about how you will pay for your visit without referring to earning a salary. Mention things like ‘living off your savings’ or earning regular ‘royalties’ or ‘dividends’.

TIP: Don’t show or talk about payslips and jobs – because without a salary you won’t have one. Do talk about your foreign business and what it does in that other country.

Banking for local residents only

Now, we’ve got a few companies in the US, and while I love the online nature, cheapness, and low oversight in the US, their banking system sucks! It is painfully slow and very old fashioned.

Even US neo and crypto banks tend to have many limitations. (I can’t tell you how much time we wasted with Revolut for instance)

I don’t know how many banks in the US I’ve spoken with have refused to open a business account, where the Directors are not also local US residents. (Of course, you don’t need to be a US resident to open a US company. We did ours all remotely).

I know it’s not the law as we have banks that accept this (Wise, Mercury, Brex, Stripe etc.) but the mentality can be hard.

When we initially looked at Estonia too, we found we could only open a bank account in person. We were resident of Australia at the time the cost of ‘popping into the bank in Estonia’ was a bit prohibitive.

We ended up rejecting Estonia at the time, and again later based on their extra government reporting overheads for travel companies.

TIP 2: Do your research ahead of time about the requirements to open a bank account. Ask for the checklist.

TIP 2: Leverage the business networks and startup groups you’re a member of. They often have great memberships deals. (We got our Mercury accounts only after we joined a Microsoft startup program)

TIP 3: Ask your colleagues if they earn referral bonuses by bringing in new business. It could connect you with more experienced sales people

TIP 4: Aim to open accounts in the second half of the month and hope the sales team are behind in their sales achievement that month. It really makes a difference.

Not all the family is welcomeD with open arms

Visiting new countries requires you to fit into their rule system.

Some of the more religious, or more conservative, or underdeveloped countries around the world might have laws that seem old-fashioned to some. Even secular countries can have unusual dress code rules (see France’s rules and controversies on wearing burkas, hijab’s, speedos and burkinis in schools and public swimming pools)
Regardless of religion the world is full of different rules
It really doesn’t matter what we think of their rules. It’s their country, and as visitors we need to fit into their rules. We do need to be mindful of not only their laws, but how the business community deals with them as the business community may be your first engagement.

Examples:

• LGBTQIA folk get a raw deal in too many countries (care in Africa and Middle East)
• Unmarried couples need to be mindful of booking rooms in some countries (especially Middle East)
• Formal marriage certificates may be required to be shown if your passports are in different names (Passport checking and reporting to authorities by hoteliers is common practice in many countries)
• Children in mixed marriages may need formal permission from both parents to cross borders

And if your family includes furry ones then you be surprised with things like:

• Some countries, like India, prevents tourists and businesspeople from bringing thier pets into the country (so much to us setting up a business in India)
• Pet Quarantine laws are getting stricter by the month. Our ageing Chief Happiness Officer Dakar Dingo will never see his birth country of Australia again.

TIP: Don’t draw attention to yourself. Don’t make it obvious you may be transgressing a rule. Many people won’t care or won’t want to ask.
TIP: Breaking a law or a rule by accident is a normal part of life. It’s how you deal with it that makes the difference.

TIP: If you get surprised by some unexpected rules and conventions, try not to poke the bear too much. Plan an exit and maybe try to explain respectfully why their standards don’t align with your own. Share your experiences with others in your network to help them avoid uncomfortable situations too.

TIP: Always have a Plan B and be ready to leave quickly if things turn nasty.

Additional Government Reporting

There is a general shift to more VAT/GST/Sales Tax taxation systems around the world in recent years. With shrinking income tax paying populations (per capita) governments are turning to indirect tax to raise their needed funds.

Here in Europe, it’s common to see 20% VAT added to almost everything. It makes our 10% in Australia seem cheap, and our 0% in the US sound amazing.

So, while being a foreign company has traditionally meant you’re exempt from many of these local tax rules, there are places like the EU that have introduced new tax laws that apply to foreign businesses from anywhere in the world selling into their country. Actually, it does go to the extreme where the EU forces internet platforms like ours to report the earnings of all EU people selling apartments etc. anywhere in the world. Even if there’s no VAT in the country where the property is located. Ouch again.

EU Reporting Going Extreme

You might have thought that migrating from Belgium to Central America 15 years ago means you avoid EU tax reporting – sadly, no.

The reporting we would have to do for all accommodation bookings globally to the Estonian government was the big determiner for us rejecting Estonia as our headquarters. The cost of gaining that info, and then reporting monthly to the government is/was frankly, uncompetitive. And now its spread to the whole EU.

Did you know that France is already requiring platforms to withhold Social Contribution from payments to suppliers and forward those Contributions to the French Tax Authority?? I’m not sure about you but I’m pretty sure when I buy an occassional service or good from a supplier I’m not their employer.

With e-invoicing coming to many countries in the next few years you need to look carefully at what each country is building too. Some countries require you to send every invoice to the government, the government will then send it to your customer. The customer then pays the government, who extract what they believe is the taxation element before sending you the change.

Ouch.

More reason to look at countries that are ‘paperwork friendly’.

TIP: Get on the distribution lists of trade media to learn of new changes. (I use an RSS reader to skim 50 news sources a day. VATUpdate is a great source on sales tax issues for instance)

TIP: LinkedIn Groups and leaders are often the first places in-depth articles appear on government rule changes
TIP: Use hashtags in Twitter/X to setup for latest news releases

TIP: Jump onto forums that specialize in business issues in your industry (

Governments and policies change often – need to be nimble

Then there’s the situation of shit-happens.

You do all the research, you choose a country to set up in, and a structure that makes sense. But the government changes and the old rules go out the window.

For example, right now, we’re seeing Romania go from a <5% tax rate for many freelancers to a 15%+ taxation system. Ouch. Time to change countries again. Albania changed recently from a great 5% tax rate to a ‘no tax for digital nomads’ situation (which is actually bad as it means DNs using their new visa can’t become tax residents in Albania and probably remain tax citizens in their own country).

The UK may change their Non-Dom (non-domiciled persons) tax rules soon based on a series of recent high profile people not paying much tax while living in the UK.

Australia changed both their quarantine rules and digital nomad tax rules recently with significant impact on digital nomads.

TIP: Roll with the punches. Changes rarely happen instantly but it can be stressful.
TIP: Announcements are not law – they require ratification by parliaments etc. before coming into force. You’ve probably got time to change strategy.
TIP: Don’t panic. Governments change their mind a lot. Maybe wait until there’s is indisputable weight of evidence that the new rules are coming into play.
TIP: Plan the next strategy and next company location maybe. Switching business to a new company is often a lot easier than shutting down the original company. The original company may exist for years into the future but without trading isn’t likely to have many tax issues.

Internal conflicts can add a lot of time and cost

Even the most normal of countries have internal conflicts between authorities.

Many of you know that instead of the promised 2 month turn around for our French Visa they actually took 18 months to issue our visas. We had to move countries for months but remain close to France for making meetings.

Why – well in France immigration is processed by local ‘prefectures’ (local governments) not the national government. In our case the local prefecture didn’t agree with Paris’s rules and so refused for more than a year to process our application.

Some countries don’t recognize certain other countries – the Kosovo-Serbia conflict is one of the largest examples. Cyprus comes to mind too. And certainly within some countries in Africa the local militia are in control and the government nowhere to be seen. (I had to take 2 drivers in Cameroon years ago in order to leave 1 as hostage with some militia to ensure the car returned to its starting point).
So, what you might ask. Well, you just have to be ready for extra costs, time, and hassles. In the Kosovo case I had to purchase additional insurance out as most European insurance policies at the time didn’t cover vehicles, health, medical etc. in Kosovo.

TIP: Always have a Plan B. (In our French visa disaster case we were ready to move to Jersey instead)

TIP: Don’t invest too much until you hold in your hand the needed permits. Don’t accept promises as being contracts. Tread lightly.

TIP: Ask questions of senior people. In my French visa case I made a meeting with the Minister to ask the hard questions.

Some countries refuse to acknowledge the internet

This one still amazes me. With computers being around 100 years now, and the internet being created nearly 50 years ago there are some countries that refuse to use or even acknowledge the internet.

In setting up our new African headquarters in Eswatini we found this. The government refused to accept our Police Character Reports (needed for our Directorships) directly from the foreign government’s own websites. It’s not like the French or Australian governments are considered untrustworthy. It was just the fact that they wanted a paper certificate mailed or couriered to them. Even pdf files weren’t acceptable. Seriously.

Again, it’s not logical, or practical, or even required under law. It’s just the familiarity and laziness of bureaucrats. This requirement coupled with the need for a signed lease agreement on the headquarters of our digital business added USD$1,000 to the cost of setting up in Eswatini. A country where the company fee is only USD$40.

(Being trained as a Chartered Accountant one of the things I often do is check the legislation that bureaucracies need to abide by. It’s quite easy to spot where the law does not stipulate a particular format, like couriered paper forms only.)

Dealing with internet luddites is sadly one of the things we digital nomads must deal with.

TIP: Be prepared for additional costs and time delays when dealing with new countries. Try to talk with others, and mentors, who ahve done it themselves.
TIP: Be prepared to find alternative and unusual ways to get things done (use friendly, local advisors and fixers to find local solutions.)

TIP: Be very careful about shakedowns and bribes. I never pay them, but it can add a lot of delay to your processing until the offender loses interest.

TIP: Focus on your end-goal and not the bumpy ride. Making sure your end goal is worth it can help provide some balance.

Visa runs require compatible neighbours, friendly border guards and luck

Resetting your visa record is another common geo-arbitrage event for digital nomads.

Taking a run to a neighbouring country, stopping a day or two, and then returning get that magical new starting date stamp in your passport (if you’re lucky) or at least a tick in the box on the computer as it tends to be today.

But, you need neighbouring countries that are compatible. I don’t mean just the formal rule stuff, but the logistics of getting there and back. Is it easier to fly further away than go overland on public transport.

After this year’s Indian dog-disaster we investigated Thailand as a new location. In Thailand as you probably know the average tourist visa is quite short but visa runs to Malaysia or Cambodia are common. The difficulty we found was that we couldn’t cross the border easily with our dog as Malaysia has at least a week quarantine on each border crossing for dogs.

In another story one of my friends found himself effectively exiled from the US, where as an expat, he was preventing in returning due to having a disabled daughter. Even though she was admitted on previous occasions, was enrolled in a special school in the US and the border guards prevented the whole family from re-entering the country.

TIP: Be prepared. One day you will be rejected at some border, somewhere. It’s rarely catastrophic but another speed bump to manage. Taking things professionally and courteously might resolve it at the time, but more likely it will take some days to resolve. Just be prepared to change plans at the last minute.

TIP: Going up the chain of command often results in the border officer being let off the hook on making a decision, and you dealing with a more skilled person.