The significant perk of working remotely is that you could be anywhere in the world and it won’t affect your work. You could be spending time with your family & kids or enjoying the Sun in Bali. Your business will still run as smooth as it was when you were present in your home country. But is that really where the buck stops?
You will come across endless articles about how working remotely is a dream come true (and I bet it is), but are you really investing your money right and getting the maximum returns?
If you are a remote start-up, taxes are probably not the thing you might worry about at the moment. But if you make hundreds and thousands of dollars while working remotely, and still haven't given some attention to your taxes, then you are probably doing a lot wrong.Remote workers often end up paying more taxes because of the nature of their work but this can be avoided. In fact, remote entrepreneurs can avoid more than half of their taxes legally if they are getting heavily taxed.
Does a remote worker really pay double taxes?
If you are working remotely you will generally pay taxes to the state where you do the work (the "physical presence" rule). Your employers also pay taxes on wages (paid to you) to the same state, even if the employer has no physical presence there.
If you are living in a country/state with a high tax rate, imagine the amount of money you’d have to give away to the government. You can end up giving away more than half of your money. And while there is not much you can do about the taxes that your employer pays, there is a lot you can do about the taxes that you pay.
Andrew Henderson, founder, Nomad capitalist, created the Flag Theory. He believes in going where you are treated the best. The theory revolves around the concept of having a second passport, and an offshore bank account or even hosting your website offshore. And every time you base a part of your life in a new country, you plant a ‘flag’. Watch Andrew Henderson talk about the Flag Theory.
What are you not doing right?
You, like a whole lot other remote entrepreneurs, are doing a lot wrong that is costing you (or will cost in the future) a lot more money. Wouldn’t you want to save some extra thousand dollars that you are probably giving away and not even realizing it?
- Choose the right country for you - You might be living in the wrong country with high tax rates and giving almost half of your income to the government. The tax rate in France goes as high as 45%. Imagine if the same entrepreneur living in France moves to a place like Hong Kong where tax rates start at 2%. You could save a lot more money and invest it in new ventures.
- Invest your money right - Probably you think buying a house would be a great investment! Or maybe a car? Well, we are here to tell you otherwise. By the time you’ve paid for the house, the car, all the different types of bills, and then your tax bill, you wind up with zero or very little leftover. Startups have small budgets whatsoever. One needs to save as much as possible to keep the engine running. Instead, established remote entrepreneurs are paying half of their money to the government as taxes.
How to legally avoid taxes as a remote entrepreneur?
The problem here is that people intentionally get themselves stuck in a very limited geographical sphere. If you have the mindset that traveling to places like Africa and Asia is crazy, you might be missing out on some great deals. To save big on taxes you need to:
- Cut down your tax burden -
- Look for a higher return on investment - When you are investing right, you are definite to get better returns on your investment. The reason why real estate isn’t a good investment option is that it gives you another reason to stick to your home country. And that is also one of the reasons why the government wants you to invest in real estate because if you stick around they can take more of your money from you. Choose to invest where the returns are higher and aligned with your priorities.
- Create a backup lifestyle - Most of us will never venture much of the beaten path… not even Nomads. There are certain places that seem to be the “ordained” places to go, whether that’s Bali, Budapest, Bangkok, or Barcelona. But you need to go where you are treated best. The benefits of opening up and realizing that the world is largely the same are endless.
The remote work strategy works for both established remote entrepreneurs and startups. Starting your business in a country that treats you the best enhances your success rate. Imagine how much money you would save if you start your business in a country with lower tax rates. And why would you want to wait until you are making thousands of dollars to save more money anyway?
Andrew Henderson, founded Nomad Capitalist to help people 'go where they are treated best'. He says “We have governments expanding their reach over our lives, power being consolidated by an elite few and a more volatile, unpredictable global economy."
Today, with the advent of the internet, a globalize world economy and opportunities are available to everyone. All you need to do, willing to adapt to these changes.