[imagesource: Pixar Printing]

The digital nomad working life has really become appealing of late.

But deciding to live location independent to pursue a career that supports the island-hopping, “working near the waves” lifestyle does come with a few considerations and some irritating admin.

On the upside of changing your office button-up to a tank top is working in a place with fresh air and amazing views, but on the downside is the inherent tax risk that individuals or employers need to think about and plan for.

Tax advisor Denny Da Silva points out that international tax law has not evolved in the same way that technology and business have over the last few years.

He said that the basic tax principles remain the same and should be top of mind when trying to adopt the digital nomad lifestyle. This is true for the employees who wish to work remotely and for the employer introducing the ‘work from anywhere’ policy.

Per BusinessTech, an employer needs to carefully manage the risk of creating a so-called permanent establishment in another country:

“This is essentially fancy lingo for creating a tax presence in another country… an important consideration is whether the presence of an employee in another country could create a taxable presence for the employer in that country,” Da Silva said.

On an individual basis, a taxable presence is generally created after you spend more than 183 days out of any 12-month period in a certain country.

The idea is that being in a country and rendering services means that an individual’s income is sourced in that country, which is when double tax treaties apply in terms of how the taxing rights are allocated:

“Where there is no double tax treaty in place, then an individual pays tax in one country on a source basis and in another country on a residency basis, but may be able to claim a credit for taxes paid in the other country – an administrative nightmare which can ruin your time on the beach,” stated Da Silva.

While it is possible to manage the responsibilities of a “digital nomad” so as not to create this tax presence, it is also possible to circumvent the hassle by seeking professional advice and competent assistance.

For the ins and outs of things that give most of us sweaty palms and instant headaches, tax experts such as Galbraith | Rushby are the people to turn to.

If you’re a senior employee or an administrative-staff-with-contract-negotiating-powers, then this tax risk is higher for you.

In which case, you may prefer to just go on leave and thoroughly enjoy the beach, rather than trying to manage working in an exotic location.

It also depends on which battle you’re willing to pick: SARS or Eskom.

[source:businesstech]