Is a permanent resident that is a nomad considered TAX resident?

[Mark X]

 

Hi all,

Your opinion on the following scenario would be much appreciated. Especially if you are an accountant in Panama.

Is a friendly nations permanent resident of Panama who does not live in, work or have any ties to, Panama still considered a TAX resident of Panama? 

Note the distinction between being TAX resident and resident in the immigration sense of the word.

This is of interest to anyone with Friendly Nations Permanent Residence that is abroad (outside Panama) year round. And maybe only spends a few days in Panama every two years in order to maintain this status. People working as digital nomads and people who are travelling long term, but not working, fit this scenario.

Assume the person is not tax resident in any other jurisdiction.

Also assume the person has no income, business, assets or property in Panama.

Thanks ?

[TwoSailors]

You posted this 6 times! Maybe it's me but I don't understand your question at all.

 

[Palo Alto Jo]

17 minutes ago, Mark X said:

 

Hi all,

Your opinion on the following scenario would be much appreciated. Especially if you are an accountant in Panama.

Is a friendly nations permanent resident of Panama who does not live in, work or have any ties to, Panama still considered a TAX resident of Panama? 

Note the distinction between being TAX resident and resident in the immigration sense of the word.

This is of interest to anyone with Friendly Nations Permanent Residence that is abroad (outside Panama) year round. And maybe only spends a few days in Panama every two years in order to maintain this status. People working as digital nomads and people who are travelling long term, but not working, fit this scenario.

Assume the person is not tax resident in any other jurisdiction.

Also assume the person has no income, business, assets or property in Panama.

Thanks ?

I am a bit confused by your question, but the only taxes you pay in Panama are when you buy something, own something, DO something that is taxable.  There is income tax here, only if you made your income here.  If you are asking if you still pay taxes in the U.S. , the answer is YES.  Even if you live on Mars, a U. S. resident has the privilege of filing income tax, and the requirements are more rigorous if you have a bank account in a foreign bank (foreign to U.S.)

[BlueBird]

21 minutes ago, Mark X said:

 

Hi all,

Your opinion on the following scenario would be much appreciated. Especially if you are an accountant in Panama.

Is a friendly nations permanent resident of Panama who does not live in, work or have any ties to, Panama still considered a TAX resident of Panama? 

Note the distinction between being TAX resident and resident in the immigration sense of the word.

This is of interest to anyone with Friendly Nations Permanent Residence that is abroad (outside Panama) year round. And maybe only spends a few days in Panama every two years in order to maintain this status. People working as digital nomads and people who are travelling long term, but not working, fit this scenario.

Assume the person is not tax resident in any other jurisdiction.

Also assume the person has no income, business, assets or property in Panama.

Thanks ?

 

This is a question for your attorney.

[Mark X]

I am trying to determine if there is a minimum number of days that a permanent resident of Panama must be on Panamanian soil in order to be TAX resident in Panama. For example: In many jurisdictions there is a requirement of 183 days per year to be a tax resident.

These days many thousands of "digital nomads" have residence in a jurisdiction they almost never set foot in.

I have paid both a lawyer and an accountant in Panama and got wildly different answers. Hence my posting here to see if anyone else has encountered this issue of digital nomads being resident (for immigration purposes) in Panama and the tax implications of them not being physically here.

Thank you for your comments.

 

[TwoSailors]

5 hours ago, Palo Alto Jo said:

a U. S. resident has the privilege of filing income tax, and the requirements are more rigorous if you have a bank account in a foreign bank (foreign to U.S.)

We just filed our US taxes with our US-based CPA that specializes in expats. There is no requirement to claim your foreign bank account if you maintain a balance of less then $10,000 a year. See IRS form FinCen 114 for clarification and exceptions.

[Mark X]

Thats interesting but not really related to my question. I am only interested in the rules for a European person. Thanks for your comment.

Edited April 7, 2018 by Mark X
typo

[Ray M]

If the person isn't living in Panama at all (and/or isn't living in Panama for the majority of the year), Panama cannot be used as a residency for tax purposes for a European jurisdiction.

Most European countries utilize the 183-day-rule. Also, the double taxation agreements (if in place with a specific country) won't work since Panama isn't interested in reciprocal taxation, simply because foreign personal income isn't taxed in Panama. What isn't taxed cannot be claimed reciprocally in case the foreign country taxed "foreign" income on the territory of Panama.

So, the answer is: No. The residency was never considered a residency for tax purposes. Panama does not have any such concept in place for individuals who do not live here.

[Ray M]

On 4/7/2018 at 10:44 AM, Mark X said:

I am trying to determine if there is a minimum number of days that a permanent resident of Panama must be on Panamanian soil in order to be TAX resident in Panama. For example: In many jurisdictions there is a requirement of 183 days per year to be a tax resident.

These days many thousands of "digital nomads" have residence in a jurisdiction they almost never set foot in.

I have paid both a lawyer and an accountant in Panama and got wildly different answers. Hence my posting here to see if anyone else has encountered this issue of digital nomads being resident (for immigration purposes) in Panama and the tax implications of them not being physically here.

Thank you for your comments.

 

You need proof of being physically here for at least 183 days. You might negotiate with a foreign country (other than Panama) that you are not a resident for tax purposes in that country (even if you are working in that other country) by not living more than 183 days in the country you worked. You will likely pay more federal taxes then.

As a "digital nomad" you may consider Estonian residency. They have a law explicitly for those cases. You pay some taxes and can claim against any which country that you already paid taxes there without having the need to "land" in any country permanently. Check it out!

[Mark X]

Thanks Ray M.

This is interesting information. You refer to "federal" taxes so this leads me to believe you are assuming the US is involved in this scenario. The US has nothing to do with what I am seeking clarity on.

A European who has been out of their home country in Europe for 4+ years has ZERO connection to that country for tax purposes (unless they have assets, such as a property located in that country, which in this case they do not).

Does a European with Zero tax obligations to their home country in Europe (due to the number of years they have not been tax resident there) who is a Permanent Resident of Panama (Friendly Nations) with a Panamanian Cedula, but who does not spend more than a minimal amount of days in Panama each year, have any tax obligation in their home country or in Panama if their entire income is from outside both of these countries?

Where is this person tax resident?

Is there a requirement written into the Tax Laws in Panama that says one must spend 183 days per year in Panama to be a tax resident here? 

Note again: In this scenario there is zero income, assets or gains of any kind in Panama or the European country. All income, gains and assets are outside of these 2 countries. 

Can I ask you your sources and if you are a professional tax advisor or legal expert?

Do you know anyone else who has wanted clarity on this issue? 

Many thanks

 

[Palo Alto Jo]

On 07/04/2018 at 4:21 PM, Mark X said:

Thats interesting but not really related to my question. I am only interested in the rules for a European person. Thanks for your comment.

This is the first time I've seen you mention you were a "European person".  That would have saved us all a lot of head scratching.  Hope you found your answer by now.  

[Mark X]

Hi Palo Alto Jo,

Yes.... a european. Sorry if I didn't mention it. As my question is about the Panamanian requirements to be tax resident in Panama I probably didn't think this mattered. As a nomad the person has not been living in any jurisdiction for long enough for the past 4 years to be considered tax resident anywhere else in 2018 other than Panama. So, I am still wondering where the person in this case is tax resident? A friendly nations resident of Panama who spends minimal time here each tax year and not long enough in any other jurisdiction to become tax resident anywhere else. 

Cheers for everyones input.

 

[Ray M]

On 4/11/2018 at 3:34 PM, Mark X said:

Thanks Ray M.

This is interesting information. You refer to "federal" taxes so this leads me to believe you are assuming the US is involved in this scenario. The US has nothing to do with what I am seeking clarity on.

A European who has been out of their home country in Europe for 4+ years has ZERO connection to that country for tax purposes (unless they have assets, such as a property located in that country, which in this case they do not).

Does a European with Zero tax obligations to their home country in Europe (due to the number of years they have not been tax resident there) who is a Permanent Resident of Panama (Friendly Nations) with a Panamanian Cedula, but who does not spend more than a minimal amount of days in Panama each year, have any tax obligation in their home country or in Panama if their entire income is from outside both of these countries?

Where is this person tax resident?

Is there a requirement written into the Tax Laws in Panama that says one must spend 183 days per year in Panama to be a tax resident here? 

Note again: In this scenario there is zero income, assets or gains of any kind in Panama or the European country. All income, gains and assets are outside of these 2 countries. 

Can I ask you your sources and if you are a professional tax advisor or legal expert?

Do you know anyone else who has wanted clarity on this issue? 

Many thanks

 

The tax residency here is needed as proof somewhere else. If the proof falls short, some other country will consider you a tax resident if that is advantageous to them. If not you will be a resident without tax purposes. Any which bank will always be in need of "residential exclusion" in specific countries that take part in Information Exchange. It depends on the country and your wealth if some country will claim more than they are entitled to per your status or time you're spending in that country. But if you stayed i.e. in Italy for a big portion of the year and used to be going to France during the summer, and presented your Panamanian zero-day-tax-residency, you might end up being asked some more questions, and it might be in retrospect for previous years. Also, the laws "move" and Panama will (sooner or later) be trying to get some reciprocal incentives. Why wouldn't they start taxing on "time" being spent in Panama and introduce the concept of tax residency? It would bring Panama more money than all of its GDP right now. I am guessing (really a guess but still) someone is already calculating that. If you wanna still save some money in Panama you could still use corporate vehicles but for taxing personal income there will be change coming to this country (sooner or later). For now, no personal income received from capital markets here or abroad and no concept of tax residency in Panama (when not working here).

Edited April 12, 2018 by Ray M

[Mark X]

This is getting to my point.

However, in the scenario we are discussing there wouldn't be any country where the person spent more than 90 days per year going forward. So in what jurisdiction are you suggesting they might need to prove their tax residency? 

You can assume they are currently not tax resident in any jurisdiction as a result of travelling the world for a number of years - never staying in any jurisdiction for more than a few months and thus never becoming a tax resident anywhere.

It seems reasonable that no jurisdiction would ever have the remotest interest in a tourist who passed through for max 3 months. 

That leaves only Panama, where this person will spend minimal time as a friendly nations permanent resident. Maybe a week or maybe a few months per year. They will rent a car, stay in hotels. 

It seems this scenario is not common in Panama. There are many thousands of digital nomads and other types of nomads travelling the world so it seems they are not getting residence in Panama based on the responses I have had on this topic from various sources. 

Also, what was it you meant by "residential exclusion"? Do you mean making a "non resident declaration" to a financial institution (for example)? That is a standard requirement in european banks etc. if a person is resident abroad. Not an issue in this scenario.

Thanks for your thoughts. It's an interesting area. 

 

Edited April 12, 2018 by Mark X