Double taxation conventions: what are they and how do they affect digital nomads?
Double taxation conventions (BTCs) are treaties signed between countries with the aim of eliminating or reducing double taxation on the income of individuals or companies that have economic activities in more than one country. For digital nomads, who frequently move between jurisdictions, CEBs are key to ensuring a more predictable tax structure and avoiding double taxation, which can jeopardise their mobility and quality of life.
The Functioning of Double Taxation Conventions
CEBs are based on standards set by the Organisation for Economic Co-operation and Development (OECD) and the UN, which define the basis for how countries should divide up the right to tax different types of income, such as wages, dividends, royalties and business income. The main articles of a CEB generally deal with:
Definition of tax residence;
Methods to avoid double taxation, such as exemption or tax credit;
Taxation of income from real estate, employment, pensions, etc.
Legal Basis for Conventions
In Brazil, Double Taxation Avoidance Conventions are established on the basis of Decree-Law No. 5,844/1943, which establishes the structure of the country's international tax policy, together with specific bilateral conventions ratified by the National Congress. Each country with which Brazil has a convention has a specific law that regulates the agreement, creating the legal protection needed to avoid double taxation.
Impact of Conventions for Digital Nomads
CEBs provide digital nomads with greater legal certainty, especially when travelling between different jurisdictions. This predictability in relation to taxation is crucial to maintaining an effective financial organisation, allowing these professionals to focus on their global activities without the burden of unexpected or excessive taxation. By eliminating tax uncertainty, conventions favour more stable financial planning, which is essential for a lifestyle that involves constant movement between countries.
Tax Residency and the Link to Taxation
One of the critical points for digital nomads is the determination of tax residence, which can vary according to the time spent in a country, family ties or economic links. Many countries use the criterion of a stay of more than 183 days to determine tax residence, but conventions can adjust this definition, avoiding double residence and ensuring that the nomad is taxed only where they have the strongest ties.
Examples of Relevant Double Taxation Treaties: Below are some examples of double taxation treaties relevant to Brazilian digital nomads:
Brazil-Portugal Convention: Ensures that income such as pensions and salaries are not taxed twice, a very relevant treaty due to the large flow of digital nomads between the two countries.
Brazil-Spain Convention: This treaty covers most types of income, ensuring that Brazilians who live or work in Spain are not taxed twice on income from work, pensions or dividends, creating important legal certainty.
Conclusion
Double taxation treaties are essential tools for digital nomads looking for a more predictable tax structure. They allow for the elimination of double taxation and facilitate tax planning, which in turn enables these professionals to maintain their global mobility without facing unnecessary tax uncertainties. Thus, these conventions offer fundamental legal support for the success and continuity of a travelling lifestyle.
If you are interested in hiring professional legal services related to tax planning and the analysis of double taxation treaties, we are a law firm specialising in the subject. Please contact us by e-mail: contato@trpuppioadvocacia.com.br, or by WhatsApp.
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