Digital Nomad Taxes: Where should you pay taxes?
The popularity of Digital Nomadism is soaring and with it comes the question:
Where and how should digital nomads pay taxes?
Truth is that it’s a bit of a grey area as never before people have travelled the world without staying at one place for very long - and doing that while working online.
In this blog post I will:
Dive a bit deeper in the tax regimes of Cyprus, Dubai, Portugal & Italy (for EU citizens as well as other nationalities)
List some countries that offer so-called “Digital Nomad Visas” (which cater to mostly non-EU/EEA people)
Note that I am no expert in this area but because me and my partner have done some research over the last few years and have spoken to a few experts, I wanted to share our learning from our perspectives as (occasional) Digital Nomads and full time remote employees.
If you need specific and professional advice, I would recommend you to seek out a tax specialist.
Because we were only researching options in Europe & Dubai, this article only focuses on that.
What is actually the problem with taxes as a Digital Nomad?
As a digital nomad, you travel around and you typically never stay longer at a destination than 3-4 months maximum.
This poses somewhat of a grey zone in the tax world, because in most countries, you are only tax eligible if you stay in a country for 6 months or longer (at least in EU countries; there are some exceptions elsewhere).
Now, as a citizen of any country, you are required to pay tax somewhere, especially if you have a business, but also, if you have a remote job. Let’s explore some taxation options for Digital Nomads:
Easiest way: Pay taxes in your home country
The easiest way is to pay your taxes in your home country.
Even if you don’t stay the minimum required months to be tax eligible, you are still a citizen of that country. If you pay your taxes they will definitely not tell you not to pay any taxes, even if you stay very little time in your home country.
It’s probably easier for you to set up a company or have a local contract, than setting up a business elsewhere. Also, you know your own country: it’s just more convenient for you to navigate these things in your own language and culture.
However, if you are thinking of moving elsewhere, where conditions for digital nomads might be better, read on.
Countries that allow you to stay for a short time to get tax residency
Note: Below, I am listing some options for EU citizens especially, but they also apply to other nationalities. Scroll to them next section for options for only non-EU/EEA citizens (countries that offer “Digital Nomad Visas”).
Cyprus
You may not have heard of Cyprus being an interesting country for Digital Nomad’s, but it actually is: This small island offers tax residency for any foreign person who stays a minimum of 2 months in Cyprus. The downside here is that you need a permanent residency address, meaning you will need to find an apartment or a house that you would rent the entire year.
In order to benefit from Cyprus tax advantages you need to get the “non-dom” status. This is valid for 17 years, making it one of the longer term options.
The tax situation is also very tempting: If you set up a company in Cyprus, the corporate tax is 12.5%.
Income tax is relatively high, however it is tax-free up until ~20k the rest you can withdraw as dividends tax-free. Only need to pay social security which is 2.5%.
Pros:
You only need to stay 2 months to be tax eligible
There are many digital nomads / remote workers who live in Cyprus
Cons:
You need to have a permanent residency address in Cyprus. Meaning, even if you don’t stay longer than 2 months, you need to pay for accommodation the whole year.
You need to actually set up a company in Cyprus - though this is a fairly easy process.
Cyprus is not very well connected compared to other cities.
Dubai
Dubai is known to be a tax haven and in the last few years, there’s been an explosion of people moving their tax residency to Dubai because of the following change: Instead of the normal 6 months, you only need to stay 3 months in Dubai per year to be considered tax-resident. And income tax in Dubai is 0%. Yes, you heard it right: 0%. Corporate tax is also 0%.
On top of that, you don’t even need a permanent residency address to become eligible, meaning that you could just stay 3 months a year in Dubai, rent an Airbnb or an apartment, and the rest of the year you are free to travel around the world living your Digital Nomad lifestyle.
To get a VISA the process is also relatively straightforward. Incorporate a company in one of Dubai’s freezones. Hire yourself as employee of your own company. Get an employment visa.
With that + the 90-day rule you can get tax residency in the country.
Pros:
Income Tax is 0%
You don’t need a permanent residency address, meaning you could rent an Airbnb or similar in the 3 months you are there.
Location: Dubai sits between Asia and Europe, so it’s a great country if you are usually traveling in Europe and Asia.
Cons:
Dubai is an expensive city, so the months that you are in this city, you will likely spend way more than in any other destination
Setting up a business is fairly expensive, and you would also need to invest in a private health insurance
Ethical concerns about general conditions in the UAE
Countries that have a attractive tax regime, if you stay more than 6 months
Portugal
Portugal is one of the first countries that offered a decent option for remote workers, which is called the NHR tax regime. Like with most EU countries, to be tax resident you need to stay more than 6 months. The job you do needs to be technical, scientific or artistic (there is a list of professions that you can find here).
Under NHR you can get a flat 20% income tax, 0% tax on capital gains and 0% tax on crypto (provided you hold it for at least a year). The NHR tax regime is valid for 10 years.
Portugal is a beautiful country with great weather all year round, decent wifi speed and lots of good food. However, be aware that because of it’s popularity with remote workers and digital nomads in recent years, prices have skyrocketed, especially for accommodation in Lisbon.
Pros:
If you set up as a freelancer, the first year you have a flat personal income tax of 20%
No tax on capital gains, dividends, interest, crypto, royalties etc.
Many remote workers live in Portugal
Cons:
Lisbon especially is expensive, and also places in the south are pretty pricey (mostly accommodation)
After 1 year is up, you need to consult with a tax advisor how to best set up your business
Fairly high social security costs
Italy
You might not have guessed it but Italy is a fairly interesting option, especially for foreigners and any returning Italians who haven’t lived in Italy for the last 2 years.
If you move to the North of Italy (Rome and above) you will only need to pay taxes on 30% of your gross income. If you move to the South of Italy (Below Rome), you will only be need to pay tax on 10% of your income. This is for self-employed as well as anyone who is employed by an Italian-based company.
And this tax advantage is valid for 5 years, and can be extended for another 5 years if you buy a house in Italy or have a baby. However, you must commit to living in Italy for at least 2 years to become eligible.
Pros:
Very low income tax, depending on where in Italy you will live.
Fairly long validity, up to 10 years
Applicable to any foreigner or Italian returning, who haven’t lived in Italy for the last 2 years
Italy is a fairly cheap country to live in, except Milan. If you live in the South, you can find very decent accommodation prices.
Cons:
Social security is very high: 25% of your income goes to social security payments (but only applicable to self-employed)
Italy does not have a big digital nomad community - maybe Milan would be your best shot.
There are a few other requirements for this tax advantage, such as that you need to move to Italy with a “new” work contract, though what that means exactly is unclear.
Other Countries that have Digital Nomad Visa’s
View over Lisbon, Portugal
Next up, I have listed a few countries that offer “Digital Nomad Visa’s”.
This option is best if you want to stay in a certain country longer and would like to move to this country for at least a couple of months to a year.
Here’s a list of a few countries in Europe that offer Digital Nomad visa’s which are mostly geared towards non-EU/EEA citizens:
Portugal
Portugal is one of the most popular countries for Digital Nomads that offers a Digital Nomad visa.
Visa Validity:
The Long Term visa: 2-entry visa, valid for 4 months and allows for getting a 2 year residency permit
The Temporary Stay visa: valid for 1 year with multiple entries, but no right to claim residency
Minimum required income per month: 3,040 euro
Savings: You need savings of 36,480 euro
Tax rate: 0% tax on global income and 20% flat on income earned within Portugal
Requirements: non-EU and non-EEA citizen; fully remote work with permanent contract or freelancing; ages 18 and up; you have arranged accommodation for at least 1 year
Estonia
Estonia is one of the original countries that started offering Digital Nomad Visa’s.
Visa Validity:
The Type C Visa: If you plan to stay for less than 90 days
The Type D Visa: You can stay up to a year in Estonia.
Minimum required income per month: 3504 euro gross
Savings: Not specified. However, you must prove that you have earned the monthly required income of 3504 euro repeatedly in the last 6 months
Tax rate: 20% flat rate
Requirements: You must work for a company based outside of Estonia; fully remote work with permanent contract or freelancing
More information: check out this Estonia Guide on Atlys.com
Spain
Spain recently (January 2023) introduced a new “Digital Nomad Visa” which allows any non-EU individual to stay in the country for up to 5 years maximum.
Validity: up to 12 months and then possibility to extend for up to 5 years.
Minimum required income per month: 2,160 euro per month
Savings: N/A
Tax rate: 24% on income up to 600,000 euro per year
Requirements: non-EU and non-EEA citizen; fully remote work with permanent contract or freelancing; the business must be operating for at least 1 year; Obtain Full health insurance; Clean criminal record; Not lived in Spain in the last 5 years
Malta
Malta is a small island nation close to Sicily in Italy. What is interesting is that English is one of the main languages spoken there! Making it easy for foreigners (at least those who speak English) to move there. To go to Malta as a Digital Nomad, you can apply for the “Nomad Residency Permit”.
Validity: Up to a year (but renewable)
Minimum required income per month: 2,700 euros
Savings: N/A
Tax rate: If you have tax residency in your home country, no need to pay taxes in Malta. Otherwise, there is a progressive tax rate from 0-35%.
Requirements: non-EU and non-EEA citizen; fully remote work with permanent contract or freelancing; valid health insurance policy that will cover your stay in Malta
Georgia
Georgia doesn’t really have a “Digital Nomad” visa, but they do have an excellent policy for remote workers in general.
Validity: 95 nationalities can enter Georgia visa free and stay for up to a year
Minimum required income per month: 2,000 USD per month OR savings (see below)
Savings: 24,000 USD
Tax rate: Income tax is 20%. Corporate tax is 1% for a revenue up to 155,000 USD.
Requirements: Only the monthly minimum income OR the savings
Other Countries offering Digital Nomad visa’s:
Croatia
Albania
Barbados
Curacao
Costa Rica
Colombia
Thailand
Malaysia
Sri Lanka
… and many more
And more keep being added!
Find a neatly compiled list of all countries offering Digital Nomad Visa’s on this blog post from Nomad Girl.
Things to consider
In some countries, if you are a citizen and hold a passport, you need to pay taxes regardless of where you live and where your business is located. One such country is the US, for instance.
Also consider if you have any other financial assets and/or investments, such as a house or other investments. In some countries, if you start a business there, they will also look at your income from other sources and tax you on that as well (e.g. capital gains tax).
If you are moving with your partner and/or kids this might change some of the above listed requirements as well, so be aware of this too.
Thanks for reading!
I hope this article shed a little light on Digital Nomad taxation and gave you some more information regarding the different options in Europe and Dubai.
Again, this is based on our own research, but this is a complex topic that is always changing. So if you need actual advice on taxation, please consult with a professional tax advisor.
Are you thinking of starting off as a digital nomad? See also my “Things to Prepare before starting a Digital Nomad Journey” post.
If you have any questions feel free to shoot me a message.
