Taxes are the most confusing aspect of digital nomad life. Multiple jurisdictions, conflicting rules, and the temptation to assume "if I'm not there, I don't owe taxes" creates real legal and financial risk.
This guide provides a framework for understanding nomad tax obligations—not tax advice (consult a professional for your specific situation), but the knowledge needed to ask the right questions.
For banking strategies that complement tax planning, see our digital nomad banking guide. For visa implications, see our digital nomad visa guide.
Important Disclaimer
This Is Not Tax Advice
This guide provides general educational information about international tax concepts. It is not legal or tax advice for your specific situation. Tax laws are complex, change frequently, and individual circumstances vary significantly. Consult a qualified international tax professional before making decisions based on this information.
Understanding Tax Residency
The Fundamental Concept
Governments tax based on tax residency, not citizenship (with one major exception: the US). Tax residency is determined by where you live, not where your passport is from.
Common Tax Residency Triggers
| Trigger | Typical Threshold | |---------|-------------------| | Physical presence | 183+ days per year | | Permanent home | Primary dwelling in country | | Center of vital interests | Family, economic ties | | Habitual abode | Regular, repeated presence |
The 183-Day Rule: Most countries use 183 days (half a year) as a bright-line test. Stay longer, and you're likely tax resident.
But it's not that simple:
- Some countries count days differently (arrival/departure)
- Some have shorter thresholds (e.g., 90 days for UK in certain cases)
- Tie-breaker rules exist when you qualify in multiple countries
- Some countries consider intention, not just days
Citizenship vs. Residency-Based Taxation
Residency-based (most countries):
- Tax residents pay tax on worldwide income
- Non-residents pay tax only on local-source income
- Leave the country, potentially stop being taxed
Citizenship-based (US, Eritrea):
- Citizens are taxed on worldwide income regardless of residence
- US citizens abroad must file and potentially pay US taxes forever
- Renouncing citizenship has tax implications
US Citizens: Special Obligations
US citizens face the most complex situation—taxed on worldwide income regardless of where they live.
Filing Requirements
Always required if:
- US citizen or green card holder
- Income above filing thresholds (very low—around $13,000 for 2025)
- Self-employment income above $400
Living abroad does NOT eliminate US filing requirements.
Foreign Earned Income Exclusion (FEIE)
The FEIE allows qualifying US citizens to exclude foreign earned income from US taxation.
2026 exclusion amount: Approximately $126,000 (adjusted annually for inflation)
Qualification tests (must meet one):
Bona Fide Residence Test:
- Tax resident in foreign country for uninterrupted period including full tax year
- Intentions and circumstances show genuine residence
Physical Presence Test:
- Present in foreign country 330 full days in any 12-month period
- Days don't need to be consecutive
- Easier to meet for nomads
Physical Presence Test
The Physical Presence Test is usually easier for nomads since it's purely mathematical. Keep detailed travel records—every day in every country. Apps or spreadsheets work; just be precise.
FEIE Limitations
| Feature | Details | |---------|---------| | Max exclusion | ~$126,000 (2026) | | Income type | Earned income only (not investment) | | Self-employment tax | Still owed on all SE income | | Housing exclusion | Additional exclusion for housing costs | | Tax bracket | Excluded income still affects bracket |
Critical point: The FEIE excludes income from US taxes but not from self-employment tax. A self-employed nomad earning $100,000 still owes ~$15,000 in self-employment tax (Social Security + Medicare).
Foreign Tax Credit (FTC)
If you pay taxes to a foreign country, you can often credit those taxes against your US liability.
FEIE vs FTC decision:
- FEIE: Simpler, good for lower income, pays no foreign tax
- FTC: Better when paying high foreign taxes, preserves tax credits
- Can use both, but not on same income
FBAR and FATCA Reporting
FBAR (FinCEN 114):
- Required if foreign financial accounts exceed $10,000 total at any time during year
- Includes: Bank accounts, investment accounts, Wise, Revolut, crypto exchanges
- Penalties for non-compliance are severe
FATCA (Form 8938):
- Required for higher thresholds ($50,000-200,000 depending on status)
- Filed with tax return
- Similar to FBAR but different rules
FBAR Penalties
FBAR penalties can be $10,000+ per violation for non-willful failure, and much more for willful violations. Take reporting seriously even if accounts have small balances.
European Digital Nomad Visa Tax Rules
Portugal
Standard tax rates: 14.5% - 48% progressive
NHR (Non-Habitual Resident) Regime:
- 0% on most foreign-source income for 10 years
- 20% flat rate on qualifying Portuguese-source income
- Must not have been PT tax resident for previous 5 years
- Regime has been modified; verify current rules
Digital nomad visa holders: Subject to standard or NHR rules depending on eligibility
Spain
Standard tax rates: 19% - 47% progressive (varies by region)
Beckham Law / Startup Visa Regime:
- 15% flat rate for 4 years (for qualifying digital nomads)
- Applies to Spanish-source income
- Foreign income treatment varies
- Must not have been Spanish tax resident for previous 5 years
Croatia
Digital nomad visa:
- Explicitly tax-exempt for visa holders
- No Croatian income tax on foreign income
- Limited to 2 years total
Germany
No special nomad regime
- Standard rates: 14% - 45% progressive
- Freelance visa holders are taxed normally
- Complex social security considerations
Tax-Friendly Jurisdictions
Some countries intentionally attract nomads with favorable tax treatment.
Territorial Tax Countries
These countries only tax local-source income—foreign income is untaxed:
| Country | Income Tax | Notes | |---------|------------|-------| | Panama | Territorial | Foreign income untaxed | | Costa Rica | Territorial | Foreign income untaxed | | Paraguay | Territorial | Low cost of living | | Georgia | Territorial | 1% for small business regime | | Malaysia | Territorial | Foreign income untaxed | | Thailand | Territorial (with conditions) | Complex rules |
Zero Income Tax Countries
| Country | Residency Path | Cost of Living | |---------|---------------|----------------| | UAE | Easy with income | High | | Cayman Islands | Difficult, expensive | Very high | | Bahamas | Investment required | High | | Monaco | Expensive | Very high |
Low-Tax Countries with Nomad Visas
| Country | Effective Rate | Duration | |---------|---------------|----------| | Croatia | 0% (nomad visa) | 2 years | | Hungary | 0% (nomad visa) | 2 years | | UAE | 0% | 1-5 years | | Georgia | 1-5% | 1 year+ |
Common Tax Mistakes
Mistake 1: "I'm Never in One Place Long Enough"
Reality: You might still be tax resident somewhere. Many countries have tie-breaker rules, and being "nowhere" creates legal uncertainty.
Better approach: Establish clear tax residency in a jurisdiction you choose, meeting their requirements properly.
Mistake 2: "I Work Online, So No Country Can Tax Me"
Reality: Countries tax based on residence, not where the work is performed. If you're tax resident, you owe tax on worldwide income—wherever earned.
Mistake 3: "I'll Just Not Report It"
Reality: Governments share information (CRS, FATCA). Financial accounts are reported internationally. The IRS receives data from foreign banks. Non-compliance becomes riskier each year.
Mistake 4: "The FEIE Means I Pay Zero US Tax"
Reality: FEIE excludes income tax on foreign earned income, but:
- Self-employment tax is still owed
- Investment income isn't covered
- State taxes may still apply
- Social Security/Medicare impact
Mistake 5: "I'll Figure It Out Later"
Reality: Tax elections, residency choices, and filing deadlines matter. Reconstructing years of non-compliant history is expensive and stressful. Start correctly.
Setting Up Properly
Step 1: Understand Your Home Country Obligations
| Citizen Of | Obligation | |------------|------------| | US | Always file, worldwide taxation | | UK | Residency-based, leaving rules complex | | Canada | Residency-based, departure rules important | | Australia | Residency-based, 45-day rule for return | | EU countries | Residency-based, varies by country |
Step 2: Choose a Tax Residency Strategy
Option A: Remain Home Country Resident
- Simplest approach
- Full home country taxes
- Maintain all obligations
Option B: Become Resident Elsewhere
- Pick a new tax home
- May have lower taxes
- Must meet that country's residency requirements
Option C: True Nomad (Complex)
- No fixed residency
- Must still file home country taxes (if applicable)
- Legal gray area; not recommended without expert guidance
Step 3: Document Everything
Keep records of:
- Every day in every country
- Rental agreements
- Flight itineraries
- Bank accounts
- Income sources
- Tax returns filed everywhere
Step 4: Get Professional Help
When to hire a tax professional:
- First year as nomad (setup is crucial)
- Significant income (cost of mistakes > cost of advice)
- Multiple income sources/countries
- Planning major moves
- Any US citizen (complexity justifies cost)
Finding a Tax Professional
Types of Professionals
CPA with international experience:
- Best for US citizens
- Handles FEIE, FBAR, FATCA
- Understands nomad situations
International tax attorney:
- For complex situations
- Structuring businesses
- Multi-jurisdiction issues
Enrolled Agent:
- Licensed to represent before IRS
- Often more affordable than CPAs
- Good for straightforward situations
Questions to Ask
- Do you have digital nomad / expat clients?
- Are you familiar with the FEIE Physical Presence Test?
- Can you handle FBAR and FATCA reporting?
- Do you understand cryptocurrency reporting?
- What countries do you have experience with?
Resources
US-focused:
- Greenback Expat Tax Services
- Taxes for Expats
- Bright!Tax
International:
- Local accountants in your residence country
- Nomad-focused tax advisors (search nomad communities)
State Tax Considerations (US)
Leaving your US state doesn't automatically end state tax obligations.
State Approaches
| Approach | States | Implications | |----------|--------|--------------| | No income tax | TX, FL, WY, NV, WA, SD, TN, AK | Easiest | | Residency-based | Most states | Must properly establish non-residency | | Source-based | CA, NY (aggressive) | May tax regardless of residence |
High-Risk States
California:
- Aggressive residency rules
- "Temporary absence" doctrine
- Can claim you're still resident years later
New York:
- Similar issues to California
- 548-day rule for claiming non-residency
- NYC adds city tax layer
Best Practice
Before leaving the US:
- Establish residency in no-income-tax state (TX, FL, etc.)
- Document your departure thoroughly
- Sever ties with high-tax state completely
- Get professional guidance if leaving CA or NY
FAQ
Frequently Asked Questions
Action Steps
Pros
- Track every day in every country starting now
- Keep all income documentation organized
- Establish clear tax residency somewhere
- File required returns (US citizens: ALWAYS file)
- Report foreign accounts (FBAR/FATCA)
- Hire a qualified tax professional for setup
- Learn the rules before you leave, not after
Cons
- Don't assume 'digital' means 'invisible'
- Don't try to be tax resident nowhere
- Don't ignore state tax implications
- Don't forget self-employment tax (FEIE doesn't cover it)
- Don't skip FBAR because account is small
- Don't rely on nomad forums for tax advice
- Don't wait until you have a problem to get help
Summary Table: Tax Implications by Situation
| Situation | US Citizen | UK Citizen | EU Citizen | |-----------|------------|------------|------------| | Working remotely from home country | Normal taxation | Normal taxation | Normal taxation | | Working abroad under 183 days | File US return, FEIE possible | Possibly still UK resident | Varies | | Working abroad over 183 days | File US return, FEIE likely | May become non-resident | May become resident elsewhere | | Digital nomad visa | Country-specific + US obligations | Country-specific | Country-specific | | True perpetual travel | Complex; US taxes still apply | Complex | Complex |
Conclusion
Digital nomad taxation is complex, but the core principles are straightforward:
- Know your obligations: Citizenship (US) and residency determine where you owe taxes
- Establish clear residency: Being "nowhere" is legally problematic
- Document everything: Records are your protection
- Get professional help: The cost of advice is less than the cost of mistakes
- File everything required: Information sharing makes non-compliance risky
The FEIE provides meaningful relief for US citizens, and strategic residency planning can reduce global tax burden—but only when done properly with professional guidance.
