Digital Nomad Taxes: How to Pay Less Legally (2026)

Do Digital Nomads Really Pay Taxes?

Yes, Digital Nomads generally pay taxes, but where, how much, and to whom depends on your citizenship, where you spend your time, and how you set up your business. Some nomads legally reduce their tax bill to zero by combining a territorial-tax country with the right visa. US citizens face the toughest situation, as the US taxes worldwide income regardless of where you live, though tools like the Foreign Earned Income Exclusion can help.

This guide breaks down the three tax systems, the best nomad visas for tax purposes, and real strategies for keeping your tax bill as low as legally possible. Let’s go!

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The 3 Tax Systems

So you probably do owe tax somewhere. Time to look at the three tax systems that countries use.

Residential Tax System

If you call a country home, you’re expected to pay taxes there, even if you’re not originally from there. This is about contributing to the place where you live, work, and engage with the community.

For Digital Nomads, getting a nomad visa means you’re a resident for tax purposes in that new country (please note: each nomad visa is different. Sometimes, the tax regulations are not specified in the visa. I know, it’s confusing!).

Citizenship-Based Tax System

Only the US and Eritrea taxes are based on citizenship, meaning Americans and Eritreans pay taxes on global income, no matter where they live.

To escape this, one would have to give up their citizenship, a drastic step. For nomads, a second residency or citizenship through a nomad visa might offer a different tax scenario.

Territorial Tax System

In countries with territorial taxes, only local income is taxed. This setup is great for Digital Nomads working for international clients from these countries, as their foreign income remains untaxed.

Only income earned within the country, like from a local employer, would be taxed. Georgia, Malaysia, Costa Rica, and Panama, for example, use the territorial tax system (Malaysia’s exemption for individuals runs until 2036, and Costa Rica is debating a tax on foreign passive income). Thailand used to be on this list, but since January 2024, tax residents in Thailand also pay tax on foreign income they bring into the country.

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Where do Digital Nomads Pay Taxes?

Now let’s dive deeper into the topic and find out where you pay tax as a Digital Nomad. This depends on a number of factors:

Citizenship

As stated above, your home country plays a big role. Some countries tax you based on your citizenship, no matter where you live. The United States is a famous example of this. So, if you’re an American Digital Nomad, you might still have to file taxes back home. The same applies to citizens of Eritrea.

Physical Presence

The country you spend most of your time in can also ask for taxes. There’s this thing called the “183-day rule” in many places. It basically means if you’re in a country for more than 183 days in a year, that country might say, “Hey, you’re a resident for tax purposes!”

Interesting fact: In Switzerland, you can already trigger the tax liability from a stay of 30 days under certain conditions.

Business Establishment

Choosing jurisdictions with favorable tax laws for business setup can be beneficial. Estonia is popular among freelancers for establishing EU businesses efficiently, while the US is known for its straightforward LLC formation process, especially in states like New Mexico that offer limited filing requirements and anonymity.

Local Laws and Digital Nomad Visas

Some places are rolling out the red carpet for Digital Nomad Visas with special arrangements, which I will talk about later in this article (also check out my list of the most nomad-friendly countries here).

These can come with tax perks or requirements, so it’s worth checking out if your destination offers something like this.

To simplify everything a little, let’s create a scenario that represents a typical EU nomad:

Marie, our imaginary character, has just started to become a Digital Nomad. She comes from Germany and is a freelance web designer. Since she is going full-time for the next few years and is sure that she will be traveling full-time, she deregisters from Germany.

This means that she no longer has an address in Germany, no statutory health insurance, and no debts. Under very strict conditions, she is no longer liable for tax in Germany.

She sets up an LLC in the USA and uses it to invoice all the income she earns. She has clients in Germany, the UK, and Spain. The income flows to the LLC in the USA. As Marie is a German citizen, her income from the service-based work of the LLC is not taxable. The money is deposited in her US account.

We conclude that Marie has found a way to legally generate income while traveling and write correct invoices for her clients. But where will she pay taxes?

Now we come to the exciting part: where Marie pays taxes depends on various factors, as we have already learned.

As Marie wants to pay as little tax as possible, she decides to trigger the tax liability in a country that has the territorial tax system: She loves Georgia. Only income earned in Georgia has to be taxed. Careful, though: Georgia counts work you physically do while you are in Georgia as Georgian income, even if your clients are abroad.

Remember, Marie has clients in Germany, the UK, and Spain.

As the 183-day rule applies in Georgia, Marie becomes a tax resident there if she spends at least 183 days in Georgia within any 12-month period. The work she does from her laptop in Georgia counts as Georgian income, even though her clients are in Germany, the UK, and Spain. Normally, that’s taxed at 20%. But if Marie registers as an Individual Entrepreneur and applies for Small Business Status, she pays just 1% on her turnover (up to GEL 500,000 a year; above that, it’s 3%). Genius, right?! Not every profession qualifies, though (consulting, for example, is excluded).

Please note: This scenario is highly simplified. Please consult a tax professional for individual advice.

💡 Check out Denationalize.me (Staatenlos) and Taxhackers.io (for non-US nomads) for getting hands-on support for opening an LLC and becoming tax-free as a Digital Nomad.

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Digital Nomad Visas and Their Tax Perks

In recent years, several countries have rolled out Digital Nomad Visas, aiming to draw in folks who work remotely. These visas are pretty handy, letting you legally stay and get your work done in a new country, often for a year or even longer.

Now, the tax side of things with these visas can be a mixed bag, as it really depends on where you’re headed. A few places that offer Digital Nomad Visas, and what to expect tax-wise:

Spain

The Digital Nomad Visa Spain is considered the best in the world. This visa, renewable up to five years, requires a minimum income of about €2,450 to €2,850 a month (twice the Spanish minimum wage, depending on where you apply), with adjustments for dependents.

Applicants need a stable job, company permission, and a year-old business, with up to 20% income from Spanish clients allowed.

It also opens the path to Spanish residency and EU travel, with a special 24% tax rate on income up to $647,000 (€600,000), benefiting from Spain’s extensive double taxation treaties.

Costa Rica

According to tech.co, the Costa Rica Digital Nomad Visa is one of the most popular ones. It is renowned for its huge tax advantages.

As a Digital Nomad there, if your employment is outside of Costa Rica, you’re not required to pay local income taxes. The visa also exempts you from import taxes on work equipment and from remittance taxes.

Check out my guide to the Costa Rica Digital Nomad Visa.

Malta

Malta, a scenic Mediterranean island, offers a digital nomad visa for remote workers with a minimum gross income requirement of €42,000 a year. The application fee is about $320 (€300). For the first year, digital nomads enjoy income tax exemption, followed by a low tax rate of 10%.

While living costs aren’t the lowest, they are generally more affordable than in major European cities. English is widely spoken, easing communication for many.

Read all about the Malta Digital Nomad Visa here.

Iceland

Iceland’s digital nomad visa, valid for six months, allows remote work amidst its stunning landscapes. Eligibility includes non-EU/EEA/EFTA citizenship, visa-free travel agreement with Iceland, not holding another long-term Iceland visa in the past year, remote work proof, and a minimum monthly income of approximately $7,763 (€7,200).

Necessary documents include a valid passport, completed application form, visa fee proof, recent passport-sized photo, health insurance, employer letter, income proof, and a clean criminal record. Family members require additional documentation and fees.

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Argentina

The visa demands a minimum monthly income of $2,690 (€2,500) and a rental agreement, among other requirements. Although it primarily supports those working for foreign entities, it doesn’t permit employment with Argentine companies.

Valid for 180 days and renewable once for another 180 days, this visa aims to aid economic recovery post-pandemic. Argentina, with its low living costs, welcoming locals, stable internet, natural beauty, and vibrant culture, is an ideal destination for Digital Nomads.

Croatia

The Croatia Digital Nomad Visa, essentially a temporary residence permit for freelancers or entrepreneurs working remotely, is valid for up to 18 months, and you can only reapply six months after it expires.

Originating from a 2021 initiative to boost the economy, it’s available to non-EU/EEA nationals proving a stable monthly income. Benefits include tax exemptions and the opportunity for longer stays.

Requirements include proof of income, health insurance, and a clean criminal record, among others.

Romania

The Romanian Digital Nomad Visa has existed since 2021. This visa targets those working for or owning companies outside Romania and allows remote work. The application is known for its simplicity, with a processing time of about 10-14 days.

It requires proof of a monthly income of at least three times the Romanian average gross salary and is open to non-EU citizens. You first get a 90-day long-stay visa, followed by a 6-month residence permit that can be extended as long as you still meet the income requirement.

Abu Dhabi

Abu Dhabi offers a “Remote Work Visa” for Digital Nomads and remote workers, allowing them to reside in the UAE’s capital without a local sponsor. This visa, costing $287 (€265), requires proof of a minimum monthly income of $3,500 (€3,220) and is valid for one year.

It’s open to all nationalities. Holders get an Emirates ID and access to public services similar to those of local residents.

Uruguay

Since December 2023, Uruguay has offered a Digital Nomad Visa for remote workers. It lets you work from Uruguay, a country known for being safe and beautiful. The application process is online, leading to an emailed visa for a set period.

Required documents include a valid passport, passport photo, financial affidavit, clean criminal record from the last five years, and a vaccination certificate from Uruguay.

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Norway

Norway doesn’t have a dedicated Digital Nomad visa. The immigration authority (UDI) treats remote work as work, so non-EU citizens usually need a residence permit that allows work, and the self-employed permit only fits freelancers with their own business and relevant qualifications. Svalbard is different: you can go there without a visa or work permit, as long as you can support yourself. If you need a Schengen visa, get a double-entry one, because you travel via mainland Norway.

Nomads in Norway should be aware of local tax obligations and the need to obtain a VAT number.

Andorra

Andorra’s Digital Nomad Visa requires government approval. Applicants must prove they have a remote work setup, financial means, a local residence, and a commitment to stay in Andorra for at least 90 days annually.

Benefits include no mandatory company setup or social security payments, with a simpler entry process compared to other residencies. Professional assistance is advised for application documentation.

Aruba

Aruba introduced a short-stay visa, allowing remote workers to enjoy its beaches while working for up to three months. The scheme is only open to US citizens, who can stay up to 90 days.

There’s no fee for the program (the $20 Sustainability Fee for air arrivals still applies) and no embassy application: you register when you fill in your entry (ED) card. Digital Nomads are also tax exempt in Aruba, and they can bring their families and pets.

Mexico

Mexico, favored by Digital Nomads for its rich Latin American culture, offers a Temporary Resident Visa instead of a dedicated Digital Nomad visa. This visa, with costs ranging from $150 to $350 (€140 to €320), permits stays from six months up to four years, requiring a monthly income of around $4,000 to $4,500, depending on the consulate. Initially valid for one year, it’s renewable for three more.

Applicants from any country must apply at a Mexican embassy or consulate, and while you can’t work for local companies, remote work is acceptable.

Curacao

The island introduced the ‘@Home in Curaçao Visa’ to boost tourism. It caters to remote workers, Digital Nomads, and investors with stays up to six months, extendable for another six. This visa, costing around $300 (€275), requires applicants to prove financial self-sufficiency and is open to all nationalities.

Applications can be made online, and the visa includes family benefits, promoting a balanced work-leisure lifestyle on the island.

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Panama

Panama, known for its development, climate, and lifestyle, introduced a Digital Nomad visa in May 2021 to boost tourism among remote workers. The visa costs $300 (€275), requires a minimum annual income of $36,000 (€33,100), and is valid for nine months with an option to extend.

Open to all nationalities, the application must be made through a lawyer in Panama. The country’s tax-friendly policies allow for income earned abroad to be untaxed, and a stay of nine months or longer can qualify for tax residency.

Czech Republic

The Czech Republic offers a freelancer visa called ‘Zivno’, which, while a bit complex to obtain, combines a trade license with a long-term business visa for working legally in the country. Costs include around $117 (€107) for the visa and an additional $46 (€42) for the trade license, with a bank balance requirement of at least 156,500 CZK. The visa lasts one year with renewal options, primarily for non-EU citizens, and family applications are welcome. Applications are made at local embassies or consulates.

Hungary

Hungary’s ‘White Card’, introduced in November 2021, is aimed at individual Digital Nomads and is noted for its ease of acquisition compared to other European visas. It’s a one-year, extendable residence permit with a $116 (€106) fee and a net monthly income requirement of €3,000. The application process is known for its efficiency, often concluding within a month, but it doesn’t accommodate couples or families.

Estonia

Estonia pioneered the Digital Nomad Visa in 2020, offering both short-stay (C-Visa) for 3 months and long-stay (D-Visa) for a year, allowing remote work within Estonia. Costs are €90 for the C-Visa and €120 for the D-Visa, with an income requirement of $37,000 (€34,000) for both. Any nationality can apply. The visas let you work legally for a foreign employer, but they do not give you citizenship or permanent residence in Estonia or the EU. Applications can be made remotely.

Georgia

For the Digital Nomad Visa for Georgia, there’s no fee to worry about, and you just need to prove you make at least $2,000 (€1,840) a month. The visa lasts for a year and is open to citizens from a select 95 countries. What’s more, you can sort everything out online without the need to travel for your application. Plus, there’s a sweet bonus: no visa fee and the option to apply alongside your family, making Georgia an attractive spot for Digital Nomads.

The Foreign Earned Income Exclusion (FEIE): Key Relief for US Nomads

If you’re an American Digital Nomad, you already know the bad news: the US taxes you on worldwide income no matter where you live. But here’s the good news, the Foreign Earned Income Exclusion (FEIE) can significantly reduce what you actually owe.

The FEIE lets qualifying US citizens and residents exclude a portion of their foreign-earned income from US federal income tax. To claim it, you need to meet either the Bona Fide Residence Test (you’ve established genuine residency in a foreign country for a full tax year) or the Physical Presence Test (you’ve spent at least 330 full days outside the US in any 12-month period).

This won’t wipe out self-employment tax, and it doesn’t eliminate your obligation to file, you still file, you just may owe far less. For nomads bouncing between countries and hitting that 330-day mark, the Physical Presence Test is often the easier route to qualify.

Please note: FEIE rules change, and the exclusion amount is adjusted annually. Consult a tax professional who specializes in expat or nomad taxation before relying on this.

Digital Nomad State Taxes: Do You Still Owe Your Home State?

Federal taxes get most of the attention, but for US-based Digital Nomads, state taxes can be the sneakiest problem of all.

Some US states are notoriously aggressive about claiming you as a tax resident even after you’ve left. States like California, New York, and Virginia have strict rules: simply not living there isn’t enough. They may still consider you a resident if you maintain a driver’s license, a bank account, a storage unit, or even a gym membership in the state.

For non-US nomads, the equivalent question is whether your home country will keep taxing you once you move. Germany, for example, has strict rules around deregistration (as Marie’s scenario above shows). Each country is different, so this is where individual legal advice really pays for itself.

Please note: State tax rules vary and change. If you have ties to a state with an income tax, get specific advice before assuming you’ve cut the cord.

Key Takeaways

• Digital nomads pay taxes. Location and structure determine how much.
• US citizens: taxed on worldwide income, no matter where you live.
• 183 days in a country can trigger tax residency there.
• Territorial tax countries (Georgia, Panama) don’t tax foreign income.
• FEIE can reduce US federal tax for nomads abroad.
• State taxes: formally establish domicile before leaving a high-tax state.

👉 You might also find these articles interesting:
– How to Travel Around The World and Make Money
– How to Become a Digital Nomad Copywriter
– 20 Remote Work-From-Home Jobs With No Experience Needed
– Amazon Remote Jobs and What They Pay

How will you approach the topic of taxes? Don’t forget to check out Denationalize.me (Staatenlos) and Taxhackers.io (for non-US nomads)!

Thanks for reading and for making me part of your day! Yours, Lulu

Just a heads up: some links in the article “Digital Nomad Taxes” on Nomadmum.com are affiliate links. This means if you click and buy, I might earn a small commission at no extra cost to you.

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