A digital nomad works remotely (freelance, own business, or remote employment) and moves between countries. Even though the lifestyle seems free, tax laws do apply — sometimes in several places.
The main challenges are:
Determining tax residency (which country considers you a resident for tax purposes)
Dealing with double taxation (earning in one country, taxed in another)
Navigating reporting requirements (for foreign income/assets, social security, etc.)
Here are the building blocks you’ll need to understand and use to legally optimize your taxes:
| Concept | What It Means | Why It Matters |
|---|---|---|
| Tax residency / “183-day rule” | Many countries tax you as a resident if you stay there more than ~183 days per year. Also other criteria like having a permanent home, where your center of economic interests is. | If you become tax resident, you may owe taxes on your worldwide income there. |
| Double Taxation Agreements (DTAs) / Treaties | Bilateral agreements between countries that prevent you paying income tax twice on the same income. | They can allow you to get credits, exemptions, or decide which country has primary rights to tax certain income. (DigiWander) |
| Foreign Earned Income Exclusion (FEIE) (for U.S.) / similar provisions | Allows certain foreign-earned income to be excluded from U.S. taxable income if you meet physical presence or bona fide residence tests. (taxesforexpats.com) | Â |
| Foreign Tax Credit | If you pay taxes abroad, you can often offset taxes owed in your home country by what you already paid abroad. Helps reduce double tax. (Sustainable Business Toolkit) | Â |
| Totalization Agreements / Social Security Agreements | These are specific treaties to avoid paying social security or pension contributions twice if you’re working / earning across countries. (Expat CPA) |  |
| Special Expat or Nomad Regimes (tax-friendly visa / special regimes) | Some countries offer special tax rules for new residents / digital nomads (flat rate, territorial taxation, reduced rates, exemptions etc.) (Nomad Magazine) | Â |
Here are practical steps and strategies to reduce your tax burden — while staying fully legal and compliant.
Determine Your Tax Residency
Track where you spend your time. Many countries use ~183 days rule. (El Relocator)
Also, check if you have a “permanent home”, your family is there, your main economic / business connections are there.
If possible, avoid becoming a resident in a high-tax country, unless there are compensating benefits.
Check if Your Home Country Taxes Your Global Income
U.S. citizens and some others pay tax on worldwide income even if they live abroad. If this applies to you, then you’ll need to use tools like FEIE, tax credits, etc. (DigiWander)
If your home country uses residency or citizenship basis is critical (e.g. U.S. vs country that doesn’t tax non-residents on foreign income).
Use Tax Treaties and Foreign Tax Credits
If your “host country” (where you live/work abroad) has a treaty with your home country, study it. It may reduce withholding, let you avoid or reduce tax on dividends, pensions, etc. (Expat CPA)
Always keep good documentation of taxes paid abroad — you’ll need receipts, official tax filings, etc.
Special Nomad / Expat Regimes
Some countries now provide digital nomad visas that include favorable tax conditions.
For example, Portugal’s Non-Habitual Residency (NHR) regime has been popular. (Nomad Magazine)
In Spain, there’s the “Beckham Law” / special expat regime (for certain foreign workers) which can give a flat rate (e.g. 24%) vs higher progressive rates. (El Relocator)
Choose A Favorable Base / Jurisdiction
Countries with territorial taxation (only tax income earned inside the country) are appealing. (Global Citizen Solutions)
Low-tax or zero personal income tax countries are an option. But check the complete taxation + reporting + cost of living + infrastructure. (Global Citizen Solutions)
Keep Accurate Records
Log days/time you spend in different countries.
Save invoices, bank statements, receipts for business expenses.
Keep track of income sources (foreign vs domestic).
Document when you pay foreign taxes. All that will reduce risk and help in claiming credits or exclusions.
Stay Compliant with Reporting Rules
If you’re U.S. citizen or green-card holder, you may have to file forms: e.g. Form 2555 (FEIE), 1116 (Foreign Tax Credit), FBAR / FinCEN 114 (foreign financial accounts), Form 8938 (FATCA) etc. (taxesforexpats.com)
For other countries, maybe similar forms for foreign assets, foreign bank accounts, etc.
Plan Social Security / Contributions
Be aware whether you must pay social security or pension contributions in host country, home country, or both.
If there is a “totalization agreement” you might avoid paying twice. (Expat CPA)
To make it concrete, here are a few examples:
| Country / Regime | What They Offer Nomads / Expats | Key Pros & Catch-Ups |
|---|---|---|
| Spain (Digital Nomad Visa + Beckham Law) | Foreign workers / nomads can benefit from flat rate ~24% up to €600,000 income under special regime; Spain has DTAs with many countries. (Property for sale in Spain) | Must meet requirements (e.g. not tax resident in Spain for last 5 years). Must check whether self-employed or employed qualifies differently. After six years income over thresholds taxed at higher rate. |
| Portugal (NHR) | Reduced taxation or exemptions on certain foreign income. Good quality of life, infrastructure. (Nomad Magazine) | Rules change; must apply and meet criteria; some income types may still be taxed. |
| U.S. Citizens Abroad | FEIE, Foreign Tax Credit, totalization agreements allow relief. Must file U.S. returns even when abroad. (taxesforexpats.com) | Self-employment + social security still apply. Reporting burden is larger. |
| Low/Zero Tax or Territorial Countries | Some jurisdictions only tax income sourced inside the country; if your work is entirely remote for foreign clients, you may avoid local tax on foreign-earned income. (Global Citizen Solutions) | Legal definitions matter; sometimes you lose rights / benefits; residency or visa requirements; must still check laws of your home country. |
Assuming digital nomad status removes all tax obligations — it doesn’t.
Overlooking social security or mandatory contributions in host or home country.
Failing to file foreign asset / bank account reports, which can carry heavy penalties.
Relying on informal advice (e.g. from friends, Facebook groups) instead of checking legal texts or using tax professionals.
Not considering state level taxes (in the U.S., many states tax based on your physical presence or domicile).
Ignoring visa / permit requirements, which sometimes tie into tax / residency status.
Find out what your home country’s rules are: do they tax your global income? What treaty(s) exist?
Track days spent in each country and your “center of life” (home, bank, family, business)
Research host country’s tax and social security regime + whether special nomad visas / expat regime available.
Keep full, organized documentation: income, expenses, taxes paid, residency permits, travel logs.
Use available legal tools: FEIE, foreign tax credits, treaty benefits, special expat tax regimes.
Consult a tax professional, especially someone experienced in expat / international tax law. These rules change.
Review annually — your situation (residency, length of stay, income sources, treaties) might change.