Digital nomads typically live in areas with cheap living expenses that are either entirely or nearly wholly tax-free. However, digital nomadism might be risky for those who lack a thorough understanding of their tax status. This post aims to provide useful data on taxes for digital nomads. If you’re considering becoming a digital nomad, you must check this article on jobs, taxes, and visas!
Where Do Digital Nomads Pay Taxes?
In the Country of Citizenship
Some countries tax the worldwide income of their citizens, regardless of their actual place of residence. For example, by default, US citizens are required to pay taxes in the US unless they are exempted by law.
In the Country of Residence
In most countries, if a person stays in the country for 183 days or more, they automatically become a resident for tax purposes.
Taxes and Digital Nomad Visa
A digital nomad visa entitles its holder to stay in a country and work remotely. However, the 183-day rule is applicable unless laws exempt a digital nomad from paying taxes in the country that issued a digital nomad visa.
Pay No Taxes at All
If a digital nomad is a citizen of a country that does not oblige them to pay tax regardless of their actual place of residence if they are always present in the country for less than 183 days, and if there is no other evidence that the digital nomad is linked to any country, they may not pay any taxes.
Do you want to be a digital nomad? Read this article about digital nomad work visas and how to apply.
Tax-Friendly Countries in Europe
Now we’re going to talk about the European countries with the lowest income tax. But before that, let us tell you that if you’re thinking about traveling, you need to read our article on the best tips and tricks on how to save money for any trip.
Andorra, well-known for its duty-free shopping, is tucked away in the Pyrénées between two high-tax jurisdictions: Spain to the south and France to the north.
Andorra solely levies capital gains tax on the sale of Andorran real estate. There is no wealth tax, gift tax, inheritance tax, or any other type of tax. Before 2015, the nation did not levy income taxes but eventually gave in to demands from the European Union (of which it’s not a member) to institutionalize an income tax system.
Once income surpasses EUR40,000, income tax rates, which range from 0% to 10%, are imposed. On the other hand, corporate tax rates range from 2% to 10%.
Bulgaria has one of the EU’s lowest corporate and personal tax rates, with a flat rate of 10%. Income from investments or stock market trading in the EU is not subject to a capital gains tax in this nation. Nevertheless, profits from the sale of real estate are subject to a 10% capital gains tax.
Foreigners who want to create a business in Bulgaria can do so without any additional restrictions by just going through the usual registration process. Bulgaria is also open to foreign investors. The nation is undoubtedly low-cost in Europe, where your money will stretch further.
One of the EU’s lowest business tax rates, at 12.5%, is in Cyprus.
Cyprus does not impose an inheritance tax. You’ll be glad to know that overseas pension income receives a unique treatment of a flat tax rate of 5% if you want to retire in Cyprus.
Although the standard personal income tax rate is 20% with a graduated increase to 35%, there are several tax exemptions and deductions based on your type of income and, the fact that you are not deemed to have a domicile in Cyprus.
Individual business owners in Georgia may pay as little as 1% in taxes if they satisfy specific requirements. Additionally, Georgia does not tax people’s income from overseas sources.
As the nation strives to expand the IT industry and establish itself as a regional hub for IT, Georgia also offers special tax incentives for enterprises in the sector. IT businesses can choose between two special tax statuses, one with 0% corporate income tax and the other with 5% corporate income tax.
In Malta, there are no taxes on gifts, inheritances, or, in some situations, real estate.
Malta has a 35% corporation tax rate, although there is no tax on dividends or royalties. However, the effective corporate tax rate can be reduced to 5% thanks to an imputation-based taxing scheme.
Although the maximum income tax rate is only 15%, residence permits for CEOs and high-net-worth ex-pats offer significant tax breaks.
The lowest rates in Europe are in Montenegro, where the personal income tax rate ranges from 9% to 11%, and the corporate income tax rate is set at 9%. Additionally, it imposes 9% on dividend and capital gains taxes.
It’s also important to remember that Montenegro municipalities impose a surtax on your income equal to 15% of the federal taxes you paid. Non-residents must pay a 5% tax on their interest income, another exemption to the flat rate.