How Do Digital Nomads Pay Taxes?

Luca Mussari

Last updated: Apr 28, 2025 5 min

When I first began my journey as a digital nomad, my primary focus was very simple: freedom.

I wanted to travel the world while running my business from my laptop.

But after a while on the road, I realized that hopping from one country to another comes with a hidden challenge many nomads overlook: taxes.

The Hidden Problem: Tax Residency

It’s a common misconception that if you don’t spend 183 days in any one country, you magically avoid taxes everywhere.

But it’s not that simple.

Countries can tax you based on your center of vital interests, habitual abode, or even just by having local clients or bank accounts.

Not being a tax resident anywhere can also raise red flags with banks and create issues when applying for loans, visas, or payment processors.

And there are a ton more other things to consider that we discussed in depth in a separate digital nomad tax in-depth guide.

So, how do digital nomads manage to handle their taxation?

Based on my conversations with a ton of digital nomads during my travels, this is the most common setup among many nomads worldwide.

How Digital Nomads Build a Lean, Global, Tax-Efficient Setup

For many digital nomads around the world, the goal is usually to:

Live in different countries for a few months at a time
Avoid being a tax resident by accident
Keep the business lean, compliant, and easy to manage
Legally minimize taxes without living in a high-tax country

To do so, that's usually their playbook:

Step 1: Incorporating a nomad-friendly company

They start by incorporating a company in a jurisdiction that supports global entrepreneurs.

One of the best choices is often Singapore which has many benefits including:

Flat 17% corporate tax
No tax on foreign-sourced income not remitted to Singapore
No dividend or capital gains tax
Excellent international reputation and access to Stripe, PayPal, and global banking

Other strong contenders include an Estonian e-Residency company or a US LLC, but Singapore usually stands out for nomads due to its territorial tax system and minimal red tape.

They utilize a local incorporation agent to register their company, open a business bank account, and set up cloud-based accounting. Within weeks, they can be operating their global business while staying nomads.

If they are Europeans, they also consider anchoring themselves in a country like Georgia, where they can obtain a 1-year tax residency with a 1% tax regime for small business owners under the Individual Entrepreneur status. Georgia’s territorial tax system gives them the flexibility and a residency certificate without high costs or obligations.

Some people also choose to go to Bali, but there are several caveats associated with it, which would require a comprehensive list to outline here. Therefore, I recommend learning more if you are interested in opening a company there.

Step 2: Avoiding accidental tax residency

Something very important I noticed they do is to make it a rule to never spend more than 90 days in any country unless they intend to become a resident.

They use apps like TaxDay to monitor their days and avoid triggering tax obligations or simply note them in Notion or their personal phones.

Step 3: Creating a lifestyle rotation

To avoid burnout and maximize quality of life, I see a lot of nomads building a rotation of nomad-friendly countries with short-stay visas, good infrastructure, and zero personal tax exposure. Great options often mentioned are:

Portugal (Madeira or Lisbon): Great lifestyle, visa-free for EU citizens
Thailand (Chiang Mai): Low cost, fast internet, digital nomad community
Mexico (Oaxaca): 180-day visa, incredible culture
Turkey (Istanbul or Antalya): Good value, East-meets-West vibe
Georgia (Tbilisi): Base for official residency
Vietnam (Da Nang): Productive, beautiful, and affordable

They often stay 1–3 months in each place to keep their location fresh and avoid any country’s tax trap.

Step 4: Banking and payments

Another thing I noticed is that digital nomads use modern, flexible financial tools to support their nomadic lifestyle. They often open accounts with Wise and Revolut and use Payoneer or similar platforms for receiving client payments. A popular case is for them to invoice through their Singapore company and pay themselves a modest monthly salary while retaining profits in the company.

Since Singapore doesn’t tax dividends or foreign income (as long as it’s not remitted), they can keep most of their profits in the company or use them for reinvestment.

Step 5: Compliance and peace of mind

To stay compliant, many digital nomads make sure to:

File annual reports in their company’s jurisdiction (an incorporation agent can help)
Keep clean records of flights and accommodations
Save all client contracts and invoices to prove foreign-sourced income
Avoid opening personal bank accounts or signing rental contracts in high-tax countries

It’s also smart to work with a tax advisor who understands nomadic entrepreneurs, and a yearly check-in can ensure your setup remains legal and optimized. For US citizens, it is especially important to consider specific rules like available deductions and credits for digital nomads.

Not any tax advisor would do though so it's important you ask to tax services specialized in digital nomad taxes like Heavnn or SavvyNomads.

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If you plan to speak to a digital nomad tax advisor, feel free to use our code 'freakingnomads' for 5% OFF your first purchase with Heavnn or to get $60 OFF your first purchase with SavvyNomad.

The Results

By building a lean, global structure, many digital nomads around the world are currently managing to:

Reduce their effective tax rate significantly (as low as ~10% in some cases)
Avoid double taxation or compliance nightmares
Gain banking and residency legitimacy
Continue traveling 9+ months a year (in some cases)

Some Final Thoughts

If you don’t want to settle in one country full-time, the answer isn’t to avoid tax altogether. It’s to create a smart structure that embraces the freedom of remote work while staying legal, efficient, and flexible, like many digital nomads around the world do.

You don’t need to live in a tax haven or break the rules. You just need a global mindset and the right setup. With the right structure, you can stay lean, stay mobile, and stay free.

Did You Learn Something From This Guide?

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Written by Luca Mussari

Marketer and digital nomad. After leaving his 9-to-5 corporate job in London, he co-founded Freaking Nomads to inspire others to embrace unconventional paths and find happiness wherever they go.

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