Tax Risks for Digital Nomads: Key Issues to Consider

In the era of remote work, an increasing number of individuals are choosing the digital nomad lifestyle — freely relocating between countries while combining work and travel. However, mobility does not exempt one from tax obligations. On the contrary, it may create legal uncertainty: in which country will tax residency arise, and consequently, where should income be declared and taxes paid? Is there a risk of double taxation?

In this article, REVERA’s experts examine the tax risks digital nomads may face and how to minimise them.

Main Tax Risks for Individuals

1. Acquisition of tax residency in the country of temporary stay

Each jurisdiction has its own approach to recognising individuals as tax residents. The following are common (but not exclusive) criteria used by states for determining individual tax residency:

• Physical presence exceeding 183 days
  The method for counting 183 days varies. It could be a calendar year, a tax year (e.g. 6 April to 5 April / 1 July to 30 June), or any rolling 12-month period.
• Centre of vital interests
  This refers to a combination of personal and economic interests. Personal ties typically include the location of family members (spouse/children), permanent accommodation, education, and social connections. Economic ties may include place of work (source of income), business activity, property, bank accounts, etc.
• Place of habitual residence
  According to case law, some countries may deem an individual tax resident based on habitual residence (e.g. property ownership), even if the person spends as little as 20 days in that country within the tax year.
  For more insight, see our summary of a relevant German court case.
• Citizenship
  Some national laws stipulate that if a citizen of Country A is not a tax resident of any other state, they may be deemed a tax resident of Country A.

2. Double Taxation

An individual may be simultaneously recognised as a tax resident in two countries, resulting in double taxation of income, especially in the absence of a Double Taxation Agreement (DTA) between the states.

Where a DTA exists, tax residency is determined under its provisions. The primary criteria are usually permanent home, then centre of vital interests, followed by habitual abode, and finally, citizenship. If the person is not a citizen of either state, the competent authorities will negotiate and determine the residency status.

Note: The burden of proof regarding tax residency status lies with the individual, who must provide supporting evidence.

3. Late Income Declaration and Tax Payment

Many individuals are unaware that they qualify as tax residents in another country and consequently fail to declare global income or pay tax there. However, ignorance does not exempt from liability — the tax authorities may impose back taxes, interest, and penalties.

4. Concealment of Income via Foreign Accounts

Most countries participate in the Common Reporting Standard (CRS) for automatic exchange of financial information. Banks report account data of non-residents to tax authorities.

In the United States, there are additional reporting requirements:

• FBAR (for foreign accounts exceeding USD 10,000 per reporting period)
• FATCA (requiring foreign financial institutions to report on U.S. taxpayers’ accounts)

Failure to comply may lead to fines, account freezes, tax audits, or even criminal liability. Individuals opening accounts or companies without considering their tax residency are especially vulnerable.

REVERA’s Legal Recommendations

• Keep detailed records of your travel and income sources.
• Determine your tax residency and obtain a tax residency certificate.
• Check whether your tax residency country requires notification of foreign bank accounts.
• Consult international tax professionals.

REVERA’s legal team will assist you in building a lawful income structure, establishing tax residency, properly reporting foreign assets, and ensuring compliance with CRS, FATCA, FBAR, and other international reporting systems.

Author: Yaroslavna Zadesenskaya

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