The strong rise of cryptocurrency and the popularity of remote working models have driven the rapid increase in the number of digital nomads – those digital nomadic workers – globally. According to a survey from the Flatio platform, the majority of digital nomads today are U.S. citizens.
Another study noted that in 2021, the number of Americans pursuing this lifestyle increased by 42%, reaching 15.5 million people, and continued to rise to 16.9 million in 2022, equivalent to a 131% growth compared to the pre-pandemic period. The Digital Nomad Outlook 2025 report predicts that 43% of American digital nomads will live abroad for at least six months each year.
Digital nomad is a term describing individuals who use technology to work across borders of their country of residence. Through residency permits based on foreign income, they can enjoy freedom of movement, flexibility in working hours, and the opportunity to explore various cultures. However, alongside these advantages, being a digital nomad also means facing complex tax challenges, particularly regarding income from crypto assets.
This article focuses on analyzing key aspects related to taxation for digital nomads, including principles for determining tax residency, how to apply capital gains tax to crypto transactions, tax obligations to comply with, and legal strategies to optimize tax liabilities.
Specific tax challenges for digital nomads
In the borderless digital asset environment, clearly determining the tax obligations of digital nomads becomes particularly complex. The decentralized nature of cryptocurrencies makes establishing tax boundaries between countries ambiguous, while the continuous travel schedule of digital nomads may subject them to taxation in multiple jurisdictions within the same fiscal year.
One of the biggest challenges is determining tax residency. Traditional regulations – which rely on minimum residency time – are difficult to accurately apply to individuals who move continuously. This can easily lead to disputes with local tax authorities and create the risk of double taxation in multiple countries.
Moreover, the issue of double taxation is also a significant concern. When an individual generates income abroad, determining the country with the right to tax becomes complicated, especially in the context where bilateral tax agreements have not fully addressed income from crypto assets. Although countries have made efforts to sign double tax avoidance agreements, the rapid development of blockchain and crypto technology causes existing regulations to quickly become outdated, leaving taxpayers in uncertainty.
Additionally, digital nomads must continuously update themselves on the legal framework related to crypto in both their home country and host country. For example, a U.S. citizen residing in Portugal will have to comply simultaneously with U.S. tax laws and new European Union regulations, particularly the Markets in Crypto-assets Regulation (MiCA). With many countries still struggling to regulate the activities of decentralized platforms (DeFi) and non-fungible tokens (NFTs), the risk of unexpected tax obligations is very real.
Fundamental tax concepts that digital nomads need to understand
In this context of continuous movement, understanding the basic legal concepts related to tax rights and obligations is crucial for every digital nomad.
The concept of nationality determines an individual's legal status in a particular country, linked to long-term rights and obligations. Meanwhile, residency refers to the status of living in a specific country, providing limited rights and obligations within that local legal framework.
Tax residency, a key factor in tax obligations, is primarily determined based on the length of stay. For example, in the United States, an individual is considered a tax resident if they stay for at least 31 days in the current year and a total of 183 days over the last three years, while in many European Union member countries, this requirement is 183 days per year. Some exceptions exist, such as in Cyprus, where an individual may be considered a tax resident if they can prove they are not taxed in any other country.
Domicile, unlike tax residency, is a longer-term concept that defines where a person is legally considered 'home'. Changing domicile is often very difficult, and in some countries like the UK or Australia, domicile has a significant impact on global tax obligations, including income from digital assets.
Types of taxes related to crypto income
Income from crypto assets may be subject to various types of taxes depending on the nature of the income and the legal system of the country.
Typically, service payments made in crypto will be taxed as personal income, with the tax rate depending on the total annual income and the applicable tax brackets in the host country. If income arises from the sale or exchange of crypto, the profit portion will be subject to capital gains tax (CGT), with different tax rates for short-term and long-term gains.
In the case of a digital nomad receiving crypto through self-employment, that income may be subject to self-employment tax; in the United States, the applicable tax rate is 15.3% before considering personal income tax.
If operating as a limited liability company (LLC) or a small business, profits may be subject to corporate tax instead of just personal income tax. Additionally, in some cases, using crypto to pay for goods and services may also lead to value-added tax (VAT) or goods and services tax (GST) obligations in the host country.
The global tax system and its impact on digital nomads
Depending on the country, tax systems may operate on a territorial, global, or nationality-based principle.
Territorial tax systems, such as in Singapore, only tax income generated within the country, allowing digital nomads to easily avoid tax obligations on foreign income. In contrast, global tax systems, such as in Australia and Canada, require tax residents to report and pay taxes on all worldwide income, including crypto income. Some countries, like the United States, even apply a nationality-based tax system, requiring citizens to pay taxes on global income even if they no longer reside in their home country.
International regulations and efforts to enhance crypto tax transparency
In light of cross-border challenges, international organizations like the OECD have developed the Crypto-Asset Reporting Framework (CARF) to standardize reporting of crypto transactions and enhance transparency. The European Union has also implemented the MiCA regulation to govern crypto asset activities across the bloc, simplifying compliance obligations for investors.
Digital nomads can avoid double taxation by correctly applying the double tax avoidance agreements (DTA) between countries. DTAs clearly define the country with the primary right to tax each type of income and allow for deductions of taxes paid in the secondary country.
To optimize tax obligations, digital nomads need to accurately determine their tax residency status, understand relevant DTA regulations, maintain accurate records of crypto transactions, and consult international tax experts during financial planning.
An effective tax strategy will help digital nomads minimize their tax burden and optimize income from crypto. By proactively managing the timing of transactions, choosing crypto-friendly host countries, and consulting international tax experts, digital nomads can maintain compliance while protecting their long-term financial interests.
