Taxes as a Digital Nomad in the EU

Taxes. We all need to pay them, so why are they so difficult to understand? When you do not have a permanent home or a traditional job, it makes it even more grueling.

We understand that you probably prefer to not think about it, but the truth is that making mistakes when it comes to taxes might end up costing you money. Use this article as a first point of information for your specific situation, and let us get into the nitty gritty of paying taxes as a digital nomad within the EU!

Digital Nomad Paperwork — Taxes can be overwhelming. We’re going to help you understand how to handle them as a Digital Nomad!

Firstly, a required disclaimer: DigitalNomad.Earth does not provide tax, legal, or accounting advice. The material below has been prepared for informational purposes only, and is not intended to provide, nor should be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transactions or tax-related activities.

What are taxes?

First, let us make sure that we are on the same page about what tax really is. Income tax is essentially a percentage of your salary that you give to the government. Now, why would I do that, we hear you ask. Well, the government needs money to operate public institutions and services, like schools and medical facilities.

Usually, then, people pay their taxes to their local government. In short, where they are residents. There are no general EU rules dictating where people should pay tax, if they spend a significant amount of time outside of their home country.

So, what do you do then, if you do not have a permanent home, which is the case with a lot of digital nomads?
The short answer is that you pay your taxes to the country you, and/or your business is registered.

The long answer is, well, longer.

Where do I have to pay my taxes as a digital nomad in the EU?

Let’s get into the details. Every situation is different of course, and not all countries have the same rules. But in general, below are the main ways taxes are handled in the European Union listed.

As a person

If you have an official address in your home country, you pay your taxes there. Even if you travel around and obtain digital nomad visas in different countries, you still pay your taxes in your home country. This is one of the essential deals when it comes to most digital nomad visas; you do not conduct any business in the country you are in, thus you do not pay tax there either.

As a business

If you are a sole business owner, with a registered company in your home country, you usually pay your taxes to your own government. This applies even if you conduct all your business activities online, and not primarily in your home country. If, however, you are registered with an address in your home country, but decide to set up (and register) your business in a different country in Europe, you need to pay taxes in that country.

The EU rule of thumb (180-day rule)

As a general rule within the EU, you are liable for taxation in the country where you spend most of your time, during a one-year period. In some instances, however, you might find yourself being taxed twice, what is known as double taxation.

This can happen if you have dual residency, so make sure you pay extra attention and prevent yourself from ending up in that situation if this is the case for you.

Luckily, a lot of countries within the EU operate with double tax agreements, which are put in place to avoid this situation. Make sure to visit your local government website to read more about this subject, as it will differ from country to country! You can also read more about it here.

Remote jobs remote work digital nomad online work digital jobs — There are many ways of lowering your taxes. Investments in your business (like a camera, laptop or harddrive) can often be deducted from your taxes in some way, this differs per country. Seek the advice of a local tax specialist to see what would help you the most.

Tax-friendly countries

A wise man once said; you should ‘go where you are treated best’.

Tax havens in the EU

You might be familiar with the term “tax havens”. In short, it refers to countries that do not impose high taxes on foreign business owners. In some cases, there is no tax at all, but this is not very common.

What is essential here, is that if you want to avoid large taxes, you have to register your business in countries where taxes are generally low. Countries have varying levels of taxation, according to the general economy of the country.

Every country has different tax rates

Denmark, for example, has high-income taxes because the general income level of the population is high. Other countries in Europe, such as Greece, Portugal, and Malta, have lower income taxes. For tips on increasing your income as a digital nomad, read our article that shows you the best ways to earn money online. See a full table with all the highest tax brackets of the EU below.

This is also why a lot of company owners prefer to be selective with where they operate their businesses. In fact, it is a great illustration of how taxation works, even for digital nomads.

Paying taxes in a different country as a digital nomad in the EU

You pay your tax where you operate your business, and where your main income stream comes from.

You should however note, that in order to open up a business venture in a different country than your home country, you need to have some form of residence permit. This is necessary for you to be able to pay taxes as well.

EU rules state that you should be taxed in the same way as nationals if you are a tax resident in that country.

Personal Income Tax Rates in the EU

See the table below for an overview of the highest tax brackets for personal income in countries in the EU.

Denmark (55.9%), France (55.4%), and Austria (55%) had the highest top statutory personal income tax rates among European OECD countries in 2021.

Hungary (15%), Estonia (20%), and the Czech Republic (23%) had the lowest personal income top rates.

Country	Highest Income Tax Rate
Austria 🇦🇹	55.0%
Belgium 🇧🇪	53.5%
Czech Republic 🇨🇿	23.0%
Denmark 🇩🇰	55.9%
Estonia 🇪🇪	20.0%
Finland 🇫🇮	51.2%
France 🇫🇷	55.4%
Germany 🇩🇪	47.5%
Greece 🇬🇷	54.0%
Hungary 🇭🇺	15.0%
Iceland 🇮🇸	46.2%
Ireland 🇮🇪	48.0%
Italy 🇮🇹	47.2%
Latvia 🇱🇻	31.0%
Lithuania 🇱🇹	32.0%
Luxembourg 🇱🇺	45.8%
Netherlands 🇳🇱	49.5%
Norway 🇳🇴	39.4%
Poland 🇵🇱	36.0%
Portugal 🇵🇹	53.0%
Slovakia 🇸🇰	25.0%
Slovenia 🇸🇮	50.0%
Spain 🇪🇸	54.0%
Sweden 🇸🇪	52.3%
Switzerland 🇨🇭	44.8%
Turkey 🇹🇷 (EEC)	40.8%
United Kingdom 🇬🇧	45.0%

Source: PwC, “Worldwide Tax Summaries,” accessed July 15th, 2022, taxsummaries.pwc.com.

Getting personal tax advice

If you made it this far, congratulations. You are now well equipped to start your journey of figuring out where taxes should be paid during your specific digital nomad adventure.

I guess this leaves us with only one thing to say; happy taxation! Or not. Either way, being familiar with how taxation works is essential. It might be worth contacting financial institutions for further advice!

We can’t do that for you, but we can give you advice on many other things as a digital nomad. For example, how to make friends when you’ve just arrived at a new place!