The strong rise of cryptocurrency and the popularity of remote work have rapidly increased the number of digital nomads – technical digital nomadic workers – globally. According to a survey from the Flatio platform, most 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, and continued to rise to 16.9 million in 2022, equivalent to a 131% growth compared to the pre-pandemic period. The report Digital Nomad Outlook 2025 predicts that 43% of American digital nomads will live abroad for at least six months each year.
Digital nomads are individuals who use technology to work across national residence borders. Through income-based residence permits, they can enjoy freedom of movement, flexibility in work hours, and opportunities to explore diverse cultures. However, alongside these advantages, becoming a digital nomad also means facing complex tax challenges, especially regarding income from crypto assets.
This article focuses on analyzing key tax-related aspects for digital nomads, including tax residence principles, capital gains tax application for crypto transactions, tax obligations to comply with, and legal strategies to optimize tax responsibilities.
Specific Tax Challenges for Digital Nomads
In the Borderless digital asset environment, determining a digital nomad's tax obligations becomes particularly complex. The decentralized nature of cryptocurrency makes establishing tax boundaries between countries blurry, while digital nomads' continuous travel schedules may require them to pay taxes in multiple legal jurisdictions within the same financial year.
One of the biggest challenges is determining tax residence. Traditional regulations – based on minimum residence time – can hardly be accurately applied to individuals moving continuously. This easily leads to disputes with local tax authorities and creates the risk of duplicate taxation in multiple countries.
Additionally, double taxation is a significant concern. When an individual generates income abroad, determining which country has the right to tax becomes complicated, especially in a context where bilateral tax agreements haven't fully adjusted for crypto asset income. Although countries have attempted to sign agreements to avoid double taxation, the rapid development of blockchain and crypto technologies quickly renders current regulations obsolete, pushing taxpayers into uncertainty.
Moreover, digital nomads must continuously update the legal framework related to crypto in their home and residing countries. A U.S. citizen residing in Portugal, for example, must simultaneously comply with U.S. tax laws and new European Union regulations, particularly the Markets in Crypto-assets Regulation (MiCA). When many countries are still struggling to regulate decentralized (DeFi) platforms and Non-fungible Assets (NFT), the risk of unexpected tax obligations is very real.
The territorial tax system, such as in Singapore, only taxes income generated domestically, allowing digital nomads to easily avoid tax obligations on foreign income. In contrast, the global tax system, as in Australia and Canada, requires tax residents to declare and pay taxes on worldwide income, including crypto income. Some countries, like the United States, even apply a citizenship-based tax system, requiring citizens to pay global income tax even if they no longer reside in their home country.
International Regulations and Efforts to Enhance Crypto Tax Transparency
Facing cross-border challenges, international organizations like OECD have developed the Crypto-Asset Reporting Framework (CARF) to standardize crypto transaction reporting and increase transparency. The European Union has also implemented the MiCA regulation to regulate crypto asset activities across the bloc, helping to simplify compliance obligations for investors.
Digital nomads can avoid double taxation by correctly applying double taxation avoidance agreements (DTA) between countries. DTAs clearly define which country has the primary right to tax each type of income and allow deductions for taxes paid in the secondary country.
To optimize tax obligations, digital nomads need to accurately determine their tax residence status, understand relevant DTA regulations, maintain accurate crypto transaction records, and consult international tax experts during financial planning.
An effective tax strategy will help digital nomads minimize tax burdens and optimize crypto income. By proactively managing transaction timing, choosing crypto-friendly residence countries, and seeking advice from international tax experts, digital nomads can maintain legal compliance while protecting long-term financial interests.
