5 Best Countries to Live as Digital Nomads Tax-Free

Last Updated on 14/02/2024 by Edy Ragnoli

If you are reading this blog, you love to travel, change environments, be your own boss, enjoy freedom, and reduce expenses to the minimum. So, keep reading to discover the best five countries to live as digital nomads while paying almost zero taxes (…and why avoid the Digital Nomad VISA).

Where You Should Reside as Digital Nomads

The term “digital nomad” has gained popularity after remote work opportunities and technological advancements enabled any tech-savvy individual to communicate and collaborate on projects from everywhere in the world (coffee shops, co-working spaces, libraries, beaches, hotels, and other cool places).

As a digital nomad, you should get the advantages of doing a travel job, the joy of touring the world, and the benefits of spending as little as possible in the selected long-term residence country (which means few or zero taxes and cheap everyday expenses).

This way, you can spend all your hard-earned money on what you love most: discovering planet Earth and “receiving all its blessing” rather than getting crazy with bureaucracy, bills, and regulations that will leave only breadcrumbs in your pocket.

Other people would tell you to choose a place with high living standards – as if this is the only way to live a good quality of life – while you should avoid those countries not exactly designed for “pampered kings and queens”.

Let's be clear, everyone is free to live where they prefer but logic imposes a simple consideration: the countries with the highest quality of life are also generally the most expensive to live in.

If you already earn at least $100,000 a year you could decide to live in the country with the highest quality of life like Switzerland or in the unbridled luxury of Dubai where many Youtubers and Digital Marketers have settled in recent years.

If, on the other hand, you are starting your life as a digital nomad now, or you already are but have an income under $50,000, some of those countries can offer you a way to live tax-free and pursue your dreams.

Don't worry if you don't find the lifestyle you are used to because it really doesn't matter. You are a digital nomad after all, and you'll spend 3 to 6 months a year traveling around the world, so you won't miss any “shortcomings” during the few months you'll be spending in your country of residence. Aren't you?

If you replied YES, you already know you can travel wherever you want, visit and stay in any country with the best quality of life (although subjective) while still paying almost zero taxes on your income because you reside in one of the following five countries.

Disclaimer: I'm not a financial, legal or tax professional. I'm a self-taught entrepreneur who likes sharing lessons learned. Given the complexity of the topic, this article may contain some inaccuracies regarding the laws and taxation of the countries mentioned. Always consult a professional before making your choice.

The 4 Income Tax Systems in the World

1. Residential Taxation (Worldwide Taxation Principle)

Most countries worldwide adopt this taxation. All residents must pay taxes on all income produced in the territory and abroad.

2. Territorial Taxation

Only a few countries (21) have territorial taxation. A tax resident in one of these countries must pay taxes only on income generated in the residence country. You can choose between Portugal, Gibraltar, Estonia, Georgia, Libanon, Thailand, Hong Kong, Singapore, Malaysia, Belize, Panama, Costa Rica, El Salvador, Saint Martin, Honduras, Guatemala, Bolivia, Paraguay, The Democratic Republic of the Congo (DRC), Gabon, and Eswatini.

We can say territorial taxation is convenient for digital nomads owning or planning to incorporate a foreign company.

3. Non-domicile (non-dom) Taxation

It combines residential and territorial taxation. You'll find it in Cyprus, Malta, Ireland, and the UK (Read more details below).

4. Citizenship-Based Taxation

You will find it only in the USA and Eritrea. This tax system requires U.S. and Eritrean citizens to pay taxes in the United States (or Eritrea) regardless of their country of residence.

This means the only way for them to pay less taxes is by obtaining a second citizenship and passport in another country.

5 Cheapest Countries to Live as Digital Nomads 

1. Cyprus

Cyprus country for digital nomads
Love Bridge in Ayia Napa, Cyprus

Cyprus is an island country in the eastern Mediterranean Sea (south of Turkey and west of Syria and Lebanon). It's the third largest and third most populous island in the Mediterranean, with a rich history that spans thousands of years.

Cyprus is known for its Mediterranean climate, characterized by hot, dry summers and mild, wet winters. The island is home to diverse landscapes, including beaches, mountains, and fertile plains.

Cyprus has a long and complex history. It has been inhabited by various civilizations, including the Greeks, Romans, Byzantines, Crusaders, and Ottomans. The island became a British colony in 1878 and gained independence in 1960.

The official languages of Cyprus are Greek and Turkish. English is widely spoken and understood due to the island's colonial history.

The southern part of Cyprus is a member of the European Union (EU), which has brought economic benefits and opportunities to the country.

I like Cyprus's dynamic tourism industry, tasty food, free parking, and beach atmosphere. It's an island, after all!

Cyprus adopts a non-dom taxation system that offers you many attractive benefits as a foreigner digital nomad when you decide to live there. And here's why.

What's a non-dom status?

Non-dom (or Non-domicile) is an Anglo-Saxon origin tax status used in the UK, Ireland, Malta, and Cyprus. If you or your parents were born abroad, you will pay taxes only on the income produced in one of the four countries above where you have decided to live and acquire residence.

This system is ideal if you are a digital nomad making money mostly (or all of it) with a company incorporated overseas.

The New (and Better) Tax Residency Rule for Individuals

You become a Cyprus tax resident after staying there for at least 183 days in a tax year. But since January 2017, the government also introduced the 60-day rule (unique country in the world except for Antigua and Barbuda), which allows you to obtain tax residence after physically staying in Cyprus for just two months. However, you must meet the following requirements.

  • Remain in Cyprus for 60 days or more in a tax year
  • Carry on a business in the country, get employed or hold an office with a Cyprus tax resident company.
  • Keep permanent residence by owning or renting a home in Cyprus.

After becoming a self-employed non-dom tax resident individual, you won't pay any personal tax on income invoiced in Cyprus below €19,500. You are also exempt from the Special Defence Contribution (SDC).

Your only expense will be the Social Insurance (15.6% on up to €58.080 Cyprus-generated income), the National Healthcare System (4% on Cyprus income and 2.65% on earned income, such as rent, dividends, and interest), the tax on rental income (standard rates).

NonDomiciled Tax Resident Individual

Type of income

Income tax

SDC

Dividends

Exempt

Exempt

Interest

Exempt

Exempt

Rental Income

Taxable (standard rates)

Exempt

Personal Income Tax Rates

Taxable income (€)

Tax rate

Amount of tax (€)

Accumulated tax (€)

0 - 19,500

0%

0

0

19,501 - 28,000

20%

1,700

1,700

28,001 - 36,300

25%

2,075

3,775

36,301 - 60,000

30%

7,110

10,885

> 60,000

35%

How do you claim non-dom status?

The application of non-dom status is the latter of 7 steps. I suggest you read and follow them carefully to become a non-domicile Cyprus tax resident.

  1. Buy a Cyprus SIM card.
  2. Rent or buy a house in Cyprus.
  3. Receive an electricity or water bill in your name.
  4. Register as self-employed or incorporate an LTD to get the Social Insurance Number and Tax Identification Code (TIC).
  5. Open a bank account with the Bank of Cyprus or Hellenic Bank.
  6. Apply for a residence permit at the Civil Registry and Migration Department of the district where you live in Cyprus.
  7. Apply for the non-dom status after downloading and completing the forms T.D38 and T.D38QA.

After receiving the certificate you are officially a non-dome Cyprus tax resident and can potentially live tax-free for at least 17 years.

Cyprus Highlights

Life in Cyprus

Language: English, Greek, and Turkish
Landscape: largest Mediterranean island with beaches, mountains, and fertile plains
Climate: Hot, dry summers and mild, wet winters
Cuisine: Mediterranean
Main Religions: Greek Orthodox Christians (Greek-Cypriots), Muslim (Turkish-Cypriot)
Culture: a blend of Greek and Turkish influences
Economy: tourism, finance, shipping
Capital: Nicosia
Currency: Euro
Political situation: EU member (southern Cyprus)

Cost of living index: 59.2
Quality of life index: 146.5

Taxes in Cyprus

Taxation system: Non-dom
Days of presence required for residence: 60 or 183
Tax on foreign-generated income: 0%
Tax on dividends, interests or crypto: 0%
Tax regime validity: 17 years
Personal income tax: 0% (on up to €19,500)
Social insurance: 15,6% (on Cyprus income up to €58.080)
NHS on Cyprus income: 4%
NHS on rent, dividends, interest): 2.65%
Tax on rental income: standard rates
Corporate tax (LTD): 12.5%
VAT: 19%

2. Georgia

Georgia country for digital nomads
Ananuri, Georgia

Georgia stands at the crossroads of Eastern Europe and Western Asia. The landscape astonishes visitors with its high mountains, lush valleys, and coastline along the Black Sea.

Georgia's history dates back thousands of years and was built passing through the glory of various empires, including Romans, Byzantines, Ottomans, and Russia.

Thanks to its history, location, and mix of civilizations, Georgia brought us a vibrant culture, old wines, a flavourful cuisine, a distinctive music and dance culture, and the Georgian language with its unique alphabet.

How Tax Works in Georgia

Georgia offers territorial taxation, which means you won't pay any tax on foreign-sourced income (0% as a legal entity and natural person). Your only expense will be 2% for Social Security.

The condition? Obtaining tax residency in Georgia (don't confuse it with ‘legal residency') and exploiting the double taxation avoidance treaty (verify the list of included foreign countries).

This makes Georgia a perfect destination for digital nomads who incorporate a business outside the country.

The easiest way to obtain tax residency is to spend at least 183 days in Georgia. The process is automatic. So, it doesn't require any application or visit to a governmental office.

Additionally, Georgia offers an attractive option for individual entrepreneurs.

Are you a freelancer, digital nomad, crypto enthusiast, digital marketer, small business owner or startup founder? You can start an individual entrepreneurship (sole partnership) in Georgia and get additional benefits when you meet the following conditions.

For an income below GEL 30,000 ($11,376), you qualify for Micro Business Status and live tax-free (0% tax rate). Between GEL 30,000 and GEL 500,000 ($189,600), you can apply and qualify for Small Business Status and pay 1% of taxes.

In this case, obtaining tax residency is not mandatory, but you must pay income tax based on your country of residence.

Georgia Highlights

Life in Georgia

Language: Georgian
Landscape: high mountains, lush valleys, Black Sea coastline
Climate: subtropical (west) and dry moderate continental (east)
Cuisine: flavourful and distinctive
Main Religions: Eastern Orthodox Christians
Culture: wine, music, dance
Capital: Tbilisi
Currency: Georgian Lari
Political situation: democracy with ties with the European Union and NATO

Cost of living index: 40.61
Quality of life index: 115.98

Taxes in Georgia

Taxation system: territorial
Days of presence required for residence: 183
Residence application: None (automatic)
Tax on foreign-earned income: 0%
Social Security (pension fund): 2%
Time to open a local business and bank account: 2 days
Individual Entrepreneur tax: 0% (Micro Business Status
Individual Entrepreneur tax: 1% (Small Business Status)
Standard corporate tax: 15%
Tax on dividends: 5%
Typical personal income tax: 20%
VAT: 18%

3. Lithuania

Lithuania country for digital nomads
Gediminas tower, Vilnius, Lituania

Lithuania has undergone significant changes in recent history. It regained its independence from the Soviet occupation during and after WW2 and integrated with Western institutions.

The country's cultural heritage, natural beauty, and historical significance make it a fascinating destination for travellers and those interested in European history and culture.

Lithuania is known for its historic cities, charming old towns, and natural beauty. Vilnius Old Town is a UNESCO World Heritage site known for its well-preserved medieval architecture.

The country has seen significant economic growth since joining the European Union. Its primary focus is now on agriculture, manufacturing, and services.

Attractive tax system for small local businesses

In Lithuania, the personal (and self-employment) income tax rate varies between 5% (on annual profit up to €20,000) and 15% (on higher profit), which is attractive.

And if your digital nomadic spirit also has an entrepreneurial soul, the Lithuanian standard corporate tax is 15%. But it got even better in 2018. Since then, small businesses (gross revenue below €300,000 and with up to 10 employees) can benefit from a 0% tax rate in the first year and only 5% in the subsequent years.

Lithuania Highlights

Life in Lithuania

Language: Lithuanian
Landscape: flat plains, hills, lakes, and forests
Climate: humid continental
Cuisine: hearty and traditional dishes
Main Religions: Roman Catholicism
Culture: folk music, dance, and literature.
Economy: manufacturing, services, and agriculture
Capital: Vilnius
Currency: Euro
Political situation: democracy (it joined the European Union and NATO in 2004)

Cost of living index: 49.92
Quality of life index: 160.4

Taxes in Lithuania

Taxation system: Worldwide (residential)
Days of presence required for residence: 183
Small business tax: 0% first year, then 5%
Standard business tax: 15%
Tax on dividends: 15%
Self-employment income tax: 5% to 15%
Standard VAT: 21%

4. Montenegro

Montenegro country for digital nomads
Perast, Montenegro

Montenegro is nested along the Adriatic Sea. It captivates visitors with a blend of nature, history, and modern allure. The country features a diverse landscape (rugged mountains, pristine beaches, tranquil lakes, and verdant valleys).

When you come to Montenegro as a digital nomad, you will probably decide to stay for its sandy shores, towering cliffs, turquoise waters, charming coastal towns like Herceg Novi and Budva, and a vibrant Mediterranean lifestyle with a once-fishing village turned into a luxury resort.

Furthermore, food is cheap, and I can always feel safe while roaming around.

But Montenegro is also an excellent destination for outdoor activities (exploration, skiing, and hiking on its glacial lakes, rugged trails, and magnificent peaks).

Montenegro Taxation

Taxation in Montenegro is the same for resident and non-resident individuals and businesses.

As a digital nomad, after gaining residence in Montenegro, you will have a personal/self-employed income tax rate of up to 15% if you earn more than €12,000. But you can benefit from a 9% tax rate on income up to €12,000 or even live tax-free if you make no more than €8,400.

Are you planning to incorporate a business? Your company will pay an attractive 9% on corporate profit below €100,000 or 12% or 15% if higher (see highlights below).

Montenegro Highlights

Life in Montenegro

Languages: Montenegrin and English
Landscape: mountains, beaches, lakes, and valleys
Climate: Mediterranean (coast), continental (higher altitudes)
Cuisine: Mediterranean (seafood, grilled meats, and vegetables)
Main Religions: Eastern Orthodoxy
Culture: traditional and modern music, dance, and literature.
Economy: Tourism, agriculture, and energy
Capital: Podgorica
Currency: Euro
Political situation: parliamentary democracy since 2006 (inspiring to become an EU member)

Cost of living index: 42.44
Quality of life index: 138.22

Taxes in Montenegro

Taxation system: Worldwide (residential)
Days of presence required for residence: 183
Corporate tax: 9% (up to €100,000), 12% (up to 1.5M), 15% (over 1.5M)
Tax on dividends: 15%
Personal/self-employed income tax: 0% (up to €8,400), 9% (up to €12,000), 15% (over €12,001)
Standard VAT: 21%

5. Portugal

Portugal country for digital nomads
Torre de Belém, Lisbon, Portugal

Located in southwestern Europe, Portugal is known for its rich history, stunning landscapes, and cultural heritage. Its “geological companions” are Spain to the east and the Atlantic Ocean to the west and south.

The country gave birth to legendary explorers like Vasco de Gama and Ferdinand Magellan. Today, the service and industry sectors contribute the most to Portugal's economy.

Many factors make Portugal attractive for Expats and digital nomads: its old history, natural beauty, warm hospitality, diverse, enjoyable climate, and rich culture shaped by many influences, including Phoenician, Visigoth, Celtic, Germanic, Viking, Lusitanian, Sephardic Jewish, and Moorish.

Tax Benefits and the NHR Programme

Portugal adopted a territorial taxation system with a proportional tax rate. High earners can see their income reduced by up to 48%. However, Portugal offers an appealing treatment to non-habitual residents.

This is how it works

Keep reading if you can live in Portugal at least 183 days a year, have not been a Portuguese tax resident in the five years before your application, own a foreign company abroad or receive foreign dividends or interests.

Standard tax rates on personal and corporate taxes can be steep in Portugal. But if you apply for the Portugal Non-Habitual Residents (NHR) Regime, you can “change the standard game rules” for ten (10) consecutive years.

After becoming an NHR, your foreign-sourced income will be tax-exempt for ten years (interests, dividends, rental income, pension, real estate gains). This is valid when such income is taxed in the country of origin (Double Taxation Agreement-DTA, OECD model tax treaty). But it may also apply even when it's not taxed in that country.

And what if you receive a Portuguese-sourced salary or are self-employed? As an NHR digital nomad, you benefit from a 20% flat tax rate on income from specific professions.

Although some foreign-sourced income can be taxed in the country of origin, a 20% flat tax is still pretty favourable compared to Portugal's standard rates.

If you are a lover of remote islands, I remind you that the Azores and Madeira islands enjoy special tax regimes of 11.9% for small business and 14.9% standard corporate tax, therefore an opportunity for a lower basic taxation compared to the rest of Portugal.

What do you need to qualify for the NHR Regime?

Be a Portuguese tax resident in the year of your application. The easiest way to achieve that is to stay in the country for 183 or more days (consecutive or not) in a single calendar year.

Update 02/2024: The Portuguese Government has announced the end of the Non-Habitual Residents regime from 1 January 2024 onwards, with individuals looking to relocate to Portugal no longer being able to access the special tax regime, unless they meet the relevant conditions and hold a valid residence visa as at 31 December 2023.

Portugal Highlights

Life in Portugal

Languages: Portuguese
Landscape: picturesque beaches, rolling plains, rugged mountains, and lush valleys
Climate: subtropical oceanic, Mediterranean, and continental
Cuisine: fresh seafood, grilled meats, and pastries
Main Religions: Roman Catholic
Culture: a rich mixture of art, theatre, music, literature, folklore, festivals, holidays, and cafés.
Economy: tourism, services, industry
Capital: Lisbon
Currency: Euro
Political situation: unitary multi-party semi-presidential representative democratic republic

Cost of living index: 46.12
Quality of life index: 166.45

Taxes in Portugal

Taxation system: territorial
Days of presence required for NHR Regime: 183
Standard corporate tax: 21% (14.7% in Madeira and the Azores)
Small businesses tax: 17% (11.9% in Madeira and the Azores)
VAT: 23% (22% in Madeira, 16% in the Azores)
Standard personal income tax: 14.5% to 48%
NHR Regime validity: 10 years
Tax on foreign-sourced income (NHRs): 0%
Tax on gifts, wealth, and inheritance (NHRs): 0%
Tax on Portuguese-sourced or self-employed income (NHRs): 20% (for eligible professions)

Digital Nomad VISA (and Why Avoid it)

Short stay digital nomad visas
Short stay digital nomad visas

A digital nomad visa allows you to legally work remotely in a foreign country and receive foreign income for an extended yet limited period.

There are 44 countries currently offering (or are implementing) a Digital Nomad VISA, including the Bahamas, Barbados, Spain, Mauritius, Indonesia, and Norway. Most of them are one-year visas, some extendable to two. But there are several downsides.

  • Expensive VISA fee
  • Minimum proof of income (usually high)
  • Living in some countries is not cheap
  • The application is bureaucratic
  • The VISA is time-limited
  • Mandatory health insurance covering your entire stay period
  • You need to repeat the procedure continuously
  • You must deal with different tax systems and requirements as you move to another country.

As a digital nomad who loves travelling like me, you know that you can literally live and work everywhere and still visit those countries while paying taxes (if any) in the cheapest states. Therefore, digital nomads can still rely on tourist VISAs to visit those places.

Most countries in the world offer the opportunity to stay on a tourist visa for three months, in some cases like Mexico or Malta even six. Additionally, most countries are small. Hence, a few months are enough to visit and enjoy them.

Does it make sense to spend money and waste time applying for a one-year visa?

In my opinion only in a few cases.

So, I may suggest this option for big countries, such as Spain (since June 2023), Mexico or Germany, where you would need many months to visit the entire territory. Another acceptable reason to apply for a Digital Nomad VISA could be taking a sabbatical year and spending 12 months volunteering (for example, dedicating yourself to saving sea turtles in Costa Rica).

Let's see three examples not particularly beneficial.

Bali, Indonesia

In 2021, the Indonesian tourism minister proposed a 5-year digital nomad visa in Bali, which would grant income tax exemption. But it seems to be on hold since the launch of the Second Home VISA, which is not ideal for the average digital nomad. Here are the requirements.

  • Proof of funds: 2 Billion Rupiah ($131,000)
  • VISA application fee: 21 Million Rupiah ($1,377)
  • VISA validity: 5 or 10 years

Barbados

The Barbados digital nomad visa is officially called the Barbados Welcome Stamp Visa. It's considered the 10th best digital nomad visa, but here are the downsides.

  • Individual VISA application fee: $2,000
  • Family VISA application fee: $3,000
  • Proof of annual income: $50,000
  • VISA validity: 1 year

Norway (do you like cold weather?)

If you want to get the chance to settle down in Norway for a year and discover the whole country, the Norway digital nomad visa is for you. But remember, unlike in other countries, you must have at least one Norwegian client who pays you not less than the minimum wage for a skilled worker.

Additionally, here are the other cons.

  • Proof of self-employment outside of Norway
  • Proof of annual income: $35,719
  • Address of accommodation in Norway
  • Proof of education
  • VISA application fee: €600
  • VISA validity: up to 2 years.

What type of digital nomad are you? What's the best country you lived in as a remote worker? What's your strategy to work while travelling and save money on expenses and taxes?

Cyprus, Georgia, Lithuania, Montenegro, and Portugal are the best countries where you can live long-term as digital nomads. They offer a low cost of life, beautiful landscape and culture, advantageous tax systems with reduced or zero tax rates and easy bureaucracy.

Conversely, I suggest you avoid Digital Nomad VISA Programmes and countries with a high standard of living unless you have at least $70,000 in net income. Costs can be steep. Additionally, the VISA programmes are expensive, bureaucratic, and far from a typical digital nomad lifestyle.

Source: Quality of Life Index and Cost of Living Index 

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