Living internationally as a digital nomad has enormous benefits. There are the obvious upsides, such as freedom of location, endless summers or winters, and even cost of living savings in many cases. But there is also the appeal of the tax situation, which, if managed properly, can result in significant savings.

But as a UK digital nomad who doesn’t have to pay taxes while working abroad, that doesn’t mean I’m completely exempt in every situation. International digital nomad tax rules are often more complicated than many realise, and without proper planning, nomads can end up owing more than expected.

Understanding tax residency, whether it’s back in the UK or while travelling abroad, is something any long-term digital nomad should master. Once you understand the fundamentals, it’s easy to stay on the right side of tax law wherever you are.

Tax Moves With You

Even if you’re not living within the UK, or working for a UK company, tax law still applies to digital nomads. Taking the purpose of taxes in mind, it makes sense for a country to expect a little contribution, beyond spending money, for living within its borders. So, most countries, with a few exceptions, will start to expect payment after a certain amount of time.

This is where the global 183-day rule often comes into play, although that number is not hard and fast. After around 183 days, even if you didn’t mean to move to a country, many countries will begin viewing you as a resident of the country for tax purposes. This means that you could begin to owe taxes on your income, depending on the country’s rules and who you are working for.

Many factors can come into play, such as where else you may pay tax, family or business ties, earnings, or asset ownership. It’s important to research which rules apply where, when working as a digital nomad, to avoid falling foul of the law.

However, most places have a set amount of time that people can work within a country as a digital nomad before becoming a tax resident. To be on the safe side, it’s best not to spend more than 183 days in a place if you’re unwilling to start paying and to keep close track. In fact, a few weeks less is generally advisable.

Keeping Track of Your Location

I, for one, have often bounced between countries, moving back and forth throughout a year, racking up some days here and some days there. It can make keeping track of how long I have spent in a place, and how close I am to the tax threshold, quite tricky. 

So, on my travels, I make sure to keep a record of how long I have been somewhere, jotting it down and updating it as I go. 

Simply using the stamps in my passport isn’t enough. They’re all over the place, and sometimes hard to read due to a smudge or faded note — and an increasing list of countries, including the United Kingdom, European Union, and Argentina, don’t even physically stamp anymore and track your border crossings electronically. 

Instead, you should ensure that you list the places you visit in a note or app including the entry and exit dates and the length of stay. An effective and more ‘hands-off’ method of keeping track of how long I have spent in a place is to use a location-tracking app like Nationly, an app we recommend for digital nomads. It does a fantastic job of keeping you informed of where you’ve been and for how long.

It’s important to record more than just your length of stay, too. I also include the places I have lived, including addresses if it’s more than just a few days, who I was working for, relevant tax years, and the time I have spent in the UK. All these factors can come into play if you need to prove your exemptions to either a UK or foreign tax authority.

The trick is to have the information already prepared. For any year you country-hop, taking many international flights, reconstructing and proving where you were and when can be a nightmare a year down the line.

The Statutory Residence Test

Avoiding becoming a tax resident while you travel is one thing, but it’s also important to make sure you’re not qualifying for tax in the UK, to avoid any nasty extras when you return. The same basic regulations apply to UK citizens, with the 183-day rule, but you have a few extra hoops to jump through if you want to remain tax-free.

The SRT, or Statutory Residence Test, looks beyond how long you have spent in the UK and delves deeper into your connections to the country. The test determines whether you still have to pay some level of tax, even if you’re not still living or working there. 

The test runs a few checks. 

• How long you have spent in the UK and whether it is over 16 days. 
• How many days you have spent outside of the UK, specifically if it is over 183.
• Family, property, and accommodation in the UK.
• UK or foreign employment. 

These are balanced against one another, and a decision is made on whether you are considered a tax resident.

Tax Breaks for Digital Nomads

Some countries have slightly more stringent rules around paying tax. But some choose to go in the other direction, instead offering tax breaks and leniency for digital nomads. Some even offer digital nomads the option to pay absolutely no income tax at all.

• UAE: 0% personal income tax with a minimum income threshold of around $4,000.
• Costa Rica:  Offers digital nomads 0% tax on foreign income as part of a digital nomad visa program.
• Croatia: Offers people on a digital nomad visa an exemption from local tax on any income earned abroad.

Many countries around the world offer enticing incentives for digital nomads. As long as you register for the appropriate visa and declare your income correctly, your stay could be tax-free for much longer than the initial 183 days. These are often paired with generous digital nomad visa programs, as in the cases of Costa Rica and Croatia.

Taxes for American Digital Nomads

A big exception to the global 183-day rule applies for Americans, who are required to pay taxes to the United States even if they live abroad and don’t set foot in the country during the year. 

American citizens must file with the Internal Revenue Service (IRS) and pay taxes to the United States no matter where they work and for whom. This applies even if they become a tax resident somewhere else (although taxes paid abroad are deductible for the most part). This system is known as citizenship-based taxation.

America’s citizenship-based taxation policy is shared only with Eritrea, making it stand out as a country that expects it due from citizens whether they benefit from services or not.

However, there are some tax breaks American digital nomads and expats can use, both at home and in their new tax residency, if it comes to that. 

The most common mechanism for US digital nomads to reduce their tax burden is known as the Foreign Earned Income Exclusion or FEIE. This allows qualifying Americans abroad to exclude a certain amount of foreign earned income from US federal income tax. For 2026, the maximum exclusion is $132,900 per qualifying person.

This system is set up for Americans who are almost always abroad or have made a more permanent move. To qualify, a US resident must pass either the Physical Presence Test or the Bona Fide Residence Test. These prove they have moved to a new country for at least 330 days in 12 months and are now established as a tax resident there.

To apply for the FEIE, digital nomads and expats need to file Form 2555 with their taxes and submit their location history to verify eligibility. Nationly, the location tracking app we recommended, helps make this an easy process and will output Form 2555 pre-filled based on your tracked location history automatically.

Bottom line

As a UK digital nomad, I always make sure to be aware of when and where I should be paying tax, and if you spend any serious time abroad, you should make it a habit as well. Typically, it’s a simple case of checking just how much you can earn in a country and how long you can stay before triggering local tax residency. But, for Brits, it’s also important to ensure you qualify for exemption back in the UK and, for Americans, qualify for the Foreign Earned Income Exclusion.

The real trick is tracking your movements and income. The easiest way to do this is by using an app like Nationly. By keeping a simple and up-to-date record, not only can you stay on top of your tax situation as a digital nomad, but also provide proof if the question ever comes up.