Digital nomads residency is often the subject of discussion in online forums. Rules and regulations can be complex and application criteria can be strict. However, it is worth exploring whether there are some tax advantages for digital nomads.
Applying for Residency as a Digital Nomad
Permanent residency and the notion of being a digital nomad don’t really go hand in hand. Residency laws were designed for non-nomadic citizens in mind. However, digital nomads need to consider residency and taxation to find a solution that best suits their needs and lifestyle. See also: income tax rates in the European Union.
Two Popular Locations for Digital Nomads: Malta and Estonia
Two countries that welcome digital nomads and have fairly straightforward processes are Malta and Estonia.
The income tax rate in Malta varies between 15% and 35% depending on earnings; EU citizens who apply for a residence programme and either rent or buy property in Malta can benefit from a flat tax rate of 15%. Corporation tax in Malta is 35%, however tax refunds can apply. For example, after distributing profits, shareholders can request a tax refund. Special tax incentives apply for financial services professionals who are not resident in Malta, with a view to attract investment in Malta.
Permanent residency in Malta is available to EU citizens (ordinary residence). Non-EU citizens can apply for the Malta Global Residency Programme to benefit from a special tax treatment, provided they invest in Malta through buying or renting a property (minimum amounts needed for either buying or renting) and paying tax on foreign income. Non-EU nationals can also apply for Permanent Residence, which they need to renew annually.
To be a tax resident in Malta you need to live in the country for more than 183 days a year.
Malta is considering to offer a digital taxation scheme for digital companies without a physical presence.
Estonia is one of the first countries to offer e-residency, which has been designed with location-independent entrepreneurs in mind. See also this post about Tallinn, Estonia.
This is the official definition of e-residency from the government of Estonia’s website:
“e-Residency is a transnational digital identity available to anyone in the world interested in administering a location-independent business online”
e-residency comes with some downsides: it is not an identity document, it does not confer physical residency or tax residency and it is neither a visa nor a residence permit. It gives access to a number of e-services, however taxation is applied in the country of residence.
See this explanation about tax residency in Estonia. The only way to become an Estonian resident for tax purposes is to apply for permanent residency and live in Estonia for at least 183 days a year.
The application fee is non-refundable.
Online business banking and secure digital signing of documents are the main reasons to offer e-residency in Estonia.
e-residency means that you are not required to live in Estonia. To obtain an e-residency digi-ID card you need to register with the Estonian police and provide your fingerprints.
See also this article about taxation and e-residency.
To obtain permanent residency in Estonia as an EU/EEA citizen, you need to have lived in the country for five years. Applicants should not have lived outside Estonia for 12 consecutive months and for a total of 18 months in the five years before applying for residency.
The corporate tax rate in Estonia is as follows:
- 0% on retained and reinvested profits
- 14-20% on distributed profits
Companies established in Estonia are subject to 20% corporation tax.
The personal income tax rate is 20%.
Malta and Estonia Residency Comparison Table
|Permanent residency application fee||€0 (EU citizens)
€25 (non-EU citizens)
|e-residency application fee||€100|
This article summarises publicly available information and should not be considered professional advice. It is important to speak to a specialist to plan the right type of residence to suit your needs.