Key takeaways
- VAT obligations follow your clients, not your location: As a digital nomad, you may need to charge VAT based on where your clients are, especially for digital services.
- You might need to register in multiple countries: Depending on your revenue and the markets you serve, VAT registration in several jurisdictions (or through simplified schemes like OSS/IOSS) may be required.
- Proper documentation is crucial: Keeping detailed records of invoices and business expenses can help you stay compliant and reclaim VAT where eligible.
In short: VAT for digital nomads depends mainly on where your clients are, not where you work. You may need to charge VAT on digital services and goods sold abroad. You may also need to register in several countries or use schemes like the EU's OSS. Good records let you stay compliant and reclaim VAT on business costs.
The digital nomad lifestyle keeps growing. More professionals now swap traditional offices for laptops, co-working spaces and a passport full of stamps. The freedom to work from anywhere is thrilling. But it also brings its own tax duties, especially for VAT (Value Added Tax).
You may be a freelancer, a remote worker or the owner of an online business who moves from country to country. Either way, you need to understand your VAT obligations. Here's what you need to know.
What is VAT and why does it matter?
VAT is a consumption tax charged at each stage of the supply chain, from production to the final sale. A sales tax is usually charged only once, at the final point of sale. VAT is charged at every step instead. But businesses can often reclaim the VAT they pay on business purchases (known as input VAT). Related reading: Selling Online: An Introduction to Marketplace VAT.
VAT matters for digital nomads because:
- You might need to charge it on your services or products, depending on where your clients are.
- You may have to register for VAT in multiple countries.
- You could be able to reclaim VAT on business expenses while abroad.
If you ignore your VAT obligations, you risk fines, penalties or even being blocked from doing business in some markets. So it pays to get VAT right.
When does VAT affect digital nomads?
Selling digital services to international clients
If you offer digital services, you may have to charge VAT based on your client's location, not your own. Digital services include web development, SaaS subscriptions, e-books and online coaching.
Example:
You're based in Thailand, but you provide marketing services to clients in Germany and France. Under EU rules, you may need to charge VAT based on where each client lives. This applies even if you're not an EU resident.
The EU's VAT OSS (One-Stop Shop) or Non-Union OSS schemes make this simpler. They let non-EU businesses register in a single EU country and handle all their EU VAT reporting from there.
Selling physical goods online
If you run an e-commerce business as a digital nomad, VAT matters when you ship to customers in countries with VAT systems. This applies whether you sell through your own website or through platforms like Amazon, Etsy or Shopify.
Example:
You sell handmade products online and ship them from Portugal to customers across Europe. Once your cross-border sales to EU consumers exceed the EU-wide threshold of €10,000, you must charge VAT at each customer's local rate. You can report this VAT through the OSS instead of registering in each country. The IOSS (Import One-Stop Shop) covers a different case: low-value goods of up to €150 imported from outside the EU.
Paying VAT on business expenses abroad
As a digital nomad, you'll likely have expenses in many countries, such as flights, co-working spaces, tech gear and client dinners. In some cases, you might be able to reclaim the VAT on those business expenses.
However, the reclaim rules depend on your business structure and the local tax laws. You'll often need proper documents, such as VAT invoices and proof of business use. Sometimes you'll also need a local VAT registration.
When and where do you need to pay VAT?
Where and when you pay VAT depends on several factors:
Client location
Many VAT systems, especially in the EU, base tax liability on the customer's location, not the provider's. This matters most for digital services and online subscriptions. For a closer look, see Digital Goods and Tax Compliance: What E-Commerce Businesses Should Know.
Local thresholds
Most countries have VAT registration thresholds based on revenue. If your sales exceed the threshold in a country, you must register and comply there.
Country-specific rules
VAT rules differ widely from country to country. For example:
European Union (EU)
- Digital nomads who sell goods or services to consumers (B2C) in the EU may need to charge VAT in each customer's country. This applies once the €10,000 EU-wide threshold is met.
- For digital services, the VAT One-Stop Shop (OSS) simplifies B2C reporting across the EU.
- B2B sales are generally reverse-charged. This means the EU business customer accounts for the VAT.
- Marketplaces, such as Amazon or eBay, may be liable for VAT on certain B2C sales to customers within the EU.
Canada
- Non-resident sellers must register for GST/HST if their sales to Canadian consumers exceed the CAD 30,000 threshold.
- This applies to digital services, physical goods and software subscriptions sold B2C.
- For B2B sales, the Canadian business customer may reverse-charge (self-assess) the GST/HST, especially for digital services.
- Marketplaces often collect the tax on B2C sales, which reduces the duties of individual sellers.
Australia
- Non-resident sellers must register for GST if their B2C sales exceed AUD 75,000 a year.
- This includes digital goods and services such as apps, online courses and ebooks.
- B2B sales are usually exempt if the buyer gives a valid Australian Business Number (ABN) and states that they are GST-registered. In that case, no GST is charged.
- Marketplaces must collect GST when they facilitate B2C sales.
New Zealand
- Non-resident sellers must register for GST if their sales to NZ consumers exceed NZD 60,000 a year.
- This covers digital services, including subscriptions, cloud software and webinars.
- For B2B sales, no GST is charged if the NZ business gives a GST number. The sale is zero-rated.
- Marketplaces and digital platforms must collect GST on the B2C sales they facilitate.
Always do your research or get local advice before you enter a new market.
What are the VAT compliance basics for digital nomads?
Register for VAT
If you need to, register with the right tax authority in each country. In the EU, you can use schemes like OSS or IOSS instead.
Charge VAT where applicable
Put the correct VAT rate on your invoices, based on your client's location and the local rules.
Submit VAT returns
You usually submit VAT returns quarterly or annually. You'll report the VAT you collected (output VAT) and the VAT you paid on expenses (input VAT). For a full country overview, see our New Zealand VAT manual.
Keep records and invoices
Keep clear records, especially for business expenses and client sales. Most tax authorities require you to keep records for 5–10 years.
What else should digital nomads consider?
Reverse charge mechanism
For B2B sales, especially in the EU, the reverse charge mechanism lets the buyer account for the VAT. This means the seller doesn't have to collect and pay it.
Place of supply
The place of supply decides where VAT is due. It depends on the type of service and on whether your client is a business (B2B) or a consumer (B2C). If you get it wrong, you may not be compliant.
Multi-jurisdictional VAT registration
Digital nomads with a wide client base might need to register for VAT in several countries. This adds complexity and may need professional help. But it's critical to staying compliant.
What's the bottom line on VAT for digital nomads?
The freedom of the digital nomad lifestyle comes with a duty that people often overlook: managing cross-border taxes, especially VAT. VAT may seem complicated. But if you understand the basics, like when and where to pay VAT, you can stay on the right side of the law and avoid nasty surprises later.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
How Taxually handles this
Taxually’s LumaTax runs a nexus analysis on your sales, helps you register in the states where you must collect, and prepares and files multi-state sales tax returns, including Canadian GST/HST. LumaTax is currently available to enterprises and accounting firms. For the full workflow, read how to automate US sales tax filing in every state.
Related guides
Frequently asked questions
Do I need to charge VAT if I’m not based in the EU?
Yes, possibly. For digital services sold to EU consumers, you may be required to charge VAT based on the customer’s location, even if you're not an EU resident. The Non-Union OSS scheme can simplify registration and reporting.
What if my clients are all businesses (B2B)?
In most cases, you don't need to charge VAT on B2B transactions. Instead, the reverse charge mechanism applies—your client accounts for the VAT in their country. Be sure to obtain and validate their VAT numbers.
Do I have to register for VAT in every country I sell to?
Not necessarily. Some regions offer simplified schemes like the EU’s OSS/IOSS, which let you report VAT in one place for multiple countries. However, if your sales exceed local thresholds and you don’t qualify for a scheme, registration in multiple countries might be required.
Can I reclaim VAT on my travel and remote work expenses?
Sometimes. If the expenses are business-related and you have valid VAT invoices, you may be eligible to reclaim VAT, depending on the country’s rules and whether you’re registered for VAT there.
What happens if I don’t comply with VAT rules?
Non-compliance can result in penalties, fines, or restrictions on doing business in certain markets. It’s crucial to understand your obligations and keep proper records.
