VAT for Digital Nomads: What You Need to Know

As the digital nomad lifestyle becomes increasingly popular, more professionals are trading traditional offices for laptops, co-working spaces, and a passport full of stamps. But while the freedom to work from anywhere is thrilling, it also comes with a unique set of tax responsibilities, particularly when it comes to VAT (Value Added Tax).

If you're a freelancer, remote worker, or run an online business while hopping from country to country, understanding your VAT obligations is essential. Here's what you need to know.

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.

What is VAT and why does it matter?

VAT is a consumption tax applied at each stage of the supply chain, from production to the final sale. Unlike a sales tax—which is usually applied only once at the final point of sale—VAT is charged at every step, but businesses can often reclaim the tax they've paid on business purchases (known as input VAT).

As a digital nomad, VAT matters because:

• You might need to charge it on your services or products depending on where your clients are located.
• You may have to register for VAT in multiple countries.
• You could be eligible to reclaim VAT on business expenses while abroad.
  

Ignoring VAT obligations can lead to fines, penalties, or even being blocked from doing business in certain markets—so it pays to get it right.

Common scenarios where VAT affects digital nomads

Selling digital services to international clients

If you offer digital services—like web development, SaaS subscriptions, e-books, or online coaching—you may be required to charge VAT based on your client’s location, not your own.

Example:

You're based in Thailand but provide marketing services to clients in Germany and France. Under EU rules, you may need to charge VAT based on where each client resides—even if you're not an EU resident.

The EU’s VAT OSS (One-Stop Shop) or Non-Union OSS schemes allow non-EU businesses to register in a single EU country and handle all EU VAT reporting from there, simplifying the process.

Selling physical goods online

If you're running an e-commerce business as a digital nomad, VAT becomes relevant when shipping to customers in countries that have VAT systems. This applies whether you sell via your own website or platforms like Amazon, Etsy, or Shopify.

Example:

You sell handmade products online and ship them from Portugal to customers across Europe. Once your sales in a specific EU country exceed the distance selling threshold, you’ll need to register for VAT in that country—or use the IOSS (Import One-Stop Shop) for low-value items.

Paying VAT on business expenses abroad

As a digital nomad, you'll likely incur expenses in multiple countries—flights, co-working spaces, tech gear, client dinners. In some cases, you might be able to reclaim the VAT on those business expenses.

However, the reclaim rules vary depending on your business structure and the local tax laws. You’ll often need proper documentation (VAT invoices, proof of business use) and sometimes a local VAT registration.

When and where do you need to pay VAT?

This depends on several factors:

Client location 

Many VAT systems, especially in the EU, base tax liability on the customer's location—not the provider. This is particularly relevant for digital services and online subscriptions.

Local thresholds

Most countries have VAT registration thresholds based on revenue. If your sales exceed these thresholds in a particular jurisdiction, you’re obligated to register and comply.

Country-specific rules

VAT rules differ widely. For example:

European Union (EU)

• Digital nomads selling goods or services to consumers (B2C) in the EU may need to register for VAT in each country where thresholds are met.
• For digital services, the VAT One-Stop Shop (OSS) simplifies B2C reporting across the EU.
• B2B sales are generally reverse-charged, meaning the EU business customer accounts for 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 they exceed the CAD 30,000 threshold from Canadian consumers.
• Applies to digital services, physical goods, and software subscriptions sold B2C.
• For B2B sales, GST/HST may be reverse-charged (self-assessed) by the Canadian business customer, particularly for digital services.
• Marketplaces often handle tax collection for B2C sales, reducing obligations for individual sellers.

Australia

• Non-resident sellers must register for GST if B2C sales exceed AUD 75,000 annually.
• Includes digital goods and services such as apps, online courses, and ebooks.
• B2B sales are typically exempt if the buyer provides a valid Australian Business Number (ABN) and declares they are GST-registered—no GST is charged.
• Marketplaces are responsible for GST collection when facilitating B2C sales.

New Zealand

• Non-resident sellers must register for GST if sales to NZ consumers exceed NZD 60,000 per year.
• Covers digital services, including subscriptions, cloud software, and webinars.
• For B2B sales, no GST is charged if the NZ business provides a GST number—the transaction is zero-rated.
• Marketplaces and digital platforms are responsible for collecting GST on B2C sales they facilitate.

Always research or seek local advice before entering a new market.

VAT compliance basics for digital nomads

Register for VAT

If required, register with the appropriate tax authority in each relevant country—or use schemes like OSS or IOSS for the EU.

Charge VAT where applicable

Include the correct VAT rate on your invoices based on your client’s location and local rules.

Submit VAT returns

Returns are typically submitted quarterly or annually. You’ll report VAT collected (output VAT) and VAT paid on expenses (input VAT).

Keep records and invoices

Maintain clear documentation, especially for business expenses and client transactions. Most tax authorities require you to keep records for 5–10 years.

Important considerations

Reverse charge mechanism

For B2B transactions, especially in the EU, the reverse charge mechanism allows the buyer to account for the VAT, relieving the seller of the responsibility to collect and remit it.

Place of supply

This concept determines where VAT is due and differs depending on the type of service and the status (B2B or B2C) of your client. Misunderstanding this can result in non-compliance.

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 require professional help, but it's critical to staying compliant.

Conclusion

The freedom of the digital nomad lifestyle comes with an often-overlooked responsibility: managing cross-border taxes, especially VAT. While it may seem complicated, understanding the basics—like when and where to pay VAT—can help you stay on the right side of the law and avoid nasty surprises down the line.

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. 

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.