The Taxation of ‘Digital Nomads’ and the ‘3 W’s’: Between Tax Challenges and Heavenly Beaches

Abstract

Work mobility is not something new, but it certainly received an important boost with the COVID-19 pandemic as many people began working remotely which reflected on their lifestyle. In this context, the objective of the present study is to analyse the challenges imposed by what is known as ‘digital nomads’ from the exclusive perspective of individual taxation. The first part aims to understand the first ‘W’, i.e., who the ‘digital nomads’ are and the factors that favour the choice for this type of work. Subsequently, it examines the impacts caused by the ‘digital nomadism’ in determining the tax residence (second ‘W’ – where) and presents the measures, albeit incipient and indistinguishable, adopted by some countries in relation to this phenomenon. The third section delves into the taxation of income obtained by ‘digital nomads’ through either an employment relationship or the provision of services (third ‘W’ – what). Based on the analysis of examples and the presentation of some alternatives, this study seeks to demonstrate the need to adapt the tax residence rules at both of the levels of domestic law and double tax treaties (tiebreaker rules). The rules on the taxation of income from employment and the provision of independent services also demand modifications that detach them from the strict need for a physical presence. Digital nomads’, work mobility, international taxation, tax residence, employment income, digital economy