Technological advances such as fast and broadband internet, portable computers, video conferencing, digitised administration and countless other innovations have made it possible for the intellectual workforce to telework effectively, and the closures caused by the COVID-19 pandemic have reshaped the home office part of the working culture, so that working outside the office has since become acceptable for some jobs. This is backed up by statistics, with a survey showing that 16.9 million US workers will have declared themselves digital nomads by 2022[1] , more than double the pre-pandemic level.
Due to the unregulated nature of the “nomadic” lifestyle, it is difficult to define exactly who can be considered a digital nomad. For the purposes of this article, a digital nomad is defined as one who travels to another country for a short or long period of time and carries out their activities online, outside their usual place of residence. Given that national tax (and insurance) systems are still based on ‘traditional’ employment relationships, the digital nomad lifestyle can pose a myriad of tax risks for both the individual carrying out the activity and the business employing them. Below, we will introduce the most important tax considerations for a digital nomad and highlight the risks we have identified.

Digital nomads working in Hungary
Digital nomads arriving in Hungary are entitled to apply for a special residence permit, the so-called “White Card“, for one year (renewable for another year) under the provisions of Act XC of 2023 on the General Rules for the Entry and Residence of Third-Country Nationals. Holders of the card are not allowed to establish an employment relationship or acquire a business share in a Hungarian company in Hungary.
Since the White Card does not entitle the holder to a longer stay, the acquisition of the card does not in itself have tax implications, i.e. the digital nomad is not automatically considered a tax resident of Hungary. Digital nomads arriving in Hungary are subject to the general residence rules of Act CXVII of 1995 on Personal Income Tax (“Personal Income Tax Act”), so if the individual’s habitual residence or centre of livelihood remains in the country of origin the 183 days of residence in Hungary should be specifically assessed. Of course, special attention should also be paid to the provisions of double taxation conventions (if any), which may establish different rules for the taxation of income from employment than the rules of the Income Tax Act.
Domestic employment of a digital nomad from abroad can also raise social security issues. For EU residents, the social security rules of the sending country will continue to apply for postings of less than 24 months as defined in the relevant regulation[2] , so the 18.5% Hungarian social security contribution will not be payable for shorter stays. In the case of third-country nationals, it should be checked separately whether there is a social security agreement or in which country the contribution is payable under the rules of the agreement.

The tax situation of the “Hungarian Nomad”
The situation of Hungarian citizens who are planning to work remotely when travelling abroad is somewhat different from the above. They are automatically considered as Hungarian residents under the relevant provisions of the Income Tax Act, the only exception being if the individual is also a citizen of another state and ceases ito have an address in Hungary[3] . Considering that digital nomads typically visit the destination country for shorter periods of time for their own reasons (favourable climate, lower cost of living, entertainment, etc.) rather than with the intention of permanent residence, it is likely that they would not be able to apply the above exception and would retain their Hungarian tax residence. Consequently, with regard to digital nomads, it must be examined whether they acquire tax residence in the country of destination under the domestic law of the country of destination and, if so, whether Hungary has a double taxation convention in force with that country.
If there is a treaty – and we would like to point out here that Hungary has double taxation treaties in force with most developed countries except the United States – the residence rules of the treaty can be used to decide in which state the individual will be considered a resident. If a person has a permanent residence in both states, the centre of vital interests will be the determining factor, and if this cannot be determined, the place of habitual residence will be decisive. To determine the country of taxation of wages, the second step is to examine the rule laid down in the convention in question for the taxation of employment.
So, to take an informed position on the taxation of the digital nomad’s income, it is necessary to be familiar with the domestic tax rules of at least two countries and the tax treaty provisions (if any). In the above, we have only dealt with the taxation of wages from the ‘sending country’, but in practice an individual may carry out various business activities in the destination country or receive other income, where the relevant social security and other tax issues require further detailed examination and consideration.

Risks for the employer
While it is typically tax and contribution issues on individual income that are the most puzzling for digital nomads – and their employers – it is important to highlight some issues of particular importance for the businesses that are in contact with them.
If it can be established that the digital nomad’s activity creates a permanent establishment for the company employing him in the country where he actually works, the income from the business activity of the permanent establishment created in that country is subject to tax (so-called “limited tax liability”). It is therefore important to consider whether the digital nomad’s activity may entail a risk of establishment for the company.
And if the digital nomad is the chief executive of a company established in a country other than the country of residence, there is a risk that the tax residence of the controlled company could change. The concept of ‘place of effective management‘, often used in tax treaties, focuses on the place where the main business decisions are made and the management activities are carried out by the managers, and therefore the place of effective management may be the nomad’s new state of residence and the company managed by the nomad may become tax resident in that country, resulting in the company becoming fully taxable in that new state.
In the light of the above, the atypical employment situation of digital nomads requires a very complex tax knowledge, in which case it is recommended to seek the support of a specialist in this field.


[1] MBO Partners, “The Aspirations and Reality for Digital Nomads,” 2022

[2] Regulation (EC) No 883/2004 on the coordination of social security systems

[3] Income Tax Act 3 § 2 a)

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