Regulatory strategies for this new business
(published in Spanish in LegalToday jan 24,2024)
Accumulation of experiences instead of heritage, breaking the office routine, temporarily changing country or territory and developing exemplary flexibility to solve problems are the basic virtues of the digital nomad. However, there are not many legal definitions that protect the freedom of being a nomad. Art. 13 of the Universal Declaration of Human Rights only defends freedom of movement as an opportunity to travel and choose where to live within your own country. At the same time, European freedom of establishment is perhaps the only instrument that refers to the unrestricted regional movement of people and companies. The remaining legal approaches only represent different limitations on the freedom of the nomad. Precisely, the economic freedom of carrying the office on one's back and temporarily relocating it is what torments legislators of labour, commercial, immigration and tax content.
The freedom of the nomad. Nomadic life aspires to be realized within an internationally liberated space of circulation. It does not represent an accidental lifestyle but rather a very productive one that also provides a modern form of solution for relevant legal conflicts.
It is not true, for example, as many ESG discourses proclaim, that commercial mobility implies a greater dose of freedom or a certain social status for individuals, facilitating the circumvention of ethical rules. The way-dislocation and circulation of their goods, nor does it allow for serious regulation of the right to live as a digital nomad.
A modern lifestyle of prehistoric origin. The enviable National Geographic journalists, who travel with their portable technology equipment around the world to capture unique images, are not the only digital nomads that exist. Today it is natural to work digitally as a tourist. This is a commercial practice that does not deserve to be repressed.
According to Tsugio Makimoto and David Manners in their old book “Digital Nomads” (1997), Digital nomads are professionals freed from the social constraint of a fixed workplace thanks to the use of technology.
Digital nomads are interested in economic freedom as a principle that enhances the increase and circulation of their income. They use their short stays to mobilize ideas and promote new projects, contributing 787 billion dollars per year to the global economy.
They play a leading role in international financial transactions in the developed world. Emerging economies have taken advantage of this natural deregulation of the digital market to offer visas for nomads, with the rationale of facilitating collaboration and innovation in their territories.
Effects of nomadism. Transitory movements are part of the characteristics of the nomad and are conceived as legal effects of nomadism although they do not contribute much to the legal explanation of this business. For example, through the automobile marketing industry and tourist destinations, they seduce us with mobility implied in economic power, well-being and social status. However, we can buy a car or a plane ticket and drive it until we become nomads for safety, necessity or simply a rejection of the living conditions in our country of origin. Economically, the mobility of the digital nomad is in itself a business that computes costs and income. Its adaptability and comparison of the different jurisdictional options reveal the commercial sedentary lifestyle as a less profitable expression of that enterprise. In that sense, we can all be considered nomads as opposed to the sedentary lifestyle of remaining definitively within a certain legal and economic system. And we all have the opportunity to compare and choose. But you are a digital nomad because you work remotely as or almost like a freelancer in different territories. Movement constitutes an effect and digital nomadism is a business that attracts attention.
Nomadic lawyers. The reduction in the number of professional licenses in many associations can be explained by the global mobility and digital activity of lawyers. More and more professions are linked to law that do not require registration. Why register if you can negotiate globally with legal knowledge and then go directly to the local notary? How can the licensing requirement be adapted to the era of Web3 law and the consumption of artificially produced law? What is the real need to be a resident or citizen to be able to register as a lawyer? These and many other questions linked to this topic show that lawyers daily lose interest in participating in a professional association if it does not offer a formula capable of supporting a globalized practice.
Legal marketing to promote visas. Countries that offer a Digital Nomad Visa seek to associate quality of vacation life with remote work, translating this idea into the language of legal marketing. Certainly, those who work remotely investigate which countries they could do so freely and at what cost. Comparison of rights is key to being able to work as a non-resident.
After analyzing 60 national Digital Nomad (or remote worker) Visa regimes, in Europe, Latin America and Asia, we found in most cases that this novel immigration framework is built with five elements:
An authorized period of stay that ranges from 6 months to a maximum of 5 years including successive extensions, often conditional on maintaining a minimum annual income.
A remote work authorization to do so with foreign clients or employers. The ordinary concept of nomad is denatured, which seeks, on the contrary, to take advantage of local resources and actors to work temporarily. The candidate cannot interact locally under penalty of becoming a permanent resident.
The governments that offer these visas consider digital nomads as non-residents for tax purposes to achieve the minimum taxable income obtained abroad, which if they remain in the tourist category will normally not be taxable.
In exchange for this tax, applying the same rates for non-residents, they offer a sedentary program for digital nomads to transform them into residents.
A simplicity of granting as if it were a long-term tourist visa (normally for an initial year) with a more complex or conditional extension mechanism.
The life of a Digital Nomad contains more legal marketing than protection of international freedom of movement. States do not seek to guarantee the mobility of the digital nomad but rather to achieve it through taxes, avoiding all local labour competition, in exchange for a quasi-tourist temporary stay.
The marketing of the tourist vocation of the digital nomad concept is used to attract their productivity in a technological hub. The legal marketing of this visa creates a negative exception to the global income principle, taxing an activity abroad generated by a foreigner and granting an extension of permanence of the admission regime applicable to tourists.
Unregulated nomadism. In 2023, the FlexJobs organization estimated 35 million digital nomads, with 52% men and 48% women, 90% with higher education, organized by majority into Caucasians, Asians, Latinos, Africans and Indians. The most preferred destinations are Mexico, Thailand, Portugal and Spain. 25% of digital nomads earn less than 23,000 euros and 75% more than 69,000 euros per year, of the second group 36% earn more than 90,000 euros and the average income of a digital nomad is 110,000 euros. However, 60% of them are in debt up to U$D 60,000.
The United States has not yet considered this visa regime because it is similar to that of the tourist or visitor (B-2 visa) which allows you to participate in events, medical treatments, tourism and visits and enroll in courses. The H-1B visa allows a US employer to hire qualified foreign workers for 3 to 6 years.
Canada also does not require a special visa for those who want to work remotely. Digital nomads can remain temporarily as visitors in the country for up to six months, renewable for the same period as long as it is proven that they have resources and do not seek to stay indefinitely. Europeans do not even need a multiple-entry tourist visa. They are not taxed in Canada if they work for a foreign employer or client, but if they stay more than 183 days in the country they can be considered tax residents. There is a Start-Up Visa program that turns digital nomads into residents, which we already explained in our previous note in this newspaper.
The legal identity of the Digital Nomad. There is no uniform legal concept of the Digital Nomad that allows the creation of an autonomous immigration category. Some legislation equates it to a long-stay tourist who works with the aspiration of staying more than 6 months. Other legislation grants you extended nonresident status for a minimum of one year to tax your foreign income. It all depends on the policy of the host country that applies the principle of territoriality to attract income and consumption from the phenomenon of digital nomadism.
In the first case, the tourist can only work with the foreigner. In the second, the digital nomad is required to receive a foreign income and work to stay. In that sense, the systems oppose each other.
The mobility of the nomad does not seem relevant in any of these hypotheses. The principle of territoriality operates as a reduction in global freedom of movement. In short, the legal identity of the Digital Nomad is only recognized by:
The strategic decision of the candidate is to reject, at least temporarily, his or her original territory of residence. He does not want to be a working tourist, he does not define himself to return but to continue travelling.
The candidate's decision to receive all or a large part of his or her income outside the territory of income generation. Prefers non-resident status.
The material possibility of digitally providing your services in the host country. It is not about opening a subsidiary or branch of your business but rather maintaining a mobile business structure.
The best Digital Nomad Visas:
GRANTING COUNTRY | TEMPORARY STAY ALLOWED | MINIMUM FOREIGN INCOME REQUIRED - WHEN TO APPLY | GENERAL CONDITIONS OF ADMISSION | PROCESSING TIME AND TAXATION |
SPAIN | Initial 12 months extendable up to 5 years in total | 2,160 euros per month per adult It is advisable to apply after 90 days as a tourist. | -non-EU-EEA citizen -stable contract with foreign clients or employer -up to 20% freelance | Process of n 15-45 days - pay 24% taxes up to 600,000 euros, deductible if there is a double taxation agreement |
PORTUGAL | 12 months with an extension up to 4 years | 2,950 euros per month per adult It is recommended to apply after 90 days as a tourist. | -non-EU-EEA citizen -stable contract with foreign clients or employer | 3-4 month process Pay 15% tax for 4 years |
CROATIA | 6 months to 1 year | 2,700U$D per month | non-EU-EEA citizen -stable contract with foreign clients or employer | 3-month process health insurance |
COSTA RICA | 1 to 2 years | 3,000U$D per month 4,000U$D per family | Open to all. Proof of accommodation, foreigner's employment contract, declaration of remote work | 2-month process, bank account statements with financial means proof of payments received. |
THAILAND (the most consumed visa) | Maximum 4 years, the tourist one is used first for 90 days. | U$D80,000 a year | Open to all. Smart Visa is for industries with different requirements, some require a bank deposit and the declaration of leaving the country at the end of the term. | The candidate does not pay taxes for 6 months and pays 17% afterward. It takes 3 months to obtain. |
DUBAI | 1 year for another year you have to apply again | U$D 3,500 per month U$D 5,000 for owners of their own business. | Open to all. Proof of accommodation, foreigner's employment contract, declaration of remote work | Provides a local identity. Health coverage, three months of pay received must be shown for business owners to prove ownership |
PANAMA | 9 months + 9 months9 | U$D 36,000 per year | Open to all. Proof of accommodation, foreigner's employment contract, declaration of remote work | It must be processed with a lawyer, it takes 30 days. Taxes are not paid until 9 months, then it must be applied to tax residence but taxes are not paid for foreign income |
MEJICO | 1-4 years then you can apply for permanent residence | U$D 2,600 per month | Open to all. Proof of accommodation, foreigner's employment contract, declaration of remote work | It takes 30 days. The candidate becomes a tax resident after 183 days and contributes under the worldwide income principle. |