Skip to content

Countries courting corporate digital nomads hope they stay

Countries are increasingly using “digital nomad” visas to attract remote corporate workers, as governments look to outbid each other in a global war for talent, tax experts say.

More countries have introduced a form of digital nomad visa, which allows a person to live in a country and work remotely, as the pandemic increased demand for employees to “work from anywhere”.

The notion of “digital nomad” has tended to suggest free freelancers who backpack from country to country or work on beaches from their laptops.

But self-employed digital nomads make up a relatively small portion of the total community. While their numbers have increased by more than 50 percent since the pandemic, according to figures from MBO Partners, they were not the core group that governments are trying to attract, global mobility experts told the Financial Times.

“Ironically, the ‘nomad’ visa is not made for nomads,” said Gonçalo Hall, CEO of NomadX, a remote work consultancy, which advises governments on how to launch digital nomad communities.

“Most governments are seeing [nomad visas] as a way to attract remote workers with the clear intention of getting them to stay and become permanent residents in their countries.”

Goncalo Hall, the Portuguese founder of a digital nomad village in Madeira
Gonçalo Hall, the Portuguese founder of a digital nomad village in Madeira © Salón Gonçalo
Images from Gonçalo Hall’s Instagram promoting work as a digital nomad © Salón Gonçalo/Instagram

The total number of American digital nomads reached 17.3 million in 2023, according to MBO Partners, of which only 6.6 million were self-employed. The survey only tracks Americans, who are believed to be the largest group of digital nomads by nationality. Remote wage workers are not taking jobs away from local ones and their consumer activity contributes to the economy of their host country.

Countries were capitalizing on the “buzzword” of digital nomads, but in reality the visas “should be called remote worker visas,” Hall said.

Last month, Italy became the latest country to introduce a digital nomad visa, joining several European countries, including Portugal, Estonia, Greece, Malta and Spain, that are trying to attract a growing global remote workforce. .

Pallas Mudist from Enterprise Estonia, a government agency, said: “The Estonian digital nomad visa is specifically designed to attract not only entrepreneurs and freelancers, but also salaried remote workers.”

Visas are only open to non-Europeans, and around 600 have been issued since the scheme was launched in August 2020. But overall, the government estimates that 51,000 digital nomads visited Estonia in 2023, including Europeans who do not need a visa.

Similar programs have also been introduced in Barbados, Brazil, Cape Verde, Costa Rica, Mauritius and the United Arab Emirates, among others. While there are no official figures on the number of countries that have introduced visas, tax experts point to sources compiled by digital nomads such as nomadgirl.co, which says there are now 58 countries offering them.

Daida Hadzic, global mobility tax expert at KPMG, said aging societies were one of the reasons governments were looking to attract remote corporate employees through digital nomad visas. If these employees settle permanently in the country, they will also contribute their skills and work in the long term.

“The driving force behind digital nomad visas is that these countries compete with each other for labor,” he said.

Giorgia Maffini, a tax expert at PwC UK, said countries offering digital nomad visas tended to be “a little less competitive” in attracting foreign workers, citing Costa Rica, Croatia and Indonesia as examples.

Steve King, a researcher at US consultancy MBO Partners, said countries with visa programs for digital nomads often prefer salaried employees.

“Many countries view digital nomads with traditional jobs as tourists on steroids who will spend money locally, but will not take local jobs or be a burden on local social services,” he said.

Marta Aguilar, who lives in Spain, said she spent almost half the year traveling the world while working for Coverflex, a flexible compensation company based in Portugal.

The company does not have offices and employees work completely remotely, with a teleworking budget of 1,000 euros per year.

“I do not like winter. So I haven’t had winter in two years. I just skipped it,” Aguilar said.

However, the international tax system is often difficult for remote workers, as the rules were not designed for a more mobile workforce.

For businesses, a key risk when employees work remotely is that the country in which they are located may be considered a de facto business branch or “permanent establishment” of the employer for tax purposes. That imposes tax reporting requirements on the company and means that some of the company’s profits are potentially subject to tax in the country in which the employee works.

Remote workers can also expose themselves to income and social security taxes on earnings generated while working abroad and potentially end up forced to pay taxes in multiple locations, also exposing the employer to liability.

Various intergovernmental bodies, including the EU, OECD and the United Nations, are examining ways to make it easier for companies and countries. In February, the European Economic and Social Committee recommended that taxation of remote employees be carried out in the employer’s country of residence, and that some tax revenue be shared with the employee’s country of residence.

Column chart of the number of US digital nomads (millions) showing that digital nomads have increased since the pandemic, but growth has slowed.

Experts also warn that some countries risk losing tax revenue as workers relocate, especially if they move to lower-tax jurisdictions.

“The problem, let’s say, with the United Kingdom is that we are very dependent on labor and our climate is not good. [The trend for more remote working] It may well lead to a lot of people going to, say, Greece, and undermining our tax base,” said Grant Wardell-Johnson, global tax policy leader at KPMG International.

These risks are believed to be small for now. Rough estimates from the IMF in 2022 found that the rise of remote work reallocates about $40 billion of the income tax workers pay globally. This represents approximately 1.25 percent of the global income tax base. The potential revenue lost or gained between countries was found to range between 0.1 and 0.2 percent of GDP.

Small emerging market economies “with below-average tax rates and good remote work capabilities” tend to benefit the most from this trend, the research found, underlying the potential for fiscal winners and losers.

Dino Jangra, partner at Crowe, said: “In most countries, the tax on salaries is the biggest profit. “If you start to see a lot of people leaving your country, that becomes a problem.”

However, the growth of remote work has slowed lately. According to MBO, the number of American digital nomads increased only 2 percent last year.

“I don’t think the digital nomad concept has turned out the way people thought so far. “There has definitely been a ‘get your butts back to the office’ wave around the world,” Jangra said.