One year post-pandemic, how are the novel digital nomads regimes impacting workers' mobility?

Wednesday 24 May 2023

Leonor Echeverria
Fragomen, San José

Immigration law is a crucial component of a country's strategic framework and is constantly evolving. Remarkably, two of its main principles are frequently competing. On the one hand, there is a need to restrict the number of foreign nationals entering the country to safeguard its local labour market and attend to national security concerns. Conversely, most countries want to attract foreign investment, which frequently requires bringing human talent from abroad.

From an economic perspective, immigration law can have a profound impact on a country's workforce and overall economic growth. For example, a country that has a labour shortage in certain industries may use immigration law to attract workers from other countries to fill those positions. Similarly, a country that wants to encourage foreign investment may use immigration law to make it easier for foreigners to spend or invest in their territory.

Digital nomads, also known as international remote workers, are tourists who stay in a foreign country for an extended period while working remotely for a foreign employer or a foreign project as a freelancer. Due to the Covid-19 pandemic, many countries have started to offer special visas or programmes to attract digital nomads as a source of foreign investment, as they are not seen as displacing local labour or selling goods or products in the host location.

2020 was crucial year because for the first time in history, a specific digital nomad visa regime was enacted. This notable trend began in Estonia, but over 38 countries followed and many are expected to continue. This is a major development because in less than three years, a significant number of countries created programmes to attract digital nomads, which speaks to the potential impact of this global phenomenon.

Countries with international remote work visa programmes are: Albania, Anguilla, Antigua and Barbuda, Argentina, Aruba, Barbados, Belize, Bermuda, Brazil, Cape Verde, Colombia, Costa Rica, Croatia, Curaçao, Cyprus, Dominica, Ecuador, Estonia, Greece, Hungary, Iceland, Kyrgyzstan, Latvia, Malaysia, Malta, Mauritius, Montserrat, Namibia, Panama, Portugal, Romania, Seychelles, Spain, Sri Lanka, St Lucia, Thailand (under the Long-Term Resident Visa), the United Arab Emirates and Uruguay (under expansion of the Short-Term Visa). Other programmes have been suspended or closed in the Bahamas (suspended January 2022), Cayman Islands (ended October 2022) and Georgia (suspended April 2022). Furthermore, these programmes are currently pending in the Czech Republic, Grenada, Indonesia, Italy, Montenegro, Slovakia and South Africa.

Traditionally, creating new visa regimes is not an easy task for immigration authorities in most countries. This is partly because they believe it will be difficult to cope with the increased volume of applications, and equally, they fear a backlash and public scrutiny from sectors that regard the arrival of foreigners as a massive threat.

However, this topic should not be controversial because digital nomads are merely extended-stay tourists working for a foreign employer or with clients and projects outside the host country. Consequently, they are not displacing the local labour force. Notwithstanding this, in many countries, initiatives to provide special benefits to attract international remote workers or digital nomads remain controversial. For example, immigration authorities may see these programmes as a burden, or lack the capacity to issue fast-track visas in large numbers. Moreover, political parties and other stakeholders believe these remote workers may represent a significant risk, as they might abuse the programme and illegally enter the country’s labour market and constrict the social security system, among other negative outcomes.

Such criticism has some merit. Governments are dealing with a new reality that is not easy to regulate. In addition to immigration concerns, there are also tax, employment and health and social security implications. None of these new digital nomad regimes have been able to fully resolve these issues. From a tax perspective, some programmes do not clarify whether a company with an employee under a digital nomad visa in a foreign country will create a permanent establishment situation for their employer. They may also fail to clarify whether the person can apply for this visa if their employer has an office or establishment in the host country. Others do not specify whether the remote worker needs to obtain a certain health insurance. Similarly, others do not explicitly prohibit the applicant to work for a local employer or project. Moreover, the situation for dependents – or accompanying family members – is not completely clear in a number of these programmes. Not surprisingly, governments have already started and will continue to introduce reforms as these policies evolve and adapt.

Even when these norms are not perfect, it is expected that the trend of remote work and digital nomadism will continue to grow, as a growing number of companies are embracing flexible work arrangements and individuals are seeking greater freedom and work–life balance.

Additionally, these programmes generate new opportunities that were previously unexpected. For example, because of the war in Ukraine, Dubai’s digital visa regime has been widely utilised by Russian applicants wishing to stay in Dubai for up to one year, if they meet the eligibility criteria. Evidently, this was not the programme’s original purpose, but it has proven a very interesting and successful alternative. In the Americas, the digital nomad visa in Costa Rica, for instance, has been utilised by companies that need to ‘park’ their employees – or place them in a third-country location – while they wait until their H-1Bs or other types of visas in the US are approved.

The realm of immigration is a dynamic and ever-changing landscape, and as such, an open-minded approach towards novel ideas and advancements should be embraced. The reasons to travel and look for new frontiers are now different after the pandemic, and digital nomadism will eventually become a new normal for many people around the world. As the phenomenon of digital nomadism gains momentum, it has become increasingly clear that countries must leverage best practices and recognise the significant benefits of attracting this growing population to enhance their economic competitiveness.