What are the benefits of digital nomadism for countries?
The tourism industry is having to reinvent itself after the pandemic. The financial blow of these two years has made it imperative to come up with novel ways of attracting travelers and encouraging them to consume locally. The normalization of remote work during Covid-19 lockdowns, as well as the increase in freelance workers who left 9-to-5 jobs during the Great Resignation in the US, has transformed digital nomads into a class of travelers of their own.
Multiple countries are creating digital nomad visas. These give remote workers who earn an offshore income, usually of at least 1,500 USD a month, the right to live in their country for 6 months to 2 years. This arrangement has many advantages for the host country. The remote workers inject valuable foreign currency into the economy by spending not only on everyday expenses (rent, food, utilities, etc.) but also on leisure and hospitality – malls, restaurants, resorts, etc. This way, these “long-term tourists” can help quicken the recovery of the hospitality industry.
At the same time, digital nomads do not represent competition for local workers because they are not allowed to be employed locally. Even then, their networking with locals can still build cultural bridges and encourage the exchange of knowledge and expertise. They also do not put pressure on the country's public services, as they generally need private health insurance and aren't eligible for welfare state benefits.
Portugal and Spain both launch 1-year digital nomad visas
In October 2022, the Portuguese government announced the upcoming launch of a new digital nomad visa called the “residence visa for the exercise of professional activity provided remotely outside the national territory.”
It allows remote workers from outside the European Economic Area (EEA) to live in the country for 12 months as long as they earn four times the country's minimum wage. At the moment, that is 2,800 euros (about 2,750 USD) per month. Of course, they need to earn it from a company based in another country or from freelance contracts outside of Portugal. After a year, they can apply for residency if they wish to stay longer in the country.
This new visa complements the preexisting Portuguese D7 Passive Income Visa, which allows non-EEA expats to do the same thing, with the main difference being that D7 holders need to rely on only passive income – pension, rent, investment returns, etc. In contrast, digital nomads need to earn money through work actively. D7 visa holders, many of whom are retirees, also have a lower income requirement: only the minimum wage.
Portugal is a popular expat destination owing to its membership in the European Union, its low cost of living, its sunny weather, its history and architecture, and its relaxed lifestyle infused with saudade (beautiful melancholy). However, it has a notoriously convoluted bureaucratic system. On Euronews, some expats say that their excitement about this new digital nomad visa is tampered with by an awareness that they might have to face a lot of paperwork to actually get it. Portuguese authorities still need to provide further details about the application procedure, including the launch date.
Portugal's neighbor, Spain, also announced a similar digital nomad visa earlier in 2022. This visa will also be valid for one year, but it can be renewed for a maximum of 5 years. The minimum income threshold has yet to be communicated, but it will likely be around 2,000-3,000 euros, similar to Portugal. It is also likely to offer tax breaks and – unusual for this type of visa – allow nomads to derive part of their income from within Spain, report Forbes and Euronews. As an incentive, nomads will be taxed only 15% instead of 25% in their first four years, and they will likely be allowed to derive a maximum of 20% of their income from Spanish firms. Lastly, the visa holder's spouse and dependent children should also be able to join them without any additional application.
Spain boasts of one of the fastest internet connections in Europe, which makes it easy for digital nomads to work from anywhere, even from small towns and villages. As for cities, Barcelona, in particular, is trying to transform itself into a technology hub by welcoming startups and digital nomads. The reason behind this is to become less dependent on tourism, which has been an unreliable industry since the pandemic.
Costa Rica wants to transform repeat tourists into digital nomads
In another part of the world, Costa Rica is also trying to tap into the trend of digital nomadism. This small Central American country boasts sunny weather, incredible biodiversity, low taxes and political stability. The country's Tourism Board has noticed that some repeat tourists (i.e., tourists who visit the country more than once) are actually digital nomads. The board has decided to formally recognize them by creating a digital nomad visa.
The Costa Rican Digital Nomad Visa (DNV) requires a monthly offshore income of 3,000 USD for a single person, which is higher than in Portugal. If applicants are bringing their families along, they need to earn 4,000 USD per month. The high-income threshold is to guarantee that these nomads not only have money for basic expenses but, importantly, also have disposable income to spend on leisure and hospitality. This way, they can act like tourists on extended stays and boost the economy.
The DNV allows nomads to stay for an initial three months and then extend their stay for up to 2 years. In contrast, a normal tourist visa is valid for 90 days. Unlike the Spanish and Portuguese visas, which are still being finalized, the Costa Rican DNV has already started processing applications since July 2022. While it's open to remote workers of all nationalities, the authorities are especially looking to target Americans. The country's Minister of the Environment, Carlos Manuel Rodríguez, has said that if they manage to attract 0.5% of the United States' 3 million remote workers, they will have met their economic targets.
