With the rise in remote work during the pandemic, countries around the world seized the opportunity to attract remote workers (and their cash) through digital nomad visa programs. Sure, it sounds amazing to get a visa that allows you to live and work in a place you’ve always dreamed about.
But before you decide to run off to your version of paradise to work remotely, you’ll want to first understand the advantages and disadvantages of these new programs.
Many countries rushed to introduce their own version of a digital nomad visa to take advantage of the cash remote workers spend on accommodation, transportation, food, and leisure activities. This much-needed money helps to boost local tourism industries and economies that suffered big losses during the pandemic. Most importantly, remote workers bring this cash boost without taking jobs from the locals.
But despite the recent media hype, digital nomad visas are not perfect solutions to the remote work and travel trend. They also don’t address a lot of the real needs of digital nomads. This is especially true for American remote workers and freelancers who face complex double-tax situations. In this article, we’ll take a look at the pros and cons of digital nomad visas to help you decide if they are right for you.
Disclaimer: The information in this article is provided for general information purposes only. It is not meant to represent legal, financial, medical, or other professional advice. Deskless Nomad makes no representations, warranties, or guarantees, whether express or implied, that the content in the publication is accurate, complete, or up to date. Please see the full Deskless Nomad Disclaimer.
What is a digital nomad visa?
A digital nomad visa allows a remote worker or self-employed person to stay and work in a country other than his normal country of residence. It is a type of temporary residence permit legalizing the right to work as long as the work is for an employer or client outside of the country.
Digital nomad visas typically allow you to stay for at least 6 months to a year and are frequently renewable. This is compared to the typical tourist visa which allows stays between 30 days and 3 months. You then must leave the country for a period of time before you can return.
The temporary residence status of a digital nomad visa may or may not lead to a permanent residence status. A digital nomad visa is not a true residency visa in most respects.
The cost, application requirements, application process, length of stay, and tax rules differ from country to country. There are currently over 40 countries offering digital nomad visas. You can browse these countries, visa details, and links to applications in my index of digital nomad visas around the world.
Depending on your travel and work plans, a digital nomad visa may not be appropriate for you. To help you better understand the basics of this new visa type you may want to read my article, “What is a digital nomad visa, and do you even need one?”
What are the pros of digital nomad visas?
With a digital nomad visa, you have the ability to stay in a country longer
The main benefit of all digital nomad visas is the ability to stay in a country longer than a typical tourist visa.
While there are several countries with long stay tourist visas, like Georgia and Albania, most countries limit the amount of time you can spend there. If you want to stay longer you have to do visa runs or strategically spend time in another country. Once the clock restarts you may then return for another tourist visa. For Europe there are definitely ways to stay longer than the 90-day Schengen limit but they require advance planning and don’t always allow you to work legally.
The energy needed to move from location to location every 30 to 60 days or so is easier when you are younger and unattached. Older remote workers or remote workers with young children may not want to live a life of constant movement every 30 to 60 days. Digital nomad visas give the peace of mind that you can stay in one place for an extended period of time.
The ability to stay in a country longer makes it easier to slow travel. Yyou can rent an apartment, settle into a neighborhood, and live as a local. This type of slow travel, in which you spend more time in one place, is one of many ways to reduce your carbon footprint when traveling.
Staying longer in a country can help you stick to a set budget. It also makes it easier to negotiate a discount with Airbnb hosts on monthly rentals.
With more time to explore you can try staying in a digital nomad village among other like-minded individuals working remotely.
Some digital nomad visas come with tax benefits
In order to entice digital nomads, several countries are offering tax benefits to visa holders. Some countries, like Barbados and Georgia, permit a one-year tax-free status. In other countries, like Greece, visa holders only have to pay taxes on 50% of their income. This benefit is granted for up to 7 years of living in Greece.
It is important to note that some countries were already tax-exempt long before digital nomad visas came around. These countries, like the Cayman Islands, continue to offer the same tax exemption to digital nomad visa recipients.
Not all countries with digital nomad visas offer tax advantages. Unfortunately, there are several countries, like Romania, that don’t currently specify how and if you pay tax with their digital nomad visa. If you want to apply for a visa in one of these countries, you may want to consult a tax specialist to avoid any unpleasant surprises.
If you are an American citizen or green card holder, you may way to review my tax guide for digital nomads to understand your continued filing requirements when living abroad. Although you can take advantage of certain tax deductions, like the foreign earned income and housing exclusions, you may still end up owing tax to the IRS on a portion of your income.
You get a special legal status allowing you to work
Digital nomad visas give you the legal right to work in a country. You don’t have to worry about immigration officers questioning the purpose of your stay. You can rent an apartment and get a membership to a coworking space without worrying you will have to justify why you are there for so long.
A digital nomad visa removes the worry about the legality of working while you are traveling. This benefit may become even more valuable as more countries crack down on the influx of remote workers claiming to travel for pleasure when they are actually working remotely.
There is also a certain peace of mind that comes with having legal status in a country. You know you can reenter easily if you have to leave the country for a week or two.
It is easier to convince your boss to let you work remotely from abroad
Digital nomad visas essentially have built-in employment and tax law waivers for the employers of remote workers. This is a little bit complicated so bear with me…
There are three main barriers to companies allowing employees to work remotely from another country.
1. If an employee is physically present and working in another country for a certain period of time some countries require that company to register as a local entity. With digital nomad visas, there is usually no requirement for employers of remote workers to register and create a local entity in order for remote workers to work in that country.
2. If you work remotely in another country without the special status of a digital nomad visa, your employer may have to abide by that country’s labor laws. Your company then has to follow all of that country’s rules about maternity leave, work-related injuries, paid time off, overtime, etc. Your Human Resources department now has extra homework making sure they follow all of the rules of multiple countries. With digital nomad visas, countries are generally not expecting employers to follow local labor law rules.
3. Traditionally, when workers were physically working in another country, the company was establishing a physical presence in that country. This is a legal status that sometimes required the company to pay extra taxes in that country. With digital nomad visas, local tax obligations for employers of visa holders are generally waived.
Bypassing these three barriers with a digital nomad visa makes it so much easier to convince your boss to let you work remotely in another country.
There are lower financial requirements with digital nomad visas compared to an investor or golden visa
Previously, if you wanted an easy way to get a residence permit in another country, you needed to have enough money to purchase a house of a certain value or make a relatively large local financial investment. Because of these hefty financial requirements, Golden Visas are generally only available to wealthy individuals.
Digital nomad visas have lower financial and paperwork requirements than investor visas or golden visas. While golden visas require large sums of money to be tied up in real estate, bonds, or businesses, digital nomad visas only require showing proof of income. There is no obligation to spend any particular amount of money while you are in the country.
Of course, there are a couple of rare exceptions, like Portugal’s D7 residence permit, for which you only need to show proof of income.
If you want to stay long-term in another country it is worthwhile to compare the financial requirements for a digital nomad visa versus a residence permit before making any decisions.
Digital nomad visas are great for trying out a single country
Have you always dreamed of moving to a country but you were too afraid to take the leap? Or was the immigration process too daunting? A digital nomad visa is a much easier way to try out a country before committing.
If you are hoping to become a citizen of a country, you should know that your year(s) spent living in a country with a digital nomad visa may not be applicable to the years of residency required to obtain citizenship. The clock may restart once you obtain a regular residence permit.
If you only want to try out a country for 1-2 months then you could consider sticking with tourist visas. Although working while on a tourist visa is not technically legal, most countries are not yet imposing these rules on tourists.
A few of the digital nomad visas can be paths to permanent residency and citizenship
While this does not apply to every country with a digital nomad visa, there are a couple of countries in which obtaining a digital nomad visa can be a path to permanent residency and citizenship.
For example, in Latvia citizens of OECD countries are eligible to change their digital nomad visa to a temporary residence permit after two years. After 5 years of residence, you can then apply for Latvian citizenship.
Some digital nomad visas have very easy application processes
The Caribbean countries of Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Bermuda, Cayman Islands, Curacao, Dominica, Montserrat, and Saint Lucia have made their applications available 100% online. The processing time for these programs is typically 1-4 weeks.
Remember, applying for a digital nomad visa is just one of many things to add to your long-term travel planning checklist and timeline.
Digital nomad visas are great if you want a base to explore a region
There are several great digital nomad visa options if you want to have a base for exploring a region.
Iceland is a good example. You can access the Schengen zone in Europe for about half of your stay. Tickets from Iceland to the EU are very economical so it is easy to hop over for a visit. Flights between Iceland and the US are also very affordable if you need to return to the states for work.
Croatia is another great base for exploring the European region. With its proximity to Italy, Austria, and Hungary you can easily explore many Schengen countries without having to go far. The European rail networks make it easy and affordable to use Croatia as a base to visit numerous European countries.
Similarly, in the Americas, Costa Rica and Panama both make great bases to explore Central and South America.
What are the cons of digital nomad visas?
Digital nomad visas have minimum income requirements
The main goal of most digital nomad visa programs is to bring in people who will be spending money. This means that most digital nomad visas have minimum income requirements. If you don’t meet those requirements you are out of luck.
According to Nomadlist, the median income of digital nomads is $85,000 per year. A fifth of digital nomads makes less than $50,000 per year. Not all digital nomad visas are easily accessible for the average digital nomad. A number of digital nomad visas are available exclusively to high-income remote workers with lots of money to spend.
For example, the Cayman Islands requires a single applicant to have a minimum income of $100,000 per year. That increases to $150,000 if married and $180,000 if traveling as a family of 3 or more. According to Nomadlist, less than half of single digital nomads would meet this income requirement.
Iceland also has a high income requirement, which they justify by the high cost of living. Iceland requires a monthly income of $7,750 for single applicants and $10,075 if you bring your spouse.
Remote workers are not eligible for every type of digital nomad visa
There is an important distinction to understand between the terms remote worker and digital nomad.
A remote worker is someone who works remotely (outside of an office setting) for an employer. They receive compensation from their employer on an hourly or salary basis. They work remotely either from within the same country where their employer is based or from another country.
The term digital nomad can describe someone who is an employee of a company working remotely. Or it may describe a self-employed freelancer, small business owner, or entrepreneur who completes their work online.
Because of the confusion around the term digital nomad, it is no wonder that there is no universal eligibility requirement for the type of worker who can apply. Some digital nomad visas are only for freelancers, entrepreneurs, and the self-employed. Remote workers who continue to work for an employer in their home country may not be eligible to apply for some digital nomad visas.
The Czech Republic, Norway, and Germany are examples of countries that limit applications to freelancers rather than employed remote workers.
You may not be allowed to perform contract work for any clients in that country
The majority of digital nomad visas restrict you from performing any work for clients based in that country. The idea is to keep you from competing in that country’s labor market and taking work away from locals.
If you are a freelancer or business owner you will want to look closely at these rules to avoid potential income losses.
The exceptions are Czech Republic, Estonia, Germany, Norway, Portugal, and Spain which allow you to do freelance work for companies registered in those countries.
- Norway actually requires you to have at least one client based in Norway.
- Spain restricts how much freelance income you can make from Spanish clients to 20% of total freelance income.
- Estonia states you must “primarily” work for clients outside of Estonia but you may do additional work for Estonian companies.
There may be some unexpected tax consequences
You may not find out until you arrive in your new host country that you owe additional surprise taxes. These may include importation tax on personal belongings, accommodation tax, and hefty value-added tax (VAT) on products and services.
- Cayman Islands imposes a 22% import duty on personal items valued over CI $500 (around USD $600).
- Anguilla collects a 10% accommodation tax.
- Barbados collects a 17.5% VAT on products and services you purchase while in Barbados.
Not all digital nomad visas explicitly state how taxes will be handled
Depending on your length of stay, you may become a tax resident and owe income tax to that country. You may also find that while you don’t owe local tax on your earned income, you do owe tax on income from interest, dividends, and rentals.
If your home country and host country don’t have a double taxation treaty, you may still owe taxes back home. Even worse, you may be on the hook for double taxes.
It is important that American citizens and green card holders understand they have filing requirements and possible tax obligations no matter where they live in the world. The US taxes its citizens based on citizenship rather than country of residence or source of income.
For more information, read our tax guide for digital nomads and contact a tax professional.
If you are self-employed or run a small business, you may be taxed differently than an employed remote worker
Depending on the tax rules of the host country, self-employed individuals may need to pay local social security taxes. This applies even if the digital nomad visa comes with the benefit of not needing to pay income tax.
In addition, Americans may still need to pay self-employment taxes (Social Security + Medicare) to the IRS. This applies even if they qualify for the foreign earned income exclusion. If the host country and your home country have a totalization agreement then you may not have to pay both local and US self-employment tax. Keep in mind that not paying US social security tax during your working years may affect your social security benefits when you retire.
For more information on self-employment taxes for digital nomads, read Deskless Nomad’s tax guide for digital nomads. And, as always, your best source of information will be a tax professional specializing in your host and home countries.
Digital nomad visas are generally not a path to citizenship or permanent residence
For those planning to permanently immigrate to another country, a digital nomad may not be the best choice. Most digital nomad visas do not lead to citizenship in the same way as residence permits.
You should look at the requirements for both traditional residence permits and digital nomad visas if you want to be somewhere long-term. The qualifications may not be that different. For example, in Costa Rica and Portugal, the qualifications are quite similar.
A residence visa has the added benefit of helping the clock tick towards citizenship. This is important in countries where you have to be a resident for a certain number of years before you can apply for citizenship. If you are going to live somewhere long-term why not get credit for your time?
Digital nomad visas must usually be renewed every 6 to 12 months
Generally, digital nomad visas need to be renewed more frequently than residence permits. Some need to be renewed every 6 months and others every year. For some countries, this may be easy to do online. For other countries, it can be more complicated. You may need to attend an interview at an immigration office. Or you may need to file more paperwork showing you still meet the income requirements and haven’t committed any crimes.
It is important to anticipate what you would do if your digital nomad visa runs out but you want to continue living in that country.
Digital nomad visa programs are brand new and vulnerable to failure
Digital nomad visas came about as countries reacted to the rise of remote work during the pandemic. They saw remote workers as an opportunity to inject money into the local economy.
But what will happen once countries start assessing the true impact of a flood of remote workers? Some communities may not like that remote workers are driving up the rental prices for locals. Or communities may object to the cultural changes that come with well-to-do foreigners staying for long periods of time.
The digital nomad visa is a new concept. No one can predict what these nascent programs will look like in the future. But remote work is here to stay. Digital nomad visa programs will evolve over time, for better or worse. Or the programs may fade out entirely. New programs or other cross-border remote work legislation or even a country on the internet may replace them.
Nobody agrees on what “digital nomad” means, impacting the value of digital nomad visas
Digital nomad visa marketing professionals and the media have seized the term “digital nomad” and used it far too loosely. Sure, it has a sexy appeal. The name conjures hackers hiding out in paradise, millionaire crypto traders avoiding taxes, shoe-string budget tourists sipping coconut water while working with their laptops, and travel bloggers and influencers jet-setting and scoring free travel.
Digital nomad visas are really just temporary residency schemes for people who can work remotely – whether they are employed remote workers, location-independent entrepreneurs, or freelancers. But using a one size fits all approach based on the media perception of digital nomads may mean digital nomad visas ultimately fail to address the key needs of applicants.
Digital nomads were not involved in the development of digital nomad visas and associated policies
In general, governments did not involve digital nomads in the development of digital nomad visa programs. Without consideration of their perspective, it is difficult to design a program that meets the true needs of digital nomads.
Governments don’t seem to be clear about what a digital nomad is. They think digital nomads want to be in one place for a year or more. In reality, the average nomad stays in a single city for around 2 months and in a single country for 8 months according to Nomadlist.
One could argue that digital nomads may now stay longer in places because they have the legal right to stay long-term. But the adjunct of digital nomad visas is unlikely to fundamentally change the way nomads travel. Most true digital nomads focus their lifestyle on flexibility and mobility, moving around the world to experience and explore different places.
Digital nomad visa programs do not address many of the important needs of digital nomads
Because governments did not involve digital nomads in their development, digital nomad visa programs do not address many of the important needs of digital nomads. Digital nomad visa programs need more input from nomads themselves. Unfortunately, digital nomads do not have centralized representation yet (but may in the future).
We already discussed how income taxes and social security taxes may be extra complicated and burdensome. In addition, digital nomad visas do not sufficiently address important services such as:
- Education for children of digital nomads
- Community development (facilitating ways to meet other digital nomads)
- Accommodation assistance (coliving options)
- Coworking facilities
- Social security and pension payments and future benefits
Some digital nomad visas have high fees
While digital nomad visa fees are great for the country offering them, they can be a barrier for many applicants.
During the first year it offered its Welcome Stamp digital nomad visa, Barbados generated $8,000,000 in fees alone. There are also estimates that digital nomads generated $100,000,000 in revenue from the combinations of visa fees and the money they spent in Barbados.
But for visa applicants, the application fees can be hefty. Take a look at these examples of visa application fees for single digital nomads:
- Anguilla $2,000
- Antigua and Barbuda $1,500
- Bahamas $1,000
- Barbados $2,000
- Cayman Islands $1469
- Grenada $1500
Eligibility may be limited to citizens of specific countries
Certain countries are limiting digital nomad visa eligibility to citizens of specific countries.
- Latvia limits applicants to citizens of OECD countries.
- The Cabo Verde Remote Working Program is open to citizens of the US, Europe, Brazil, and West Africa.
- Aruba’s One Happy Workation is currently only open to US nationals.
Some digital nomad visa application processes are overly complicated
The application process for some of these visas can be quite daunting. Depending on the country, you may need to make an appointment at a local embassy (presuming there is one). Then you might need to meet again with an immigration officer when you arrive in the country. You may also need to get notarized bank references and criminal background checks, among other requirements. Some countries require official translations of these documents too.
Requirements vary by country. You can check out Deskless Nomad’s digital nomad visa index for more details.
Digital nomad visas may be just extra hoops to jump through for countries that already offer long visitor visas
Several countries already offer long-stay tourist visas. Depending on how long you want to stay, long-stay visitor visas are a much easier option. If digital nomad visas don’t have any added value then why apply? With long-stay visitor visas, you avoid a complicated application process. You also don’t need to provide proof of income, health insurance, etc.
When digital nomad visas first came onto the scene, they seemed like an exciting option to stay an extended period and work remotely in another country. The closer you look, it becomes apparent they are often just marketing tools for countries to attract the extended tourism dollars of digital nomads.
While digital nomad visas do have many benefits, there is still a lot of room for improvement. They need to offer more value to remote workers than just an extended period to stay.
If you are considering applying to a digital nomad visa program, make sure you are reviewing:
- The tax consequences
- How you will address your family’s healthcare and education needs
- The fees
- The overall complexities of the application process
If you are interested in learning more about the tax consequences of being a digital nomad, you can find answers to your burning tax questions in Deskless Nomad’s tax guide for digital nomads. Those who are wanting to travel longer in Europe than the 90-day Schengen visa limit should consider all of the other available options.
As with all things related to the digital nomad lifestyle, digital nomad conferences are a great way to learn about digital nomad visas and meet people who have applied to these programs.
Are you ready to apply to a digital nomad visa program? Check out Deskless Nomad’s index of digital nomad visas around the world.