COVID-19 gave US citizens who travel internationally a wake-up call. Within a few months of the start of the pandemic in early 2020, the number of countries US citizens could travel to without a visa, or with minimal visa restrictions, fell by more than half.
The reason for the sudden loss of America’s “passport power” was, of course, the fact that many countries temporarily closed their borders in an effort to curtail the spread of the virus. But citizens of countries that were perceived as having a better response to the pandemic than the United States often found themselves able to travel internationally, even while US citizens were not. The once mighty US passport was overshadowed by travel documents from international backwaters like Moldova, Albania, Serbia, Ukraine, and even North Macedonia.
At the same time, though, a countertrend began. Countries whose economies were dependent on tourism faced financial catastrophe as airlines cut international flights and cruise lines shut down. This reality, along with the fact that the technology to facilitate a mobile lifestyle is now in place in most countries, created the perfect conditions for countries to open their borders to COVID-free, self-sufficient migrants…but only for temporary stays. The newly created travel authorizations came to be known as “digital nomad” visas. Thus programs like the 12-month Barbados Welcome Stamp, Bermuda’s One Year Residential Certificate, and the Cayman Islands’ Global Citizens Concierge Program came into existence.
But the phenomenon wasn’t limited to the Caribbean. Estonia rolled out a Digital Nomad Visa for remote workers. Seychelles introduced its Workcation Program. And Croatia unveiled its Temporary stay of digital nomads visa.
In all, we’ve counted at least 20 countries that have introduced some form of digital nomad visa. All of them give remote workers the right to live in a country for a prescribed period; generally one year, but sometimes two years. In most cases, you must prove a minimum monthly income and may not work in the local economy. The visas are generally not renewable, but in some countries may be extended. They cater to a younger, more mobile demographic, leading to what one immigration expert calls “holiday by investment.”
Worldwide, millions of people work in occupations that don’t require them to be physically present in a fixed location. Indeed, according to a study by MBO Partners, there are more than 10 million digital nomads in the United States alone, although most of them still live in the country.
And digital nomad visas have proven to be popular. The Barbados Welcome Stamp, for instance, drew nearly 3,000 applicants through October 2021. One reason for their success is the growing acceptance of remote work: with hundreds of millions of people unable to work in an office due to COVID lockdowns, a growing number of companies embraced “work by Zoom” and other innovations. And even as lockdowns ended, many companies kept their remote work policies in place.
Another reason digital nomad visas have been a success is because they’re more politically sustainable in the countries offering them compared to other visa options. Those taking advantage of them aren’t competing with local workers and in most cases can’t obtain permanent residency or citizenship.
There are naturally different levels to the digital nomad lifestyle, largely defined by how wealthy you are and the degree of attachment you’re willing to accept in any one country. And special considerations exist for US digital nomads due to the nearly unique practice of Uncle Sam taxing its citizens even if they live full-time in another country.
Some of our clients strive for the goal of becoming a “PT”: (a “previous taxpayer,” “perpetual tourist,” etc.). The essential elements of this purported tax-reduction strategy involve moving out of whatever high-tax jurisdiction in which you currently reside and then roaming the world, never staying in one place long enough to become subject to any government’s taxing authority.
But this goal has become increasingly difficult to achieve for all nationalities, not just US citizens, thanks to an initiative called the Common Reporting Standard (CRS). The CRS requires financial institutions to identify the tax home of their depositors so that information about their accounts can be shared with their home country’s tax authorities.
The CRS concept works well enough, say, for a UK citizen who lives most of the time in Panama, a country that taxes only local income, and is able to establish a tax home there. But it’s problematic for a Canadian citizen who spends three months a year in Argentina, Italy, Antigua, and Canada, respectively. Even though they don’t spend enough time in Canada to otherwise be subject to Canadian tax, they don’t have a closer connection to any other country – and thus continue to be taxed as a Canadian resident.
At the same time, the PT lifestyle is for many people a temporary one. Most of us eventually want a place we can call “home”; a relatively fixed place of abode. And of course, when we’re ready to make that transition, we can either return to a country where we hold citizenship or legal residency or opt for a new one through a more traditional second residency or second citizenship program.
Of course, that’s one of our specialties here at Nestmann – contact us at firstname.lastname@example.org if you’d like to learn more.