Digital nomad visas: tax incentives for remote workers


Some of Spain’s most popular Youtubers were already residing in Andorra when Ruben Doblas’ public announcement that he was planning to move to Andorra prompted the Spanish tax agency to announce new tax avoidance measures to track people who plan to change residence for tax purposes.

Andorra’s tax system is still attractive to EU residents, even after the implementation of tax reforms that led to its withdrawal from the Blacklist of the Commission of the European Union. A 10 percent highest tax rate and a social security contribution rate of 22 percent are low enough to attract workers. The highest tax rate in Andorra is particularly low compared to Spain or France, neighboring countries of Andorra, where highest income tax rates could reach up to 50 percent in the Spanish region of Catalonia and 43.5 percent in France. On the other hand, Spain offers a special tax regime for non-residents whose Spanish income is taxed at the general rate of 24 percent and 19 percent for residents of the European Union.

Andorra and Spain are not the only ones to offer attractive tax measures for mobile workers and individuals. Last summer, Greece implemented a 7% income tax for foreign retirees who move their tax residence to Greece. The flat rate of 7% applies to all income, including rent or dividends, instead of local graduated tax rates which could reach up to 45%. To be eligible for this scheme, the individual must not have been a Greek tax resident for five of the six years preceding the transfer of his tax residence to Greece.

But Greece did not stop there. In 2021, a new tax incentive for foreign or self-employed workers who transfer their tax residence to Greece was introduced. Under this tax regime, new residents will only have to pay income tax and social security contributions on 50 percent of their Greek income for seven years. Those who earn income exclusively from abroad and invest more than $ 603,305 (€ 500,000) in Greece, according to a 2019 tax regulation, would have to pay a flat tax of $ 120,661 (€ 100,000) per year, regardless of the amount. of income. won, for a maximum of 15 exercises.

Denmark also offers fiscal advantages highly skilled migrants if they earn more than $ 11,291 (DKK 69,600) per month. Under this expatriate regime, researchers (a special category) will have to pay an income tax rate of 27% in addition to labor market tax, a combined total tax rate of 32 , 84% for a maximum period of seven years. A special scheme also applies to employees who are officially employed in another country and taken on by a company in Denmark. In this case, the combined tax rate reaches 35%. However, this combined tax rate is still 20 points lower than the highest tax rate in Denmark.

Individuals are responding to tax incentives and many countries have implemented tax policies to attract foreign residents and highly skilled workers. But if income tax rates need to be reduced to make a country attractive to foreigners, the tax rates may be too high in the first place. The COVID-19 pandemic has pushed businesses to work remotely and make it easier to work from home for their full-time employees. Policymakers should care more about highly skilled workers who can now work from anywhere in the world as long as they have access to an Internet connection. Recently a high income exodus led the South African government to rethink its strategy of raising income taxes in order to reduce the budget deficit for 2021.

Countries like Costa Rica, Georgia, Dubai, Cayman Islands, Bermuda, Antigua and Barbuda, Mexico, Australia and Thailand already offered digital nomadic visas even before the start of the COVID-19 pandemic. Other European countries like Germany, the Czech Republic, Portugal, Norway and Estonia have also implemented this system. Earlier this year, Croatia joined the group, and the income of natural persons employed or working as self-employed for a foreign company is exempt from tax in Croatia.

Policy changes aimed at attracting foreigners are not without benefits, but governments should carefully weigh the costs of tax incentives against the possibilities of implementing broader tax reforms. A policy to attract foreigners can be valuable, but if local citizens do not also reap the rewards of reforms, governments risk attracting foreigners without making the country attractive for their own citizens to work, raise families, invest. and thrive. A more efficient income tax system is a better goal than focusing only on incentives for foreigners to change tax residency.

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