New Mobility Tax Risks as Countries Attract Remote Workers

In addition to companies, countries and states are increasingly competing to attract top talent. By drawing high-income professionals, they aim to enhance their skills base and stimulate economic growth. Although some countries have long-standing programs to attract skilled professionals, the COVID-19 pandemic accelerated this trend. Many have also introduced specialized visas for remote workers who meet specific income thresholds, which differ by country.

Country-level programs to lure top talent fall into two broad categories: digital nomad visas and tax favorable residential status.

Digital Nomad Visas

These programs generally allow an individual the right to live and work in the country for an overseas employer. However, many digital nomad visa programs do not lead to residency status or citizenship. The largest difference between a tourist visa and a digital nomad visa is permission to work, although often limited to working remotely for an overseas employer. Aimed at attracting remote workers, digital nomad visas allow remote work for a limited period, usually six months to two years.

The first digital nomad program was introduced by Estonia in June 2020; Barbados introduced its program one month later. The number of countries with similar programs grew sharply thereafter as governments sought to attract high-income remote workers to help boost their pandemic-stricken economies. At the time of writing, there are over 60 countries that have digital nomad visa programs including Argentina, Costa Rica, Japan, Spain, and Seychelles.  The most recent additions to the list are South Africa and Türkiye, which introduced such programs in 2024.

Most countries have a minimum monthly income requirement, which vary from approximately $1,100 to $4,000 a month. The other required terms and conditions, as well as the application processes for such visas, vary so widely that some sources disagree on which programs can be classified as digital nomad visas instead of regular work visas.

However, the right to work in a country is not necessarily tax-free. An employee working on a digital nomad visa is likely taxable in that country. There may or may not be employer payroll tax compliance obligations related to their income, including stock compensation. Furthermore, a digital nomad visa does not necessarily circumvent any securities law, labor law, foreign exchange limitations, or other laws applicable to employment, compensation and equity compensation. Finally, a company should consider whether the nature of the work the employee will be performing will lead to a deemed corporate permanent establishment in that country.

An employee’s ability to work remotely from another country does not necessarily mean that the employer should permit it. Companies should require country specific pre-approval before allowing their employees to become digital nomads.

Tax Favorable Residential Status

Tax incentives for highly talented workers transferring into a country have been around for a long time. For example, Netherlands introduced the 30% Ruling in 1964. Although it has changed over the years, in general the 30% Ruling allows workers with specific roles who transfer to the Netherlands to receive 30% of their income free of Dutch income tax. Over time, however, the tax benefits of the status have become less generous.

Spain introduced the Special Expatriate Tax regime in 2005. It is colloquially known as Beckham’s Law, after the English soccer player who was one of its first beneficiaries. Employees with Beckham’s Law status are taxed on their Spanish sourced income at a lower rate of income tax than regular residents (24% on the first €600,000 compared to residents who are taxed at progressive rate of up to 47%).

Ireland introduced the Special Assignee Relief Program (SARP) in 2012. Individuals with this status have 30% of their income exempt from income tax (but not Universal Social Charge or PRSI) for up to five years.

Other countries with less well-known programs include Belgium, Denmark, France, Italy, Portugal, and Sweden. Germany has proposed a similar incentive.

While these programs can be beneficial for the employee, they can create more work for the employer. Often the employer needs to submit an application to the local tax authority within a certain period of arrival. Approval can take some time, which leaves the employer in the precarious position of deciding whether to extend the benefits of the status to income received while the approval is pending or assume the approval will not be granted.

Furthermore, these programs typically have a time limit (usually five to eight years) for individual participation, so the employer must be able to track the time limit and, upon expiration, apply taxes on the employee’s full income.

Finally, equity administration teams must be informed which employees benefit from such arrangements in order to apply the reduced tax withholding to equity compensation as well as the end date of the special status.

Conclusion

As long as attracting and retaining talent and working remotely remain prevalent, likely many employees will want to take advantage of these tax breaks. Companies should adopt processes to help their employees benefit from such opportunities where they make business sense while remaining compliant with the tax and regulatory requirements.