Blue-sky thinking: new rules allow digital nomads to work in the sun

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Setting up a remote ‘office’ is a freedom many are now used to. So why not do it in a beautiful part of the world?

The pandemic locked us down, but at the same time freed many workers from the confines of the office. A new breed of digital nomads emerged – people who took their laptops, jumped on planes and set up shop in some of the most beautiful parts of the world. And with them have come schemes to make it easier for them to stay for months on end.

Barbados was one of the first countries to formalise arrangements with its “welcome stamp”, launched in June 2020. To qualify, workers must earn more than US$50,000 (£37,000) during the 12 months they are in the country and pay $2,000 for the application. They will not be subject to income tax while they are there.

In June last year, Malta launched a nomad residence permit, with which workers can live in the country once they earn €2,700 (£2,230) a month. Applicants pay €300 each, plus the same for each dependant.

Iceland has operated a long-term visa for remote workers since October 2020, and Bermuda has a new “work from Bermuda” certificate. Spain and Sri Lanka have plans to follow suit.

The schemes all run in a fairly similar fashion: workers pay to apply and get the right to stay in the country while working for an employer based elsewhere. The visas typically last a year, which can usually be extended once the time is up. Once you have one in place, you can rent a property and travel in and out of the country.

However, there are things to bear in mind before you pack your bag.

“Being a digital nomad can be made to work. However, it is seldom as straightforward as people sometimes think,” says Lee McIntyre-Hamilton of Keystone Law, who specialises in global mobility. “Obtaining a visa is just the start of the process.”

Alex Lilburn, a software developer, moved from the UK to Barbados in January 2021 after making his application for the welcome stamp.

“I saw a piece on the BBC headlined something like: Working remotely? You could be working from paradise,” he says. The article mentioned Barbados, so he started looking into the practicalities. “I worked from home before, but suddenly there was no expectation from clients that we would turn up once a month,” he says.

“I spoke to my employer . They were very supportive and said if there were no tax implications, they would help make it happen.”

If you are employed, you may be contractually obliged to work where your employer says, and being overseas might not be an option.

Moving away could trigger obligations for your company, says McIntyre-Hamilton, such as the payment of social security contributions in the new country. “For example, if a UK citizen and employee of a UK company went to live and work in Spain indefinitely, they would immediately trigger an obligation for their UK employer to register as a foreign employer and operate a payroll there,” he says. Your presence may also prompt a corporate presence for the company overseas and, with it, demands for corporate tax. So this is not something you can do without consulting with your employer.

It’s more straightforward if you are self-employed, but you should talk to your clients, says McIntyre-Hamilton, as in some cases contractors – especially when they only have one client – could be considered an employee under different rules in the new country.

Barbados offers a zero income tax rate for those on its welcome stamp, but you will pay VAT on goods and services. Lilburn is paid by his employer in the UK, and it takes out income tax and national insurance as if he was still working at home.

In general, tax rules around residency are complicated, especially if you are travelling for a short period and may make trips back to the UK.

Whether or not you pay tax in the UK depends on whether you are a UK tax resident. Broadly, HM Revenue & Customs says that if you are in the UK for 183 days or more in a tax year, you are resident. But residency is complicated and travellers should go through the statutory residence test for clarity.

“If an individual remains a UK resident when they are living and working overseas, HMRC will continue to tax any income that the individual earns while they are living and working overseas,” says McIntyre-Hamilton. You may also be subject to taxes in the country you are staying in – leading to the possibility of being taxed twice, although there are exemptions where there is a double tax treaty with the UK.

Even if you are not resident in the UK, any money sourced there – such as bank interest, dividends or rental income – will typically be subject to UK income tax. “I have seen some evidence of digital nomads moving from country to country in the expectation that this will avoid triggering issues in any one country. Generally, this assumption is incorrect,” says McIntyre-Hamilton.

Lilburn has no intention of moving. It’s great work-wise, he says: the time difference is currently four hours, and he has meetings in the morning when his UK colleagues are at their desks, then does his coding work in the afternoon. He recently renewed his welcome stamp for another year, which was slightly cheaper than the original application, at $1,500, and says he can see no reason why he won’t do the same again next year.

“I came to Barbados for the scenery and weather, but I’m staying for the people – whether it’s the other people on the visa, who are similar people at the same life stage, or the Bajans I’ve met who have been so friendly,” he says. “It’s amazing, it really is.”

Bermuda visa says ‘welcome’

Lauren Anders Brown is a documentary maker who was visiting her partner in Bermuda in March 2020 when the pandemic hit. She ended up staying, and that summer, applied for the island’s digital nomad visa.

“It costs $285 to apply but it was simple,” she says. “You have to prove your overseas company pays you into a bank account, that you are paying your taxes, and that you have health insurance.”

She’s self-employed with Collaborate: ideas & images, in the UK. She earns into accounts in the UK and the US, where she is originally from, and uses accountants to make sure she has paid the right tax. Her partner is a doctor, and applied for a traditional working visa.

“It was a hell of a lot easier for me to stay than him,” she says, “because the digital nomad visa is a new kind of immigration law.” Non-residents are not allowed to drive, but under the scheme she is. She was also able to rent a place to live while he was still getting his visa approved.

Bermuda’s only downside is it is expensive. The visa lasts a year and she has renewed it. “There’s blue water, it’s dog-friendly – it really suits us,” she says.

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