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Tax Expert Warns of Drawbacks to Digital Nomad Visas

S.J. Steinhardt
Published Date:
Jun 7, 2024

There are many tax considerations Americans working remotely offshore with no fixed business address—so-called “digital nomads”—must take into account, Accounting Today reported.

More than 70 countries now offer a version of such a visa. While this permit covers immigration and employment requirements, the burden remains on individuals and employers to meet their respective U.S. tax obligations.

A digital nomad visa is much simpler to get than a traditional business visa, said Richard Leach, a CPA and director at the Global Tax Network, in an interview with Accounting Today. "The process is cheaper, and there are far fewer restrictions on who is eligible. You have to show a certain amount of money or income, and on the basis of the visa you can stay and work legally in the country for the specified time." 

Leach cautioned that such a visa does not necessarily address tax issues. "Only 12 countries currently attach a tax break to the visa," he said. "These include Croatia, Ecuador and Greece. But the majority of the countries that offer digital nomad visas do not lighten the tax burden. It's the exception to the rule."

Countries have an income requirement, which varies among them, but is around $2,000-$3,000 a monthLeach said. Some have a tax withholding requirement. Argentina, for example, “assumes that 70 percent of your income is from Argentina, so they expect withholding on that amount every month if you have employees," he said. "People tend to be excited about the freedom they have and the ease of getting the visa, but they ignore the withholding requirement on top of the fact that they need to file a tax return. There are compliance complexities they're just not aware of."

His advice to remote employees and their employers: Proceed with caution.

“They should not apply for the visa just because they will get a tax break,” he said. “They may or they may not, but that should not be the point. And critically, they don't want to create 'permanent establishment' status, which would expose the profits of the U.S. company to tax in the remote country."

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