Spain has long been the favoured holiday destination for many
sun-seeking Brits. The proposed introduction of a new digital nomad
visa, opening the door to both “working holidays” and
longer term relocations, will therefore be welcome news to
But will these potentially complex arrangements now be more
straightforward for employers to navigate? We consider the
potential employment, immigration and tax implications.
The pandemic saw a surge in requests from employees to work
remotely in another country, often for an extended period.
Initially, requests were usually short-term relocations related to
the crisis. Increasingly, however, requests have involved permanent
or semi-permanent moves abroad, with the trend continuing even
though the public health crisis has now abated.
The challenges of the “digital nomad”
Such requests create headaches for employers. No one wants to
upset their staff or put themselves on the backfoot in the war for
talent. At the same time, employers are faced with a litany of
legal issues which we have considered in detail before.
Would the employee’s activities in the third country create a
“permanent establishment” for corporation taxes? Would
the employer need to register to withhold income tax, and pay
employer social security charges? Does the employee have the right
to work, or could the employer find itself facing immigration
penalties? Would the employee find themselves in possession of a
host of local employment rights, able to take the employer to a
local labour court they know little about in the event of a
dispute? Will the local labour inspector come knocking at the
employee’s door? What about data protection? Regulatory issues?
Health and safety?
It’s therefore understandable that employers tend to tread
carefully on this issue. This can mean requests being refused,
authorisations time limited, or permission being granted only in
specific circumstances (such as where there is an existing local
entity that can employ staff). Employers of record present one possible
solution, but this arrangement is not without its own
Digital nomad visas – the legal implications
Is there a better way? Some countries think so: the Bahamas was
fastest off the mark with a “digital nomad visa”. The
basic premise behind this is that, in return for attracting well
paid staff to come and spend their earnings in the local economy,
the visa conditions mean that employers won’t need to worry
about any of these complex issues. Countries as diverse as Estonia
and the UAE have since followed suit.
Now comes a possible game changer for British employers: the so
called “Start-up Law” recently introduced as a bill in
the Spanish Parliament, with approval anticipated by the end of
2022. This seeks to establish a brand-new visa and residence permit
for “digital nomads” which will permit people working
remotely for foreign companies to live in Spain without needing a
full work visa or a local sponsoring entity.
This latest development will be of particular interest to many