Traditionally digital nomads were people who moved around from country to country every few months, usually staying on tourist visas and working under the radar.

However, with the evolution of new technologies and the pandemic, many more people have become remote workers, able to take their jobs on the road.

This means that countries across the world have been competing to attract remote workers and digital nomads, offering them the chance to legally stay and work for a period of more than just a few months.

What’s it like for digital nomads in Spain currently?

Spain has great weather, lifestyle, culture, and cities, attracting people from all over the world. Up until now however, if you wanted to come to Spain and work as a digital nomad your options were limited.

Many stayed on the non-lucrative visas, but this is a bit of legal grey area because it is not intended for working in Spain, but rather those who have the financial means to take care of themselves and their families, as well as their health costs.

The non-lucrative visa is actually a residency visa, which means that if you stay over 183 days, you will also be tax resident in Spain and will be liable to turn in a tax declaration on your worldwide income, possibly creating problems for you if you have been working and earning money.

READ ALSO: What you need to know about applying for Spain’s non-lucrative visa

The other option is the Entrepreneurs’ visa, aimed at investors, entrepreneurs, highly skilled professionals, researchers, and workers performing inter-company business operations. Digital nomads don’t really fit into any of these categories, so again it’s not the best option.

The last option is for digital nomads from an EU/EEA country to set themselves up as autónomo.

However, being autónomo in Spain is difficult and the tax and social security conditions are not favourable compared to other EU countries. In fact, freelancers in Spain pay the highest amount of social security in the EU at €283 a month minimum, regardless of earnings – and this is on top of tax.

READ MORE: Self-employed in Spain – What you should know about being ‘autónomo’

It’s far higher than the UK’s €14/month (minimum fee), the Netherlands’s €50 a year and Germany’s €140 for those earning more than €1,700 a month. It’s clear that this option is not sustainable for many digital nomads.

What’s new for digital nomads in Spain?

Spain is hoping to change all this with the introduction of new draft legislation known as the ‘Startups Law’, attracting digital nomads to its shores by creating better, legal ways people can work remotely in Spain.

If approved, the new law will entice foreign remote workers and digital nomads to choose Spain as their base by creating a new special visa for them and giving them the ability to access a reduction on the rate of Non-Residents Tax (IRNR).

It will also aim to provide tax incentives for the creation of startups. Until now, the IRNR tax rate for people with annual incomes of up to €600,000 was 24 percent, but the new bill proposes reducing it to 15 percent for a maximum period of four years.

When approved, the new visa will allow digital nomads to stay and work in Spain for a maximum of one year. Once it has expired, remote workers may request a residence authorisation as a remote worker for a further two years.

FIND OUT MORE – Tax cuts and special visas: Spain’s new law to attract foreign startups and digital nomads

What visas and conditions do other EU countries offer?

Estonia
Estonia was a pioneer when it came to foreign startups with its e-Residency visa programme in 2014, which allowed foreign entrepreneurs to create a company with tax headquarters in the country.

In 2020, Estonia added to its offerings by introducing a digital nomad visa, similar to the one Spain wants to create, which will grant a six-month to one-year residence permit.

In order to be eligible for it, however, nomads will have to prove they have monthly earnings of at least €3,504 in the last six months and that their work is 100 percent remote. Estonia has a proportional tax rate of 20 percent, which digital nomads will have to pay on their earnings. 

Croatia
Croatia launched a visa similar to Estonia’s in early 2021. To be eligible, digital nomads must prove they have an income of at least €2,200 per month, or have savings of €25,000.

This will allow them to stay for a maximum of one year without the option of an extension, although, once it has expired, it can be reapplied for in six months.

The digital nomad work visa comes with tax exemptions (foreign digital nomads are not subject to pay income tax in Croatia) and validity of up to one year, according to ETIAS (European Travel Information and Authorization System). 

Germany
Germany has also introduced its own visa scheme for remote workers, however the conditions seem to be a lot tougher than those proposed by Spain, as well as Estonia and Croatia.

In order to be eligible, the German government will ask for letters of recommendation from previous employers, a CV, cover letter, portfolio of work, documents that prove that you are doing the job you claim to be doing, educational titles, proof that you have sufficient income to and proof of registration as self-employed in your country of origin.

This visa is only for self-employed professionals, it is not used for employees who are remote workers. The good news is though is that it’s granted for a maximum period of three years. According to the German government, as a freelancer or self-employed in Germany, you have to pay about 14 to 45 percent of your earnings on income tax, depending on how much you earn.

Greece and Italy
Greece is also in the process of creating its own digital nomad visa for one year, giving tax incentives such as only 50 percent of your earnings being subject to taxation.

While Italy has yet to create a digital nomad visa, it has created several incentives, which mean that freelancers who set up legal residency in Italy are now offered a 70 percent tax reduction on income they generate within the country.

Overall, how does Spain’s new offering for digital nomads compare?

Not all digital nomads are remote workers with stable jobs and a salaried income which is the same every month, many work on different projects for clients around the world, some run blogs, are writers or are trying to set up their own businesses.

This means that the monthly income of €3,504 needed for Estonia and the €2,200 needed for Croatia may not be possible for some who earn their money sporadically.

So far Spain’s new draft bill hasn’t yet mentioned a minimum monthly amount for its digital nomad visa, but if it doesn’t set a limit, this will be a major perk for digital nomads who may not be able to meet the requirements for other countries.

In terms of taxation, Spain is no match for Croatia who won’t be taxing digital nomads at all, however, it offers great tax incentives over Estonia and Germany charging just 15 percent for those earning under €600,000 per year.

With regards to visa length, Spain is proposing a one-year digital nomad visa, but with the possibility to extend for a further two years. This is less than the German visa at four years, but more than Croatia offering just one year, before having to leave for six months, and Estonia, who will only grant visas for a period of six months to one year.

While many welcome Spain’s new Startups Law and digital nomad visa, experts also agree that it lacks clarification when it comes to tax issues and that there is still a lot to sort out.

“What happens is that nowadays it’s easier than ever to set up companies remotely in other more competitive regulatory sites, which is becoming, unfortunate for us,” Samuel Gil partner at JME Ventures told Spanish website Xataka. Gil believes that many of the important issues such as certain taxation remain unsolved.

Similarly, Héctor García entrepreneur, businessman, and technology investor from Habichuelas Ventures and founder and former CEO of Geographica argues that “there we must do much more. Like our competitors in other countries such as UK, France, Portugal, the law should be more ambitious on this point”.

READ ALSO: Tax cuts and special visas: Spain’s new law to attract foreign startups and digital nomads