Sunday 24 September 2023

Law to attract digital nomads approved in the first debate

Tax benefits and status in the country for one year, renewable for an additional year are part of the measures to attract digital nomads to the country; Second debate and possible approval into law is set for July 13; t

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23 September 2023 - At The Banks - Source: BCCR

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QCOSTARICA – In a vote of 41 in favor and 1 against, the Legislative Assembly on Monday approved in first debate the Law to Attract More Foreigners to Work Remotely in the Country, known as digital nomads.

Costa Rica has become a destination for foreigners looking to work remotely. They say that the country offers them good management of the pandemic and the possibility of combining the work of their countries of residence with surfing classes, trips to the mountains, and “pura vida”.

The only against vote came from the Frente Amplio legislator José María Villalta.

The approval was possible after months of discussions in committee and evacuating more than 60 reiteration motions.

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The bill, proposed by legislator Carlos Ricardo Benavides, of the Partido Liberación Nacional (PLN), establishes a series of facilities, including tax benefits, to promote long-stay visitation in Costa Rica and thereby increase the expenditure of resources of foreigners.

According to Benavides and Rubén Acón, president of the National Chamber of Tourism (Canatur), each digital nomad who decides to turn a Costa Rican destination into their work office can inject up to ¢15 million colones per semester into the national economy.

The concept of “digital nomad” refers to people who decide to do their work from anywhere in the world, as long as they have a good Internet connection. In this case, they would do it from a tourist destination in Costa Rica, for which the legislators approved the regulations.

Among these, they order the Dirección General de Migración y Extranjería (DGME) – Costa Rica’s Immigration Service -, to grant the migratory category of non-resident, subcategory of stay, Worker or Remote Service Provider.

The immigration benefit will be granted for one year, extendable for a single period of one additional year, provided that the person meets the requirements.

Part of the financial requirements is to demonstrate a stable monthly salary or fixed income during the last year, for an amount equal to or greater than US$3,000.

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If the applicant wishes to extend the benefit to their family nucleus, the income to be demonstrated would amount to US$4,000.

They must also obtain a medical services policy that covers their stay in the country. The coverage could be extended to their family members, according to the conditions determined by the DGME.

Regarding tax benefits, the digital nomad will have a total exemption from income tax in Costa Rica and would not be considered as residents in the country for tax purposes. Nor will the income they receive from abroad be considered from a Costa Rican source.

This benefit will not be applicable to the family group of the beneficiary, unless it applies and meets all the requirements of the direct beneficiary.

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The digital nomad will also have an exemption from paying all import taxes on their basic personal computer, computer, telecommunications, or similar equipment, necessary to carry out their tasks.

Their foreign driver’s license will be valid in Costa Rica, as long as it is current and their immigration status holds.

However, the legislation is clear that the beneficiaries will not be able to engage in paid work or services in the country other than the one registered when receiving the special benefit. That is they cannot now take a job at a call center, for example, and continue to receive the benefit as a digital nomad.

During the discussion of the more than 60 reiteration motions, which had been rejected in committee, the plenary approved four motions by José María Villalta.

One of these would establish that if the person sells their personal work equipment, they must pay import taxes.

Another motion contemplates that the beneficiary pay “all tax obligations” if he or she performs tasks other than those authorized by law.

The rest of the reiterated motions, mainly by Villalta and the pro-government legislators Paola Vega and Welmer Ramos, were rejected or withdrawn from the discussion by their proponents.

After being approved in the first debate, the legislative presidency set the discussion of the second debate for July 13.

Digital nomads are described as people with a high professional and salary profile, whether they are employers or workers.

Although they come to telecommute, they also seek to carry out activities typical of tourists, but with the difference that they relate to the communities where they stay and have greater economic potential.

The country does not have exact data on how many such visitors live in Costa Rica. However, the Instituto Costarricense de Turismo (ICT) – Costa Rican Tourism Board –  estimates that the figure could already be between 3,000 and 4,000.

Costa Rica has everything to compete

Legislator Benavides assured that the country has the best conditions to become a favorite destination for digital nomads.

“It is a world trent that Costa Rica can take enormous advantage of. It is estimated that in the coming years there will be millions of digital nomads around the planet and the country has everything to become a great recipient without having to make major transformations,” the legislator stressed.

Benavides calculates that each group of 10,000 workers who enter the country under this modality, would inject around US$600 million for the purchase of goods and services or contributing to the treasury with the payment of Value Added Tax (VAT) through those purchases.

“But especially leaving money in the communities, both in tourism, commerce and professionals or non-professionals who provide them with services. From a hairdresser to a caterer, someone who rents a house or cabin,” Benavides concluded.

Benavides, who was president of the Legislative Assembly for the period 2019-2020, also made an unsuccessful bid for the PLN nomination for president in the 2022 general elections.

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