Digital Nomads, a New Way to Live and Work

Digital Nomadas! The new law is coming!

The bill that creates a new Immigration category of Estancia (short-term visa) for digital nomads was approved in the second debate by Congress today. We now need to wait for the bill to be signed by the President, and, subsequently, the preparation and publication of the ruling that will come to dictate how this new law will be used. Therefore, it will be a while before the law comes into effect.

Today we celebrate the news as a step in the right direction!

A lot has been said about digital nomads, particularly since COVID changed the way we now live and work. Remote work seems to now be the norm while your physical presence at the office may be a thing of the past. Over these past few days, as the COVID situation is settling down a bit in certain parts of the world, we have been hearing stories of how companies are dealing with their workforce. Some are opting to have their staff back at the office, others such as UBS Group AG are transitioning towards a hybrid model, allowing staff to enjoy the perks of working some days remotely, others from home. Other companies have discovered that using a fully remote workforce has had zero negative impact on their business and can even boost productivity.

Hence, the term digital nomad, referring to that person who can work from anywhere in the world, has been resonating a lot lately.

When the pandemic started, due to the tremendous economic impact it has had, our President announced that one of the strategies to help the country out would be focused on making Costa Rica much more attractive to foreign nationals. Consequently, we have seen the new law that ensures benefits for Investors, Rentistas, and Pensionados and now we see the creation of this new Estancia for digital nomads.

The ex-pat community may be familiar with the term Residency. However, our Immigration Law features various categories aside from Residency. For example, what could only be described as short-term visas are divided into what the law calls Special Categories and Estancias. These are not residencies; they do not add up for Permanent Residency nor will they receive the benefits for Pensionado, Rentistas and Investors suggested in the law (you can review that here). This Estancia is intended for a short stay.

Up until now, our Immigration law and ruling have not contemplated digital nomads. When the law and ruling were drafted, the term may not have even existed. However, the pandemic and the need to aid the economy have created the need for this new category.

So, what does the bill say?

The bill suggests the following:

Digital nomads are people who provide remunerated services remotely, may they be self-employed or for a foreign company for which they receive a payment or remuneration from outside of Costa Rica. This means that digital nomads cannot provide services in Costa Rica to Costa Rican clients and generate income in Costa Rica as this would entail a work permit, not this category.

This Estancia will be valid for 1 year, renewable for 1 additional year only. To be able to extend for that 1 additional year, the digital nomad must have stayed in Costa Rica for at least 180 days of the original year granted. So, for example, if I received my Estancia in 2022, valid until 2023 but between 2022 and 2023 I spent only 100 days in Costa Rica, I will not be allowed to extend by Estancia for that additional year.

Those who have an Estancia will be able to change their status when or if they qualify for other categories such as Residency. For example, think of a digital nomad who had a baby in Costa Rica, he or she will be allowed to request for a change of category from Estancia to Permanent Resident.

To be eligible for this Estancia, the foreign national must provide documentation that proves that he/she received a monthly and stable income or rent of at least $3,000 for the past year. If the person will include dependents on the application, then they need to prove an income or rent of at least $4,000 a month. If there are dependents, the income or rent of one of the dependents, such as the spouse or partner, can be added so that together, they come up with the $4,000 minimum. The documentation must show that the rent or income will continue to be received, even if the person is not in their home country.

If any, the digital nomad and all dependents will be obliged to purchase medical insurance to cover them during the validity of the Estancia. They will also be required to pay the necessary application and any other fee determined by Immigration.

Another interesting thing about this new Estancia is that it will allow for dependents. This is interesting as none of the current Estancias do. This will include legal spouses, partners declared in a civil union (unmarried but recognized as a couple), children under the age of 25, children over the age of 25 exclusively if they have a disability, and any elderly person that lives with the digital nomad. The bill states that documents such as the typical birth and marriage certificates, apostilled/legalized, to show the relation between the digital nomad and the dependents will be required.

The bill also states that Immigration will have the right to request the digital nomad to reconfirm, via a sworn declaration, that they continue to qualify for the category. This request will be done after the Estancia has been approved.

Failure to confirm that the person still qualifies or if the person starts working in Costa Rica, the category will be canceled and the person will be obliged to pay for all the taxes originally exempted, any applicable interests, and sanctions as decided by Immigration if and when the time comes. If the Authority detects that any of the documents filed were false, in addition to all taxes the person will pay a fine equivalent to 25% of the exonerated taxes.

The bill also states that the digital nomad will enjoy the following benefits:

• Full exemption from income tax and any other utility tax that may come from the income generated abroad.
• There is also a full exemption for customs taxes regarding the instruments, materials, and equipment necessary to perform the work the digital nomad is coming to perform remotely in the country during the validity of the Estancia. If the digital nomad were to sell such equipment, the necessary and applicable taxes would need to be paid.
• Digital nomads with this Estancia will be allowed to drive as long as their foreign driver’s license is valid.
• Digital nomads with this Estancia will be allowed to open bank accounts.
• Applications will be filed online, and the process will be expedited.

Important things to consider

Although the approval in the second debate is fantastic, we still need to wait for a few more steps. The bill still needs to be signed by the President. Once signed, we must wait for the ruling that will come to dictate how this Estancia is actually applied for to be prepared and published. Therefore, at this time we do not yet know which exact requirements the digital nomads and dependents will need to file to qualify. Identically, we do not know what sort of insurance will be required, what the fees will be, exactly how the process will work, the estimated processing times, where to file, etc.

We do hope that the ruling is promptly issued soon after the bill is signed by the President, however, we do need to consider that Immigration is not a big supporter of the bill as it entails a significant impact on how they process Estancias. Therefore, at this time we need to be a little patient and wait for the bill to follow its course. Keep in mind that these processes are bureaucratic and the timeline could be extended.

We will keep a close eye on the bill and will do everything we can to push for the ruling to be ready soon. We do suspect that we will have numerous questions along the way, even after the ruling is ready, but we will tackle those when the time comes.
For now, let’s celebrate another step in the right direction.