Remote Work via Digital Nomad Visas in Latin America and Spain: Key Employer Considerations

After the COVID-19 pandemic, the trend to work remotely accelerated. Countries around the world have viewed foreigners working remotely abroad as an opportunity to earn income and boost their economies. For employees, remote work has been the ideal opportunity to travel and experience the world. As a result, countries on all continents have sought to create and regulate visas that allow foreign employees to provide services in their territories. This includes countries in South America (e.g., Argentina, Brazil, and Colombia), Central America (e.g., Costa Rica and Mexico), and very recently Spain.

The abovementioned countries have been a desired destination for foreigners from which to work, as the cultural wealth, climate, and low cost of living of those countries are particularly attractive. Therefore, many of these countries have implemented "digital nomad visas" or similar visas, which allow foreigners to enter and stay in their countries for longer periods of time while rendering services for their employers abroad.

Although these visas provide a more straightforward immigration process, employers who allow employees to relocate to a country where they do not have legal presence must consider other implications and risks, such as what local employment rights and tax obligations may be triggered.

We summarize below the key aspects employers must consider when allowing employees to relocate to a country in Latin America or Spain, benefiting from the digital nomad visa regulations.

Employment Rights

In principle, most countries’ employment legislation require the application of their own employment regulations to nationals and foreigners who render services in their territories. This is known as the “territoriality principle.”

However, there are some countries, such as Brazil, Colombia, and Mexico, that have provided some exemptions, allowing foreigners who work remotely for employers based elsewhere to be governed by the employment law regulation of the foreign country where they were hired—as long as the control and subordination is exclusively exercised from those countries.

Special care must be taken if entities of foreign employers have local subsidiaries. In these cases, employers must consider how services may be rendered to avoid creating a potential employment related risk to subsidiaries.

Employers that allow employees to work from countries that do not have a special provision or exemption to the territoriality principle will need to analyze the request carefully, as they may be obliged to comply with local employment regulations. Although in theory countries’ employment regulations may allow that foreign entities with no legal presence in their country to hire personnel, further analysis may be required to determine how these companies may comply with the employment and social security obligations from a practical standpoint (e.g., companies without legal presence and without an identification number in a country may not be able to register as an employer with social security entities, etc.).

Tax Obligations

When relocating to a foreign country, both companies and employees must consider the tax obligations that may arise from living and working abroad. Although some digital nomad visas may grant some tax benefits to make the relocation attractive for employees (e.g., in Costa Rica), companies must also consider the corporate tax obligations and permanent establishment that may be triggered when they have personnel rendering services in a country abroad that obligates employers to pay corporate taxes in their country.

For countries where the digital nomad visa does not provide any tax relief, employees must also assess the possibility of becoming a tax resident, therefore resulting the requirement to file and pay individual taxes.

Data Privacy Obligations

Most countries in The Americas have their own privacy regulation to process and collect personal data of individuals, as in the EU. Most likely, countries’ data regulators will take the position that personal data will be protected by their local privacy law (e.g., Colombia employers must obtain consent from the data subjects to process their personal data). Employers must identify the local obligations to comply and avoid future infringements and imposition of fines.

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Ana and Juanita are part of Seyfarth’s leading International Employment Law practice. To find out more about the key considerations of remote work via digital nomad visas in Latin America and Spain, please reach out to them or anyone else on our specialist team.