Digital Nomad Vs. Self-Employed Expat: What's The Difference?

By Su Guillory

The idea of showing up at the office every day is quickly going the way of the dodo.

getty

The idea of showing up at the office every day is quickly going the way of the dodo, thanks to a certain pandemic that shall not be named.

The benefit? Those free-spirited folk out there now have more opportunities to work and live abroad.

If you’ve been fantasizing about pecking away on your laptop on a tropical beach somewhere in the world, that might not be such an unattainable dream these days.

The rise of the digital nomad visa

Countries around the world, especially those that can benefit from a little extra revenue, are starting to offer what’s called a digital nomad visa. With this visa, an individual who works remotely can stay in a country temporarily. Generally, with a digital nomad visa, you can’t engage in business activities in the country you’re living in. You may be able to renew the visa if you meet certain qualifications.

Portugal is one of the most well-known countries to offer a digital nomad visa, but it’s far from the only one. Other countries in Europe that offer them include Georgia, Croatia, and Iceland. In other parts of the world, you can find digital nomad visas in Grenada, Panama, Dubai, Sri Lanka, and more.

Sometimes the visas are actually referred to as a “digital nomad visa.” Sometimes they’re called other things but amount to the same.

The self-employed expat

This is the category I fit into. I have a remote content writing and expat coaching business, and I live in Italy. I am here on a self-employed visa.

A major difference between the digital nomad visa (which isn’t currently available in Italy, though legislation has been passed approving it) and a self-employment visa is that the latter allows expats to participate in business activities in their new country…and they have to pay taxes there.

The self-employed expat more than likely plans to stay put in her new home rather than flitting about from one digital nomad-friendly country to another every few months. Also, with the self-employed visa, you don’t have to work online, though in many countries, if you can make money from your home country, you’re better off, as it can be difficult to find a job in another country due to job availability, qualifications, and language barriers.

More articles from AllBusiness.com:

More differences between the two

Another difference between a digital nomad and a self-employed expat is that a digital nomad isn’t necessarily self-employed. If your employer is willing for you to work in another country, you can be a digital nomad as an employee.

Self-employed expats must register their businesses in their new country. This may involve getting some sort of business identity number (in Italy, it’s called a Partita IVA) so they can report revenues and file taxes in their local country as well as back home. (My advice? Find an accountant as soon as you settle in so you understand what kind of reporting and invoicing you need to do to be compliant come tax time.)

Typically, digital nomads only pay income tax back in their country of origin. Self-employed expats, however, may be required to pay in both countries. Tax laws are murky between borders, so I won’t try to go too deep here. But as an example: there is an agreement between Italy and the United States that says I will pay self-employment taxes in the U.S. as well as taxes in Italy, but my U.S. taxes will be reduced by the amount I paid in Italy (I think I got that right. I haven’t yet filed taxes!). I will continue to pay Social Security in the United States, though I did have the option to pay the equivalent here in Italy.

The ease of getting either type of visa will vary, depending on the country, how many people are applying, and whether there is a quota or not. I was told that the self-employment visa was very difficult to get in Italy because there is an annual quota for how many people they approve for it, but then I got it with no issue. Some countries that are seeing a flood of digital nomad visas may start slowing down how many applications they approve.

Is a self-employed expat a digital nomad?

There’s a lot of hype around the term digital nomad. It’s sexy and Instagrammable. If I dive into what I consider the ethos of the term, I see a digital nomad as a twentysomething who can work anywhere, choosing to live in Bali for three months, then hop over to India, then Panama, etcetera. Obviously, that’s stereotyping, as digital nomads can be of any age, and they don’t necessarily have to country-hop.

For me, I identify as a self-employed expat. I’m in Italy for the long haul, and I’m establishing my roots here, both business-wise and personally. I’m wading through the complexities of accounting and tax reporting because I want to make a meaningful contribution to the country I have chosen to be my home for the foreseeable future.

About the Author

Su Guillory is an expat coach and business content creator. She helps women through the transformative process of moving abroad so they can live happy, more authentic lives. Su has been published on AllBusiness, Forbes, SoFi, Lantern, Nav, and more.

Source link