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Digital nomads in Andorra: electronic residency

At the beginning of this century, with the definitive expansion of the Internet, the network and the virtual world, professions flourished Aimed at this new sector which, due to its digital nature, represented a huge advantage over those that require physical means to be exercised. We were talking about programmers, digital designers, SEO and digital marketing professionals and similar profiles.

With this precedent of innovative and virtual jobs for young people, in addition to their desire to travel and the fact that most jurisdictions around the world use the criterion of effective residence to tax the income of their inhabitants, the concept of digital nomads was born. A digital nomad is a professional who uses new technologies to work, and who leads a nomadic lifestyle. Typically, digital nomads work remotely (from home, coffee shops, or public libraries) rather than from a fixed workplace.

Characteristics of digital nomadism

This profile of professionals usually stands out for the autonomous or self-employed teleworking and self-learning, and it is usually digital entrepreneurs with the particularity that they do not reside anywhere, fiscally or effectively, and are constantly on the move. However, there are also nomadic freelancers or who simply telecommute for another company.

Thus, not only is the geographical barrier or union broken, but in general also that of schedules and that of typical work hierarchies and structures, offering absolute flexibility. However, he travels a lot or lives in different places, he is not a traditional traveler, since his work always accompanies him and sometimes suddenly. Work stops responding to the "X-hour day" and becomes dependent on one's productivity.

It should also be noted that this flexibility and freedom also comes from a huge lack of security as digital nomads are not subject to any specific jurisdiction and therefore, as natural persons, they lack unemployment, health or pension insurance, and often in certain cases of physical and legal security.

In general, it supposes the facing new challenges allowed by the advancement of technology and that offer unprecedented personal, vital and professional learning, since you stop completely depending on anyone, everything is your responsibility. Worrying about savings, unforeseen events and insurance (health, accidents), all basic services, separating leisure time and work time, etc. are challenges that accumulate in the list of this type of profiles and with which they get used to dealing with day to day.

Furthermore, by the fact be constantly traveling and have no physical location, It is necessary to take into account means of transport and stay in multiple countries or areas, as well as languages and communication, legislation and schedules, visas, climates and a long etcetera which includes the difficulty of maintaining contact with family and friends .

By last, highlight the importance of a reliable and affordable connection to the Internet, as it is the source of your income and work: they require it to survive, in addition to obviously their device (usually a laptop) and relevant applications or software. In this sense, throughout this 21st century the environment has changed in a brutal way and this has allowed the concept to evolve and expand, as we explain in the following section.

Evolution of the concept and its development

At the beginning of this century, digital nomads were the exception. They were considered something like some privileged geeks who lived in caravans and went from coffee to coffee, or to public libraries or restaurants to find wi-fi connection to work on their businesses, which could hardly be as we mentioned at the beginning of the article related to the programming, graphic design and marketing.

To understand the enormous change that it has brought about in the last two decades we have to take into account a key question, and that is that in general markets and innovation tend to progress at a much higher rate than states, jurisdictions, and public administrations.

Thus, while the internet, the network and the digital world have nothing to do with how they are now compared to how they were before and have achieved unimaginable things, jurisdictions continue to tax income through effective residence, and are not even aware of its scope (for example the youtubers they still have to register under the heading of cinematographic publications).

This has meant that almost any profession and economic activity can be done digitally and through the network. Many products (videos, podcasts, courses, digital books, courses, and other digital assets, to name a few) and services (consultations and consultancies of all kinds, creation of streaming content, dropshipping and electronic commerce, advertising, etc.) are they can sell regardless of physical location.

Also, platforms like Upwork, toptal, or similar have professionalized and developed freelancer work so that we can find jobs as varied as writing and translation, management and accounting, audits, business analysis and planning, communication and education, recruiting and many more, all digitally and using simply a device and internet connection.

We say device, and not computer, because today's mobile phones or smartphones and tablets are so powerful that you can do almost anything with themincluding programming, designing, editing and rendering at the highest level. Or create the highest quality image, video and audio content with little equipment. Thus, we find that a professional translator can be a digital nomad working for Netflix remotely, or a lawyer can make consultations by videoconference working for an external firm.

Crypto assets, big data and artificial intelligence

These three words have been echoing in our heads for the past five years, and no wonder. Is about the last sectors that have emerged in the digital world involving changes in so many aspects that we do not even have an idea yet of what it will mean in the future, also affecting work and professions, of course.

In his link with digital nomadism, he adds the possibility of, being a mathematician, working developing AI algorithms and graphs or data analysis for third parties at a distance. Or for example being an economist and financier specializing in the treatment of crypto assets for various financial institutions such as funds, banks and even public administrations. In the future, it will also open an even wider range of professions.

The boom due to the covid-19 crisis

The definitive trigger has already been caused by the SARS-CoV-2 coronavirus pandemic. Lockdowns and quarantines, restrictions on mobility of all kinds and avoiding social contact have resulted in a adaptation of practically all business models to teleworking to a greater or lesser extent, leaving only those matters of great importance that require it for the specific physical location.

This has meant that all the professions mentioned above, which include those of trader, can be added those of university professors, engineers, lawyers and architects, customer service professionals, musicians and artists, producers and many more. If we think about it, What prevents all these types of professions from being carried out exclusively digitally? Practically nothing.

Thus, there are more and more fully or partially digitized professions and, therefore, potential digital nomads who can move themselves and their businesses without practically any problem.

Digital nomads in Andorra

Everyone interested in the subject knows that Estonia has applied a pioneering legal model to attract digital entrepreneurs and nomads of all kinds to his country, and with them his capital and talent. The fact of being able to obtain an electronic residency and create a company by opening a company in a short time and with hardly any costs without residency requirements and being able to manage everything online in a simple way has made this country become the main focus of these types of profiles. Simple registration, attractive taxation, and low-fee, low-capital business start-ups make this option so popular.

Digital residence in Andorra and digital nomads

The political commitment to study it

At the end of 2019, the Andorran government was considering the implementation of an electronic residency in Andorra to allow the creation of companies without physical residence to attract the interest of digital nomads from all over Europe and to compete with Estonia. The Minister of the Interior and Justice, Mr. Josep Maria Rossell, undertook to study the feasibility of such a system following this Estonian digital residence model. However, in early 2020 all this came to a standstill.

The process for creating a company in Andorra is currently complex and slow, given that there are a large number of bureaucratic procedures and strict and restrictive compliance controls by local banks and the agility of telematic way through the network is the exception, almost everything is in person and on paper, the old-fashioned way. Something certainly could be improved on your part.

However, as Andorra is the only low-tax country in southern Europe, its taxation is very attractive (more than Estonia's) and At the moment their model works very well for them to attract investment, it seems that the Andorran government sees this issue as something minor and secondary. Even more so, with the health and economic consequences of the covid-19 pandemic still on top.

At Andorra Insiders we believe that when all this problem passes and, if the real long-term consequences for public administrations and their budget are quite profound, it is very likely that the Andorran government will take up the initiative to study it. We also have the faith that this crisis works as an incentive for this.

Digital residency and international economic substance requirements

Although electronic residences certainly pick up the trend of digital entrepreneurs and these nomads who move around the world without permanent residence in any country, the legal model that implements it must be well thought out, structured and controlled. Even more so considering that Andorra is not within the European Union and that just ten years ago it left the lists as a tax haven.

Precisely a large part of the fact that the project is slow and complex is due to Andorra's lack of experience as an open and collaborative country and the caution that the BPA crisis in 2015. Banks seek the prevention and detection of possible money laundering risks and the preservation of their prestige for its investors, and sufficient substance requirements in the country.

In addition, during all this transformation and economic opening, among others Andorra had to stop offering the model of offshore companies (without economic activity) and opaque and adopt the international standards of economic substance set by the OECD. It would be contradictory after all the efforts made to encourage companies with substance in the country change now to a form of total offshore operation, even if it was a transparent model accepted by international institutions.

Thus, simplifying the process to create companies and an electronic business model would be beneficial for Andorra, positioning it as a potential economic center for businesses and digital nomads. But you have to study how this can be harmonized with local banking compliance and OECD's own substance standards for the domicile of a company, and it is not something easy to do.

The government and the banks should study the best way to implement it by establishing clear and controllable legislation to avoid risks of making Andorra once again a haven for tax evasion through a new electronic residency loophole. Any hint of doubt that may harm the Principality will mean the delay and even the rejection of its implementation by the government, who wants to avoid negative press and maintain and improve the image of the country that has already been damaged before.

Some elements are already ready

Nonetheless, Andorra already has some progress in this regard. As we have said, to attract digital nomads, a country must have, among other things, great tourist attraction (in this case mountains and skiing), coworking centers (which already have many), a wide range of rooms (it has numerous hotels, apartments and other offers where you can stay at night, affordable and with good services) and an internet connection that does not give problems (that you already installed at the time through Andorra Telecom).

Further, the country has been attracting talent and capital from this type of sector for years with which networking is quite assured and being halfway between Spain and France makes it a place of passage for all these travelers. In general, a fairly acceptable environment is being developed so that, in the event that digital residence is finally legally implemented, it has a social base to support itself to attract digital nomads.

Open up to new technologies, especially financial

Finally, and recalling that nomads are constant international travelers, the country would be required to open up to new technologies. We are not only talking about expanding the Blablacar, Uber and Cabify, the food delivery platforms, Trustpilot, Tripadvisor and others like that, but also co-living alternatives and an environment of connection between entrepreneurs and professionals.

However, the most important thing is related to the financial and digital market. Abandon the old financial system and welcome commission-free banking, SEPA (really), PayPal, Amazon, Revolut, etcetera. In general, getting the most important digital platforms to accept Andorra as just another country and attracting the most internationally known brands is another factor that must be taken into account.

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Digital nomads in Andorra: electronic residency

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Andorra Insiders is an information platform about Andorra managed by Abast Global, an Andorran professional consultancy firm for legal, tax and accounting services specializing in the establishment of people and businesses in the Principality of Andorra. More information here.

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