Digital nomad visa: Critics pour cold water on long-awaited regulations

South Africa finally has a “digital nomad visa” (DNV), aimed at foreigners who wish to spend up to three years working remotely in the country.

It might be long overdue, but freelancers and self-employed entrepreneurs will not qualify, nor will those earning below a million rand a year, and if they want to stay here for longer than six months, they will have to pay tax in South Africa.

For years, the government has faced criticism for its apathetic response to the digital nomad trend, which has elsewhere boosted economies as digital nomads stimulate tourism, hospitality and other businesses.

While welcomed by many tourism stakeholders, others have poured scorn on how the Department of Home Affairs (DHA) was not only slow to capitalise on the economic opportunity these DNVs offer, but also how it conducted the process and then rushed through the regulations.

The announcement has raised questions about whether Home Affairs Minister Aaron Motsoaledi even bothered to listen to any public comments because the final amendments are identical to the draft published in February.

Then there’s the small matter of its timing: the Second Amendment of the Immigration Regulations was promulgated a day before the closing date for public comments on the draft version and became effective on 28 March.

These are the key points of the new regulations:

• The visa may be issued for up to three years, which is very generous. Many countries allow three- to six-month visas, with the possibility of extension or renewal. A 2023 UN World Tourism Organisation report analysing 54 destinations found almost half offer visas of up to one year. Canada is the most stingy, offering the shortest stay of just 30 days for digital nomads, while Thailand is the most generous, with a 10-year visa that costs 50,000 baht (about R25,400).
• There is a minimum income requirement of R1,000,000 per annum.
• There is no international medical aid requirement and no need for radiological reports, but applicants will require a medical certificate.
• After six months of staying in SA on the DNV, beneficiaries must register with the South African Revenue Service (SARS).
• Their families can join them.
• They must be employed by a company, so freelancers and entrepreneurs need not bother — despite many digital nomads being self-employed freelancers and tech entrepreneurs.

About time

Tourism operators have long called for a DNV.

David Frost, the CEO of the Southern Africa Tourism Services Association, is cautiously optimistic about the visa’s introduction, which recognises the evolving nature of work and travel. He said South Africa had lagged in visa reform, hindering the country’s potential as a preferred destination for the digital nomad community.

“By finally opening our doors to this community, South Africa reasserts its commitment to being a forward-thinking and inclusive nation for international visitors. This decision is a resounding affirmation that the collective voice of the tourism industry has been heard.”

However, SA’s ranking of 32nd out of 54 African countries in the 2023 Africa Visa Openness Index was “dismal” and a “glaring indictment” of the work that needed to be done.

“We must ensure that the systems and processes for the digital nomad visa are efficient, user-friendly and inclusive of the unique requirements of key source markets like China and India. The challenges faced with the current e-visa portal must serve as a cautionary tale, as we cannot repeat the same mistakes and compound the damage to our credibility.”

The DNV was a golden opportunity to revitalise SA’s economy by attracting diverse international visitors who would contribute to their resident communities, he said.

“This visa regime is not merely an administrative adjustment but a strategic economic manoeuvre, essential for stimulating growth in our tourism sector — the lifeblood of our nation’s recovery and development.”

Sounding caution about the “swallows” debacle and other visa processing delays, Frost said these issues had plagued tourists from crucial growth markets like India and China.

“Our credibility as a destination of choice hangs in the balance. Urgent action and collaboration are paramount to streamlining visa processes and ensuring the resounding success of this initiative.”

‘Minimise red tape’

Mireille Wenger, the Western Cape minister of economic opportunities, also hailed the move, labelling the introduction of the remote working visa as a “clear win-win solution to boost long-stay tourism in the Western Cape and South Africa and is very much in line with South Africa Tourism’s drive to get tourists to stay longer”.

She, too, raised concern about the department’s ability to process the visas, in light of the “swallows” and other short-stay tourism visa extensions.

“Digital nomads and long-stay visitors should be enabled to work here and contribute to our economy through regulations that minimise unnecessary bureaucratic processes and ensure that the department has the necessary resources to efficiently implement a clear, responsive and reliable visa regime.

“We remain deeply concerned about the administrative capacity of the Department of Home Affairs to review and process visa applications, given the significant backlog in processing visa applications of all kinds.”

Rosemary Anderson, the chairperson of the hospitality association Fedhasa, said while SA had been “somewhat delayed” in introducing the DNV, it had to focus on the myriad of opportunities the visa presented.

“Many of our competitors recognised the importance of overall visa reform early on, reaping the benefits and fast-tracking their post-Covid recovery. Namibia was the first African country to introduce a remote working visa as the world opened up after Covid-19, swiftly capitalising on this emerging trend.

“Malawi has lifted visa requirements for visitors from 79 countries to boost its tourism sector. African nations such as Rwanda, Benin, The Gambia and Seychelles have abolished visas for citizens from all African countries, while Kenya has dropped visa requirements entirely this year.”

The visa gives SA the chance to catch up with its competitors on the continent as well as long-haul destinations that are outperforming it, she said, adding that Fedhasa was committed to working with the government and industry partners to promote SA as a haven for digital nomads, offering them a unique blend of work and leisure experiences.

The government had to ensure that the application process was seamless, user-friendly and easy to navigate, she said.

Guy Stehlik, the CEO of BON Hotels, said the DNV’s application process had to be “as easy and uncumbersome as possible.

“Should we get this right, it will open up an entirely new niche market for South Africa … there’s no reason why other tourist centres and hotspots within South Africa, such as the Kruger Park, certain pockets within KZN and the Garden Route shouldn’t benefit too.”

Visit Stellenbosch’s Jeanneret Momberg said, “The proposed temporary visa will only enhance our appeal to this lucrative market, especially in places like the Netherlands where companies are embracing work-from-anywhere policies, and even including them in contracts.

“As digital nomadism continues its rapid growth, we eagerly await the tourism opportunities it will bring to our region.”

Like a lead balloon

Others are not so optimistic: they’re concerned about the income threshold, the tax implications, the fact that it does not apply to freelancers and how the department conducted the process.

Crucially, amendments to the Income Tax Act (ITA) should have been put in place before the regulations were published.

Bowmans’ attorneys Chloë Loubser, Sian Gaffney and Aneria Bouwer explained in a blog post that one of the issues flagged when the draft was published was the proposal for foreign employees working in SA to be exempt from registering with SARS if their visa was issued for less than six months in a 12-month period.

“Although this exemption only deals with the tax compliance obligation to register as a taxpayer and submit income tax returns, this effectively provides an income tax exemption for these individuals. As this exemption is not currently provided for in the [ITA], it would require an amendment of the [Act].”

In terms of an individual’s tax liability, this means that an employee who is tax non-resident (which digital nomads would be) would be subject to income tax on their income from an SA source.

“The ITA does not provide an exemption for remuneration if the person is in South Africa for less than six months. However, in terms of most double taxation agreements (DTAs), South Africa would not be entitled to tax the remuneration earned by a non-resident employee if (a) the person works for a non-resident employer; (b) the person is present in South Africa for less than 183 days in a 12-month period; and (c) the costs of the remuneration are not borne by a permanent establishment which the employer has in South Africa.”

The public participation process was also problematic. Embedded within the Constitution, public participation is integral to the legislative proceedings as it operates on the principle that those affected by a decision process are entitled to give their input. Law firms and other interested parties who had invested significant energy and resources into developing a response to the draft regulations are incensed that their input was futile.

‘A real disappointment’

Andreas Krensel, a partner at IBN Immigration Solutions, said: “This lack of engagement with public opinion is a real disappointment and a step backwards following many positive steps forward made by the department.”

Krensel questioned whether the regulations were even valid because they were published within the public participation process.

“The DHA had offered the public a chance to comment on the proposed changes but then ignored its own deadline and went ahead with publication a day before the period for public comment was to end, which most certainly is not procedure, and shows that public comment was not taken into consideration…

“It is greatly disappointing to see that the government offered the public a chance to comment — which we at IBN did, with great care and detail — only to release an identical gazette.”

For Kristina Gromova of De Jure Immigration, the biggest issues were the R1-million income threshold, the tax implications and that the regulations applied to foreign employees — not entrepreneurs or freelancers.

“R1-million is an extensive amount. The DHA is expecting applicants who want to stay for longer than six months to register with SARS. Already, I have a lot of clients who don’t want to be here on a long-term visa because of the tax implications.”

This, she believed, would be a huge turn-off for many digital nomads — that, and the requirement that they should be employed. The final regulations are littered with errors and contradictions.

“This is all very unclear. I do believe that there must be some clarification coming from Home Affairs.”

Travel and tourism contributes about 8.6% to the SA economy and employs 9.2% of its workforce. The government recognises the importance of tourism to the economy but blocks tourists from visiting the country, says immigration attorney Stefanie de Saude-Darbandi.

“Tourism is the easiest, simplest and quickest way to make money in the country but they make it so difficult for tourists to be here. Tourists do nothing but spend money here. They are not taking jobs. The longer they want to be here, they should be welcomed. It’s a benefit to us.”

The DNV might well be a flop, concluded Krensel. “R1-million is not a small amount. I doubt it will take off because it is simply not internationally competitive.”

Yet again, the Department of Home Affairs failed to respond to requests for comment. DM