Digital Nomad Visa Regulations Promulgated – What This Means For The Employment Law Space

The global shift towards remote working arrangements has given rise to what Statistics South Africa has termed "a new generation of digital nomads" who travel from country to country to work. With its tourist attraction landscapes, diverse culture, affordability, IT infrastructure and co-working spaces, South Africa has become appealing to digital nomads.

New Immigration Regulations

On 19 May 2024, the final Immigration Regulations were passed ("the Regulations"). This follows some draft amendments to the Immigration Regulations that were released in February 2024 but were subsequently withdrawn. The Regulations introduce, amongst other things, a new 'digital nomad visa', otherwise known as a remote work visa, which permits the foreign holder to work remotely in South Africa. In a nutshell, it is a type of visitor's visa that may be issued for up to three years where a foreigner works for a foreign employer remotely and earns a gross income of no less than the equivalent of R1 million (approximately USD 53 000 and £ 42 700) annually. Certain tax exemptions, in terms of a double tax agreement, may apply.

The introduction of this visa in South Africa is certainly a step in the right direction and in line with the approach of many countries that have implemented or, at the very least, permitted special visas for non-standard types of work. However, the Regulations unfortunately give rise to uncertainty and grey areas from a tax, corporate and employment law perspective. In light of this, foreign employers should take comprehensive advice before allowing their employees to work in South Africa on a digital nomad visa.

The provision of the digital nomad visa in the Regulations did not come as a surprise since the South African government had been planning the rollout of the remote work visa for quite some time and several business institutions sought advice on the issue. South Africa joins a number of other African countries including Mauritius, Namibia and Seychelles who already provide a similar offering.

For context, the Immigration Act currently makes provision for a visitor's visa to be issued to a foreigner for any period which may not exceed three years, provided that the foreigner satisfies the Director-General that he or she has adequate financial resources and is engaged in South Africa in, amongst others, "any prescribed activity".

Importantly, the Regulations expand the meaning of "activity" as contemplated in the above section of the Immigration Act. "Activity" now also includes work conducted, as contemplated in section 11(2) of the Immigration Act, for a foreign employer on a remote basis, provided that:

1. Such foreigner earns no less than the equivalent of R1,000,000.00 as a gross income annually;
2. If the visa is issued for a period not exceeding six months within a 36-month period, the foreigner may apply to be exempted by SARS from registering as a taxpayer; and
3. If the visa is issued for a period longer than six months within a 36-month period, the foreigner must register with SARS; and
4. If applicable, complies with legislation governing the employment of workers in South Africa

The above is slightly different from the draft regulations of February 2024 (which were subsequently withdrawn) due to the following reasons:

• The draft regulations do not include work which derives from a foreign source of income;
• The draft regulations do not state whether the R1 million was a gross or net salary;
• The draft regulations referred to a 1 year period instead of a 3 year period;
• The draft regulations were silent on the application of employment laws.

Whilst the above will invariably have wide-ranging tax and immigration consequences, this ENSight focuses on the key employment considerations that the amendments give rise to, and in particular whether digital nomads may be regarded as employees in South Africa.

Digital Nomads as South African employees?

• Application

Interestingly, the digital nomad visa will only be granted to foreigners who earn a gross salary that is not less than the equivalent of R1,000,000.00. When considering the exchange rate, this is a relatively low annual salary, and would probably cover a number of fairly low-level technical and supervisory foreign employees.

A key question that is likely to be on people's minds is whether these foreigners will constitute "employees" under South African legislation and thus be subject to the protections and benefits offered by South African employment legislation? In conjunction with this is the question of whether the foreign employer would then be required to register for and provide social security benefits, such as COIDA, unemployment insurance and skills development contributions?

The Regulations leave these questions open by stating that employment legislation may need to be compiled with, "if applicable". We therefore recommend that comprehensive advice is taken to account for the nuances of each digital nomad's situation.

• Factors that may be considered

In our view, and subject to the individual facts of each case, foreigners on remote work visas are unlikely to be classified as employees in very specific circumstances, for instance, if:

• they work solely for a non-resident foreign entity (i.e. not for a local entity, even partially);
• they place their productive capacity exclusively at the disposal of such entity outside of South Africa; and/or
• they only work in South Africa for a short period of time and will return thereafter to the foreign entity.

Our court may, however, come to a different finding and the facts of each case will need to be considered.

The situation described above could be slightly different where the foreign employer has an undertaking that is in South Africa or that is closely connected to South Africa and the productive capacity of the employee may partially be given effect in South Africa. In such instances, depending on the nature of the employer, the employer may not be classified as a 'foreign employer' but our courts may find that the individual is, in fact, an 'employee'.

Conclusion

It is clear from the above that a lot of uncertainty still exists in the employment realm in respect of these new Regulations. This means that foreign employers will have to navigate these grey areas quite carefully. Ultimately, whether an individual is classified as an employee will likely turn on factors such as (i) the locality of the employer's undertaking/s; (ii) the place in which the employee places his/her productive capacity; and (iii) the length of time that the foreigner works in South Africa.

Only time will tell whether any changes are made to our employment legislation or regulations or whether any guidance and clarity is provided by the government.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.