A person who is normally self-employed in two or more Member States is subject to (a) the legislation of the Member State of residence if she/he pursues a substantial part of her/his activity — e.g. 25% or more — in that Member State; or (b) the legislation of the Member State in which the centre of interest of her/his activity is situated if s/he does not reside in one of the Member States in which s/he pursues a substantial part of her/his activity. The criteria taken into account to determine whether the activity can be considered “substantial” shall be: (i) the turnover; (ii) the working time; (iii) the number of services rendered; and/or (iv) the income. Marginal Activities, eg activities accounting for less than 5% of the worker’s regular working time and/or less than 5% of his/her overall remuneration are not taken into account.
The above rules apply only to EU nationals, who have the right to move freely within the European Union. Non-EU nationals who have the residency and right to work in one EU country cannot work freely in other EU countries.
What is a digital nomad?
According to OECD, the term digital nomad refers to a “location-independent, technology-enabled lifestyle”. Enabling technologies include high-speed internet, video conferencing, cloud services, and online collaboration tools for remote work. Working remotely may enable one to access a higher quality of life environment and choose a more favourable tax regime. Digital nomads earn income from foreign sources, setting them apart from cross-border workers and intra-corporate transferees.
Digital nomads in the EU
There is no harmonised definition of “Digital Nomads” at EU level, and even persons who exclusively rely on semi-passive or passive income may also be considered digital nomads under some new regulations. Several countries with digital nomad visas provide their own legal definitions of the term in national legislation:
Croatia: A third-country national working remotely via technology for a foreign company, without offering services to Croatian employers.
Estonia: a third country national (TCN) whose purpose of temporary stay in Estonia is to perform work duties in Estonia as a location-independent employee or an entrepreneur, who has a business/company registered abroad or a freelancer providing services to contract-based clients from abroad.
Latvia: Individuals employed or self-employed abroad who work remotely in fields like consultancy, translation, or IT services.
Spain: International teleworkers in Spain perform remote work exclusively for companies based outside Spain using digital communication tools. Visa holders may work only for foreign companies or up to 20% for Spanish companies in their total professional activity.
What legislation applies to digital nomads and remote workers who work in two or more EU Member States?
A person who is normally self-employed in two or more Member States is subject to:
(a) the legislation of the Member State of residence if s/he pursues a substantial part of her/his activity in that Member State;
(b) the legislation of the Member State in which the centre of interest of her/his activity is situated if s/he does not reside in one of the Member States in which s/he pursues a substantial part of her/his activity.
Insignificant marginal and ancillary activities are excluded when determining the applicable legislation for cross-border self-employed workers.
When the activity is “substantial” and must be taken into account for the purpose of determining the applicable legislation?
A ‘substantial part of self-employed activity’ pursued in a Member State of residence means that a quantitatively substantial part of all of the activities of the self-employed person is pursued there, without this necessarily being the major part of these activities. For the purposes of determining whether a substantial part of the activity of a self-employed person is pursued in a Member State, account must be taken of: (i) the turnover; (ii) the working time; (ii) the number of services rendered; and/or (iv) the income.
Meeting at least 25% of the criteria indicates a substantial part of activities occurs in the Member State of residence.
Example: Bricklayer X performs activities as a self-employed person in Hungary, where he is also residing. Sometimes during the weekend he also renders his services as a self-employed person to an agricultural company in Austria. Bricklayer X is working 5 days a week in Hungary and a maximum of 2 days a week in Austria. X, therefore, performs a substantial part of his activities in Hungary and the Hungarian legislation is applicable.
When activities can be defined as “marginal and ancillary”?
Marginal activities are activities that are permanent but insignificant in terms of time and economic return. It is suggested that, as an indicator, activities accounting for less than 5% of the worker’s regular working time and/or less than 5% of his/her overall remuneration should be regarded as marginal activities. Activities that are supportive, dependent, home-based, or secondary to the main work may indicate marginal activities.
What procedures must be followed by a self-employed person in the event that s/he is working in two or more member states?
A person normally employed in two or more Member States must notify this situation to the designated institution of the Member State in which s/he resides. The competent authorities must promptly inform the person once the applicable Member State legislation has been determined. The institution can either use a letter or the Portable Document A1 (certificate attesting to the applicable legislation).
References
- Should OECD countries develop new Digital Nomad Visas? (oecd.org)
- For a more thorough analysis see: 202135_digital_nomad_visas.pdf (europa.eu)
- Practical Guide on the Applicable Legislation In The EU, EEA And In Switzerland (issuelab.org)
- Art. 14, para 8 EC Regulation 987/2009
- Public Access Interface (europa.eu)
