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Remote workers may soon be able to live and work tax-free in Bali, under a 5-year ‘digital nomad’ visa

June 7, 2022, 8:24 AM UTC

As companies like Airbnb adopt a “work-from-anywhere” model, prospective “digital nomads” need to think about where they want to base themselves. Perhaps the sun-drenched vineyards of Tuscany? The gleaming skyscrapers of Dubai?

Or how about the sandy tropical beaches of Bali?

Remote workers hoping to log in from the seaside villas lining the coast of the Indonesian island may soon get their chance, as Indonesia’s tourism minister Sandiaga Uno told Bloomberg on Monday the country is developing a new “digital nomad” visa to attract higher-spending visitors.

“In the past, the ‘three S’s’ were sun, sea, and sand. We’re moving it to serenity, spirituality, and sustainability,” Uno said. Indonesia’s “digital nomad” visa would be effective for five years, and Indonesia wouldn’t tax income received from overseas. Uno also promised speedier visa approvals and a greater frequency of flights in the interim. 

Bali is already a popular—and at times controversial—destination for digital nomads, thanks to its tropical climate and low cost of living. But Bali-based digital nomads operate in a legal gray area at best.

Currently, visitors can either get a tourist visa for a maximum of 60 days or jump through numerous legal hoops for a six-month temporary work permit. But anyone staying in Indonesia for longer than 183 days of a full year automatically becomes a local tax resident—which means subjecting overseas income to Indonesia’s tax rates.

Indonesia’s top tax bracket is a 35% tax rate at income above about $350,000. While that’s a lower tax rate than countries like the U.S. (which has a 35% tax bracket between $215,950 and $539,900) and the U.K. (which charges a 45% rate for income after a $187,000 threshold), it’s still more than other potential digital nomad hubs. Dubai, which offers its own one-year renewable “digital nomad” visa, does not charge income tax at all, whatever the visa type.

An Indonesian “digital nomad” visa would regularize what remote workers in Bali are already doing, without requiring them to extend their visas every few months, and removing the risk of quick deportation for breaking the rules. And a tax exemption for income from overseas would lower the tax burden on Indonesia-based remote workers, lowering the risk of double taxation.

Indonesia’s digital nomad visa would also be longer than every other “digital nomad” visa currently available, in 33 countries including Germany, Mexico, Barbados, and Estonia. Data compiled by Harvard Business School professor Raj Choudhury finds that most “digital nomad” visas offer stays of one to two years, with the most generous offering a four-year stay. Most formal digital nomad visa programs exempt visa holders from local income tax.

Higher-value tourism

Indonesia may be trying to pivot away from the kind of tourism that defined it before the pandemic, as the industry faces a fraught post-pandemic recovery.

Rather than attempting to hit Indonesia’s pre-COVID tourism levels, the country is “trying to target 3 to 4 million [visitors] with longer length of stay and better-quality spending,” Uno told Bloomberg

Indonesia, along with the rest of Southeast Asia, is trying to revive its tourism sector after years of travel restrictions crashed visitor numbers in tourist hotspots. Earlier this year, the Asian Development Bank estimated that 9 million people were unemployed as a result of the pandemic, in part due to job losses in hospitality and tourism.

Southeast Asian countries removed travel restrictions earlier this year in a bid to win back international visitors. Vaccinated travelers can visit Indonesia without quarantine, only needing to show a negative PCR-test result from 48 hours before departure. 

Yet a speedy recovery may be difficult. Two major sources of tourists—China and Russia—are still closed off. Chinese visitors are unlikely to travel overseas so long as Beijing preserves inbound quarantine for international arrivals—including Chinese tourists returning home. Russian tourists are also stuck at home, as international flights dry up due to sanctions and closed airspace, and financial barriers prevent Russians from paying for anything overseas.

Indonesia’s tourist numbers jumped by 500% in April to hit 111,000, a record since the pandemic—but still much lower than the average 1.3 million visitors it got each month in 2019.

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