Portugal — A Future Digital Nomad Haven?

Photo by Austin Distel on Unsplash

Ever considered working where the sun shines, where there are beautiful coastlines, exquisite cuisine and a warm welcome, but never considered it an option? Portugal’s Digital Nomad Visa, accepting applications from 30 October 2022, could be the answer to your new working location.

Why do so many digital nomads already love Portugal?

With the incredible climate, plenty of interesting cities and places to visit, a generally low cost of living compared to other areas of the EU, along with English being widely spoken, Portugal is already popular with remote workers.

The Portuguese government recently announced a new visa that will allow digital nomads to stay or settle in the country for a certain period. The new scheme, aimed at both employed and self-employed workers, hopes to regulate the temporary stay or residency of remote workers. Applications for this visa will be accepted later this month.

We are still waiting for further clarification on the fiscal and social security framework and if this information has got you frantically looking for reference articles on the internet, you might want to watch this YouTube live I hosted with fellow lawyer, João Ascenso from AAMT Legal. I will explore this theme further in the article.

What is the Digital Nomad Visa?

Let´s start with the Digital nomadism/remote working trend. This is a phenomenon that gained traction and force during the pandemic and countries had to catch up on specific legislation to allow them to stay — even for a short period of time in a country.

Portugal, like several other countries, already had visa options that permitted individuals to live in Portugal and work for a company based in another country. However, digital nomads have their own special needs from a legislative viewpoint. Simply put, they are individuals who receive income from their work abroad, which poses transnational taxation and social security challenges.

Now, let´s delve into the specifics of the Digital Nomad visa. There are two versions on offer, namely, short stay or residency permit:

1. The short-stay visa is aimed at remote workers looking to stay temporarily in Portugal for up to one year.
2. The residency permit visa is for digital nomads wanting to secure a residency visa in Portugal

To be eligible, remote workers will need to prove a monthly income that is four times the amount of the current minimum income in Portugal, and provide a work contract or proof of self-employment as well as proof of tax residency.

It is important to note that the current minimum monthly income in Portugal is €705, but is set to increase to €750 in 2023.

How to Apply

Digital nomads can apply for the Digital Nomad Visa from the Portuguese Consulate in their home country. If the applicant is already in Portgual, they can apply at SEF, the Foreign Borders Office in Portugal.

Ultimately, it is important to note that if you want to pursue a residency in the country, this will involve a thorough process in the future, including the requirement to present a number of documents, including evidence of an address in Portugal, a copy of your criminal record, etc.

What are the tax implications?

As with most countries, Portugal taxes residents on their worldwide taxation, i.e., all income irrespective of the source and type of income, and taxes non-residents on their Portuguese source income.

A person is classified as a tax resident in Portugal if they are physically here for 183 days in any given period of 12 months, or if they have a dwelling with the intention to reside in Portugal.

To give you a full lowdown on the tax implications, I have asked my colleague João Ascenso to give us an overview of several fiscal details that are still pending confirmation.

“There are several details that this new law did not clarify. First, the uncertainty and high costs associated with social security. All countries are competing to attract highly-qualified people. If we really want remote workers to come to Portugal, we have to offer them competitive conditions, and above all, certainty. This is particularly important for social security. The law failed to clarify the social security situation for employees and employers and a lot of companies and employees do not want to take any risks and do not want to drop the labor agreement that grants access to employee benefits, etc.” explained João.

However, practice will eventually fill the gaps in the process and there are a couple of weeks still ahead of the application date. Be prepared as you might see another article with news on the same topics soon.

Civil Residency versus Tax Residency

If digital nomads move to Portugal with a temporary visa and stay for less than six months, they may not be taxed in Portugal, except if they have Portuguese-sourced income — for example if they are being paid by a Portuguese company.

In the remainder of cases, digital nomads will likely have to pay taxes in Portugal or at least file a Portuguese tax return, and due to the non-habitual resident tax benefits, the taxation of the digital nomads may be quite efficient if they are taxed in Portugal.

The main tax benefits are the 20% flat tax on high-value activities such as workers in IT, Engineers, and Designers, among others, to exemption on certain types of foreign income such as dividends and interest.

Madeira’s Digital Nomad Village

When it comes to digital nomadism Madeira has been a hub for some time now. With its own “Digitial Nomad Village”, Ponta Do Sol. With top-notch internet, comfortable shared working spaces, a like-minded community and purpose-built accommodation, Ponta Do Sol is already the perfect setup for those wishing to work elsewhere in the world. With this as a successful example, having shared working spaces available for use from February 2021, the “Digital Nomad Village” of Ponta Do Sol is a vision of what could be for Portugal now with the advent of the Digital Nomad Visa.

Portugal — A future digital nomad haven?

If the example set by Madeira is anything to go by, then Portugal could indeed see an influx of digital nomads in the not-so-distant future. With remote roles and working options becoming more and more commonplace, the world of work has changed, and where people choose to work has followed suit. It is an exciting time for digital nomadism in Portugal!

To discover more about the opportunities available if you’re considering the Digital Nomad Visa, check out this article detailing some of the key information about working remotely in Portugal.