When remote workers are looking for somewhere to act as their base for a while, it is easy to see why Portugal may be near the top of their lists. When deciding, however, it is also important to look at the amount of tax that they may be eligible to pay, as even within the EU, countries can vary markedly in the amounts of tax that they levy. The Portugal Digital Nomad Visa has special tax rates and we will look at these more below.
Sharing the Iberian Peninsula with Spain, Andorra and Gibraltar, Portugal is a beautiful country with a climate that is the envy of much of the world. You can choose between world-class beach and island living or life in some of the country's more rural areas.
Lisbon and Porto are two of the largest settlements, and the island of Madeira is a popular destination 430 miles off the West coast of Morocco and just 250 miles North of the Canary Islands.
Lisbon is a very beautiful and vibrant city with colourful houses and trams that meander down picturesque streets to the sea. It is definitely worth seeing and spending some time in, though some locals are getting more annoyed that digital nomads are causing the prices for private lets in the City to rise. There is increasing pushback in many countries and cities against the gentrification that comes with increasingly mobile remote workers.
The cost of living in Portugal is another factor that makes it a popular destination for remote workers, with the cost of living being over a third cheaper than in the USA.
The modern internet infrastructure also helps to make it an ideal place for digital nomads to spend some time.
It isn’t great in some more rural parts of the country, but in the major towns and cities, you shouldn’t have any complaints.
There is a lot of culture and history, and there are some amazing museums and art galleries in the major cities.
Lisbon is an ancient city which has plenty of historical sites that are ripe for satisfying curious minds, and for getting some truly memorable photos.
Portuguese cuisine is also top-notch, particularly when it comes to pastries such as pasteles de nata, krapfen and pasteles de Belem.
The Portugal digital nomad visa, sometimes referred to as the D8 visa, is specifically designed for people who are able to work remotely, whether for a foreign company or on a freelance basis, who can live in Portugal for a sustained period of time.
The D7 visa is only for people who have investments, receive regular rent or have some other form of passive income, which means they don’t actually have to work every day.
To qualify for the D8 visa, you must not be a resident of any country in the European Economic Area. This includes all of the EU, Switzerland and some others, including Iceland, Lichtenstein and Norway.
The amount that digital nomads have to earn each month in order to qualify for the D8 visa is 3480 euros per month or 41,260 euros per year. This visa is renewable for up to five years and after that period of time, it is possible to apply for permanent residency in Portugal. If this is something that you are genuinely considering, you may wish to look into the tax situation for people on the digital nomad visa as well.
The tax rate for digital nomads in Portugal will depend on how long they have been in the country at any one time and whether they are considered residents for taxation purposes. Anyone who has been in Portugal for 183 days in a calendar year is automatically considered to be a tax resident and is required to pay into Portugal’s tax regime.
Portugal has treaties with many other countries which means that if you become a tax resident in Portugal, you will then be unlikely to have to pay tax on that same income in a different country. This is known as double taxation, and the treaties should allow Portugal to be your sole source of taxation if you become a tax resident there.
Portugal has a progressive tax rate for people who are tax residents and the people who meet the earning requirements for the digital nomad visa will typically start at the 35.5% tax rate that is available for incomes between 27,146 and 39,791. This is obviously dependent on how much money they make and can rise to 48% if they make more than 80,000 euros per calendar year.
Portugal has one of the higher rates of taxation compared to some of the other potential options. The taxation bands are higher even than those in Scotland, part of the UK, where a 48% tax band comes into play but not until someone is earning over £125,140 per year.
By contrast, Malta offers one of the best rates of taxation for digital nomads and one of the best environments to conduct business, having become very popular with startups and founders in recent years. The tax rate for the Malta digital nomad visa is 0% for the first year, and in subsequent years it is only 10%. This is an excellent offer and makes Malta a prime destination when it comes to tax concerns. The amount that you need to earn to qualify for the visa is also very similar to the Portuguese digital nomad visa.
The top tax rate in Italy is 43%, and this is incurred when an individual makes 50,000 euros or more in a year. Although not as favourable as the Maltese digital nomad visa, it is still a lot better than the tax take for the Portuguese one.
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