Portugal May End Low Digital Nomad Taxes
As local employees become more frustrated with policies that have contributed to a significant housing shortage, the Prime Minister of Portugal has taken the first steps toward limiting the number of digital nomads coming into the nation.
During an interview with CNN Portugal, Prime Minister António Costa announced that he plans to do rid of the non-habitual resident system (NHR) that the country now has in place the next year.
According to Deloitte, persons who become tax residents of Portugal are subject to a special tax regime for a term of ten years under the NHR program, which is in compliance with legislation aimed to welcome foreign personnel. This particular tax regime is part of the NHR program.
The majority of Portuguese citizens who have jobs considered to have “high value-added” responsibilities, such as physicians, engineers, and journalists, are subject to a flat tax rate of 20% on their income.
According to PwC, inhabitants of Portugal are subject to income taxes that vary anywhere from 14.5% to 48%. This stands in stark contrast to the situation in Portugal. Finally, Costa has acknowledged that Portugal suffers more negative consequences as a result of this unjust strategy than it does positive ones.
According to comments made by Costa to CNN, “maintaining this measure for the future is prolonging a measure of fiscal injustice that is not justified.” In addition, “maintaining this measure for the future is a biased way of continuing to inflate the housing market.”
According to him, the policy would continue to be in effect for guests who arrive in the nation before the cutoff date of 2024.
It is still uncertain what will take its place, including new methods by which individuals may establish tax residence in Portugal and new income tax rates once they do.
The Prime Minister’s Office has not provided a comment to the story that Fortune published about the effect that the new restrictions would have on digital nomads. In addition, there is still a lack of clarity surrounding the possible ramifications of this regulation change on the digital nomad visa, which was just established a year ago.
Applicants seeking a work visa under the D8 category must have a monthly income of at least €2,800 (about $2,930), regardless of whether they are from inside or outside the EU or EEA. Due to the fact that temporary employees often pay taxes in their home countries, the new laws that apply to those who do not have permanent status may also impact temporary workers.
Because of these new regulations, it will be less appealing for high-income employees who are considering immigrating to Portugal to settle there. Since the start of the COVID-19 epidemic, hundreds of digital nomads have traveled to the nation in order to take advantage of the newly available chances for working remotely.
As of December 2017, there were 15,800 digital nomads who made Lisbon their home, according to statistics from Nomads List, which was quoted by Politico. Between the years 2018 and 2021, the Portuguese Immigration and Borders Agency (SEF) reported that there was a 45% increase in the number of foreign immigrants living in Portugal.
