Portugal’s Prime Minister has taken initial steps to limit the number of digital nomads coming into the country as local workers grow increasingly dissatisfied with policies that have contributed to a serious housing problem.
Prime Minister António Costa stated in an interview with CNN Portugal that he intends to abolish the nation’s non-habitual resident system (NHR) next year.
According to Deloitte, individuals who become tax residents of Portugal are subject to a special tax regime under the NHR program for a period of ten years, in accordance with regulations designed to welcome international employees.
Most people with “high value-added” employment, such as doctors, engineers, and journalists, pay a flat 20% tax on their Portuguese income.
This is in contrast to Portuguese citizens, who pay income taxes that range from 14.5% to 48%, according to PwC. Costa has finally admitted that this unfair approach does more harm than good to Portugal.
“Maintaining this measure for the future is prolonging a measure of fiscal injustice that is not justified, in addition to being a biased way of continuing to inflate the housing market”, Costa told CNN.
According to him, the regulation will remain in force for visitors who enter the country before the deadline in 2024.
What will take its place, including new ways to establish tax residency in Portugal and new income tax brackets once they do, is unknown.
Fortune’s report regarding the impact of the new regulations on digital nomads has not received a response from the Prime Minister’s Office. Furthermore, there remains uncertainty regarding the potential implications of this rule alteration on the digital nomad visa, which was introduced just last year.
Foreigners from outside the EU or EEA can apply for a 12-month work visa under the D8 visa if they earn at least €2,800 (about $2,930) per month. The new rules for people without permanent residency may also affect temporary workers, as these individuals usually pay taxes in their home countries.
Because of this change, it will be less attractive for emigrating well-paid workers to live abroad in Portugal. Since the beginning of the pandemic COVID-19, thousands of digital nomads have arrived in the country to take advantage of the new opportunities for remote work.
According to the Nomads List data cited by Politico, 15,800 digital nomads called Lisbon home as of December 2017. According to the Portuguese Immigration and Borders Agency (SEF), there were 45% more foreign residents in Portugal between 2018 and 2021.