02 August 2023

Portugal is an attractive country for digital nomads

Companies globally support and benefit from this “new” modality, remote working.

The possibility of teleworking anywhere in the world is a reality that has been gaining more and more supporters. In Europe alone, the number of people in this regime increased by 8% in 2021, ,in relation to the year 2019, and the trend is that this figure will increase even more. Hence the importance in the emergence of the “digital nomad” concept, which can be defined as someone who uses technology to perform their duties remotely, not needing a physical space, depending solely and exclusively on the use of the electronic means at their disposal.

In recent years, Portugal has been recognised with one of the best countries to work remotely, having recently launched, on 30 October 2022, numerous measures and benefits to support and facilitate the adhesion of the digital nomad visa.


Legally speaking


Although there are several models of employment relationships, in this article we will focus essentially on the reality of the employee, being the model that most benefits from this visa.
Employment contract
In the contract of an employee, the place of work is a very relevant element and one which comes with numerous legal restrictions as to the possibility of its definitive or temporary change. There are always some exceptions in which, due to the nature of the duties, employees may have mobile workplaces, however, the employer must always indicate all possible locations in the contract. In the case of digital nomadic workers, the place of work is not a relevant information for the proper fulfilment of the employment contract, so there is more freedom for the contracted person to choose from which location they carry out their work. 
As there is no specific legal regime regulating this type of situations, all working conditions will have to be well defined in the contract. It is essential to mention if the employee is, or not, totally free to choose the place from where he/she provides the service, or if it depends on the agreement with the employer, or if the employee’s freedom to choose the place is limited to a certain territorial space (country, for example). Another quite important aspect to be mentioned in the contract is whether or not the entity is liable for the expenses incurred by the worker as a result of successive changes of place of work and “residence”.
Which law will be applicable to the employment contract? That of the employer’s or employee’s country?

If this is not defined in the contract, the applicable law is the one in force in the country of the contracted person.
In the case of digital nomads, the contract will tend to be executed in multiple countries, each with specific rules regarding working time, holidays, public holidays, absences, remuneration, termination of the employment contract, among others. Specifying the national law applicable to the contract is very important for a better definition of the terms and conditions and the mutual rights and duties arising from such variations.


Fiscal matters


Portuguese tax regime attracts digital nomads

Portugal is increasingly being seen as a good place to live and work. In addition to the quality of life that this country offers, the tax criterion also justifies this movement.

Benefits of acquiring tax residence in Portugal

The Portuguese tax legislation encourages digital nomads to relocate and acquire tax residence in Portugal, offering numerous benefits such as the non-habitual residence regime and the “Regressar” Program.

Portuguese tax legislation encourages digital nomads to relocate and acquire tax residence in Portugal, offering numerous benefits such as the non-habitual residence regime and the “Regressar” Programme.

Non-habitual resident regime (NHR)

Employment income obtained by tax residents in Portugal is generally subject to progressive rates up to 48%, plus a solidarity surcharge (if applicable). However, under the Non-Habitual Resident (‘NHR’) regime, employment income is subject to lower percentages:

- Employment income obtained in Portugal in value-added activities is taxed at a flat rate of 20%. Otherwise they are subject to the progressive rates referred to above;

- Employment income which is earned outside the Portuguese territory is exempt in Portugal if the employee is effectively taxed by the source State.

In order to benefit from this regime, the worker will only have to fulfil two requirements:
-Not have lived in Portugal in the last 5 years;

-Have remained in Portugal for 183 days of one year or have their own house which serves as their main residence.

The NHR tax regime applies for a period of 10 years. If, during this period, the employee is considered resident in another country, he will not benefit from the regime until he returns to Portugal. The 10-year period is not suspended during the absence of the employee from Portuguese territory.

“Regressar” Programme

The “Regressar” programme is a measure that was created to support emigrants, as well as their descendants and other relatives, so that they have better conditions to return to Por tugal.
Eligible emigrants will benefit from an exclusion from taxation of the taxable base of their labour income by 50%. Taxable income will, however, be subject to the progressive rates already mentioned.

The cumulative requirements to benefit from this scheme are the following:

- The worker has been tax resident in Portugal in 2019 or 2020;

-The worker must not have been resident in Portuguese territory in any of the three previous years;

- The worker must have been tax resident in Portuguese territory before 31 December 2015;

- The worker must have their tax situation in order;

- This regime is not cumulative with the NHR status.

The scheme is applicable to income earned in the first year in which the resident meets the above requirements and continues for the following four years. Consequently, for any individual who meets the requirements and becomes a resident in 2021, the scheme will apply until 2025.