What are tax benefits available in Portugal for digital nomads?

The term “digital nomads” has found its way into everyday speech only recently though the phenomenon has existed for a long time following the trend of distance working. For some people, it is an opportunity to travel, and for others, it allows them to live where they want instead of where the office is located. There is no need to go to an office every day anymore.

This term would normally apply to skilled, well-paid specialists mainly from the IT sector. Many countries welcome such workers both as tourists and migrants and create a special working environment for digital nomads.

What does Portugal offer?

To start with, Portuguese authorities build entire digital villages for this purpose. Ponta do Sol in Madeira is the most famous one. Villas, public spaces, coworking stations and infrastructure have been built there. Special attention is given to a good internet connection, Wi-Fi and general security.

“Remote workers” enjoy that place because of its pleasant climate, comfortable working conditions and the opportunity to live among like-minded people. The authorities benefit from developing sparsely populated regions. It helps to boost the economy, create new jobs and increase trade turnover.

Tax benefits for “digital nomads”

After relocating to Portugal, a freelancer can obtain an NHR (non-habitual resident) status. There are several advantages:

• no taxes on foreign income;
• 20% tax on income earned in Portugal compared to standard Portuguese income tax rates of up to 48%;
• social contributions 10% which is considerably less than the standard rate.

It is important to note that NHR status can only be granted to new tax residents in Portugal. The NHR is issued for 10 years, but each year the status will need to be confirmed.

How to get the NHR tax status?

An applicant for the NHR tax status must fulfil the following conditions: to have lived in Portugal for at least 183 days in the last year (in total) and own or rent a property there.

The procedure for granting this status is as follows:

1. An applicant visits a Portuguese tax office, either themselves or through a representative.
2. An applicant is registered as a taxpayer in the NIF system, receives a plastic card or certificate with a unique number.
3. An applicant must apply for NHR no later than 31 March of the year following the year they change their residence.
4. If it is approved, an applicant will receive an answer by email.

Please note that NHR is not a visa, residence permit or other document entitling you to enter or reside in Portugal. It is a tax status, not an immigration one.

There are many options to stay legally in this country from obtaining a work permit to investing in a Golden Visa. If you want to become a “digital nomad” and take advantage of the Portuguese government’s program, but don’t know what to do, contact our experts. Advisers at Imperial & Legal will analyse your situation, advise you on the best immigration options and the concrete steps you need to take in order to realise your dream.