The digital nomad lifestyle is on the rise, and many countries, including Portugal, are introducing visas to attract and accommodate them. Portugal’s remote work visa, officially known as the Temporary Stay Visa, is targeted toward workers who want to experience being a digital nomad in Portugal.
The Portugal digital nomad visa requirements aren’t extensive, making it one of the world's more easily obtainable digital nomad visas.
Employing digital nomads in Portugal, though, requires unique management and communication styles. Employers should be wary about micromanaging their digital nomads; after all, being a digital nomad is about enjoying work-life balance and having flexibility.
Aside from ensuring flexibility and a work-life balance for digital nomads in Portugal, employers also need to be aware of what happens when — or if — their employee becomes a permanent resident. Unlike other countries, Portugal’s digital nomad visa for remote workers can turn into permanent residency.
If this occurs, employers must adhere to local labor laws, including data privacy laws and tax obligationsWhile many may think paying employees abroad is a challenge, luckily, with Borderless, it has never been easier. Borderless makes paying remote workers a seamless experience.
To learn more about the process of applying for this visa and what employers need to be aware of, read on.
Why people are relocating to Portugal
Portugal was ranked as the top location for digital nomads in 2023. According to the 2023 Nomad Report by Flatio, a rental property service, around 27% of respondents said Portugal was the best destination to begin their digital nomad journey. But why exactly are nomads flocking to Portugal?
For one, Portugal has a low cost of living. A single person can expect to pay approximately EUR 1,300 per month for an apartment in Lisbon’s city center and only EUR 800 on the outskirts. While accommodation may be similar to housing prices in Canada or the United States, the cost of groceries, experiences, and going out to dinner is lower.
Another key reason there are so many digital nomads in Portugal is the weather. Portugal has a temperate, mild winter climate with hot and sunny summers. This is an optimal experience for digital nomads who want to escape dreary and cold winters.
Portugal is also a safe country; it’s ranked 7th in the annual Global Peace Index Report. This makes it a top-tier destination for families or solo travelers.
Digital nomad hubs in Portugal
There are strong digital nomad and expat communities across Portugal, including the Azores and Madeira, where remote workers can find everything they need to enjoy their time and maximize productivity.
Porto
Porto is a fantastic place for digital nomads in Portugal to reside. It’s a stunning city filled with coworking offices, cafes, coliving spaces, and a strong nomad and expat community. Overall, Porto is full of life, culture, and the support needed for remote workers to succeed.
Lisbon
Lisbon is an ideal base for recipients of Portugal’s remote work visa. The nomad and expat community is huge, giving remote workers numerous opportunities to network and connect with others. There are plenty of accommodation options available for remote workers as well. With coliving spaces, such as Selina and Outsite scattered across the city, there’s no shortage of places for nomads to live. Lisbon also allows remote workers to be productive. Coworking spaces in each neighborhood and cafes welcome remote workers to sit down for the day and focus on their jobs.
Ponta do Sol
Declared as Portugal’s first official digital nomad village, Ponta do Sol, a small town in Madeira, has everything nomads need, from accommodation to the internet, and culture. Ponta do Sol is filled with digital nomads looking for a laid-back, tranquil lifestyle to connect with nature and explore the rest of the island.
About Portugal’s digital nomad visa
Previously, remote workers would apply for the D7 visa, which allowed foreigners and freelancers to live in Portugal while earning foreign passive income. However, obtaining this visa was difficult for remote workers.
So, after much anticipation, Portugal’s remote work visa has come to life. Officially known as the Temporary Stay Visa, it allows digital nomads in Portugal to stay for an extended period. This visa offers temporary residence to those with a remote job that generates at least EUR 2,800 per month.
The initial visa is granted by a Portuguese consulate for 120 days. In that time frame, digital nomad visa applicants must present the visa to the Serviço de Estrangeiros e Fronteiras (SEF) to obtain the residency permit. This permit is valid for a full year and grants recipients full access to the Schengen Zone.
Upon receiving Portugal’s Temporary Stay Visa, it is required to stay in the country for a minimum of 183 days during the visa period. Recipients of this visa have to stay in Portugal for six months; they are free to move around Schengen countries — and others — for the other six months.
Digital nomads can renew this residency visa every year for up to four years. After that, they are eligible to apply for permanent residency instead of a temporary residence visa.
Application and process
When applying for Portugal’s visa for remote workers, different application requirements are depending on employment status. Both independent contractors and employees are eligible for this visa.
Overall, both types of workers need to submit the following documents:
- The visa application, which must include personal details, proof of accommodation, and proof of a stable income.
- A letter explaining the visa request and any personal ties to Portugal.
- A valid passport and two passport-sized photographs that adhere to Portuguese size requirements.
- Proof of regular income that meets the minimum requirements. This must include bank statements, a letter of employment showing salary, investment statements, or pension certificates.
- A clean criminal record, which is later certified and translated by Portuguese officials.
- Proof of valid health insurance for at least the first four months
- Documentation confirming where the applicant resides and pays personal income tax
- Proof of paying the visa fee for the digital nomad visa cost
For those who are classified as employees, Portugal’s digital nomad visa requirements as follows:
- A work contract
- Promise of work contract
- Declaration by an employer that confirms the working relationship.
Independent contractors who wish to obtain Portugal’s visa for remote workers, though, must submit one of the following:
- Society contract.
- Contract of services.
- A written proposal of the contract of services.
Submitting the application and necessary documentation must be done at a Portuguese Embassy. This includes having a photo and fingerprint taken for biometric information. Payment for the visa application fee — which is approximately €180 — is required at this time. This visa takes, on average, three to four months to process.
Within 120 days of approval, visa holders must enter Portugal and register at the SEF with the initial visa application translated and certified by Portuguese authorities. They must also submit proof of a Portuguese bank account and a Numero de Identificação Fiscal (NIF) for tax purposes. A new application must be submitted to obtain the official residence permit. This process takes about two weeks and costs an average of €320.
Being a permanent resident in Portugal
As stated above, once recipients of Portugal’s remote work visa reside in the country for four years, they are eligible to become permanent residents. What does this mean for employers, though?
Well, put simply, international employers who have a digital nomad in Portugal and become permanent residents must figure out how to hire them. This can be done by converting employees to independent contractors, setting up a foreign subsidiary, or working with an Employer of Record.
Employers will need to adhere to local labor laws in Portugal. These labor laws include but are not limited to, annual leave policies, social security contributions, payroll compliance, and providing mandatory remote work allowances.
Fortunately, an Employer of Record (EOR) like Borderless allows organizations to manage and securely pay their remote workers in Portugal compliantly and easily.
Taxes as a digital nomad in Portugal
Those who reside in Portugal under the country’s digital nomad visa are registered with the NIF, making them official tax residents. This is in contrast to those entering the country on a tourist visa. With this, they can apply to be a Non-Habitual Resident (NHR), which has several benefits.
What is NHR status?
Portugal’s NHR regime was established to attract investors and skilled professionals. It was also a way for Portugal to increase its presence in the global market.
Introduced in 2009, it was only recently that this program became widespread knowledge, primarily due to digital nomads and independent contractors seeking a different place to live with tax benefits. Achieving NHR status provides residents with low tax rates, benefits, and, in some cases, full tax exemptions for up to ten years.
Those with NHR status only have to pay 20% income tax for income earned in Portugal, whereas the standard can go as high as 48%. In addition, they only need to pay 10% on social contributions, which include pension and insurance.
The biggest benefit, though, is that those with NHR status do not have to pay any taxes on foreign income. Meaning that digital nomads who work for an employer in the United Kingdom, for example, do not need to pay any taxes in Portugal if they possess NHR status.
To obtain NHR status, one must meet the following requirements:
- Possess the right to reside in Portugal, like being an EU/EEA/Swiss citizen, or through different visas, like the Golden Visa program, the Temporary Stay Visa, or the Tech Visa. To maintain a residency status in Portugal, the person must have proof of accommodation and must have remained in the country for a minimum of 183 days in the past year. Thankfully, those on Portugal’s remote work visa — the Temporary Stay Visa — must stay in the country for a minimum of 183 days during their stay.
- Not have been a Portuguese tax resident in the past five years.
In addition, applicants must have a job that the government considers high-value. Professions that are high-value and have the potential for large economic and cultural impact include, but are not limited to, the following:
- Architects
- Engineers
- Dentists, doctors, and general practitioners
- Psychologists and psychiatrists
- Artists, such as singers, sculptors, and actors
- University lecturers
Double taxation agreements
In the instance that someone does not hold NHR status, there is a chance that they may also be exempt from paying taxes in Portugal. Double taxation agreements (DTAs) in Portugal are in place to prevent someone, like a digital nomad, from being taxed twice — once in their home country and Portugal. The DTA in Portugal allows for most people to be taxed in the country where they came from. As a result, those who earn foreign income in Portugal, regardless of profession, are exempt from paying taxes.
Double taxation agreements also apply to independent contractors who are digital nomads in Portugal. For instance, if independent contractors contribute to social security in their home country, they do not need to contribute to it in Portugal. Currently, Portugal has signed DTAs with 79 other countries.
Managing digital nomads in Portugal
Employers need to be sure to manage their digital nomads in Portugal. This can be done through open communication lines, time-tracking software, effective project management, and a remote work policy in place.
Remote work policies
A remote work policy is essential when having remote workers on your team — especially digital nomads in Portugal. Remote work policies are not mandatory but are incredibly beneficial when having distributed employees.
Remote work policies streamline remote work and make managing a remote team a seamless and transparent. Without a remote work policy, employees and employers alike may experience confusion, frustration, and mixed communication when it comes to fulfilling their daily tasks and responsibilities.
A remote policy allows an employer to set clear guidelines and expectations for their remote employees. Remote work policies also allow employers to manage any risks that may arise that are associated with Portugal’s remote work visa or having a digital nomad in Portugal.
What to include in a remote work policy
Employers can include anything they see fit in their remote work policy. That being said, there are a few key things to remember.
Employee availability
In the remote work policy, employers should outline employee availability expectations. Setting schedules, regardless of location, allows for effective communication across all channels and ensures smooth processes for everyone involved.
Security tips
One of the biggest problems with remote work is dealing with security issues. Even when companies work on secure networks, security is not always guaranteed. Remote employees in Portugal need to be careful when working in public places. If employers don’t want their employees working on public Wi-Fi, then that should be clearly outlined in the remote work policy. Or, if an employee does work from a public network, require employees to use a VPN.
Protection from termination
In a remote work policy, employers must clearly state that no employee will be terminated because they work remotely. Unfortunately, sometimes, managers are uncomfortable with having remote employees simply because they are unable to see what they’re up to.
As a result, they can't physically see how productive employees are with their day-to-day work. This part of the policy is in place to protect remote employees from unfair termination.
For managers who are wary about employee productivity when they work as a digital nomad in Portugal, consider using performance-tracking tools, project management software, or even utilizing time-tracking tools.
What’s a flexible work policy?
Employers need to be aware of the difference between a remote work policy and a flexible work policy. In some instances, these terms may be used interchangeably, but it’s important to note that there are stark differences between the two.
A flexible work policy refers to when an employee works, whereas a remote work policy refers to where an employee works from.
An employer can choose to have a remote work policy and a flexible work policy in place. However, it must be clearly noted, and the differences must be clear.
A flexible work policy can include different communication methods, such as asynchronous communication and core hours when employees must work. Core hours create some form of overlap between employees and employers to allow for increased collaboration.
The General Data Protection Regulation
The General Data Protection Regulation (GDPR) was implemented in May 2018. It is a set of guidelines and policies that govern personal data privacy across the EU. If you plan on hiring a citizen from an EU member state, you must comply with this regulation. It requires employers to restrict data processing and protect systems from data breaches.
Employers who have employees who are living in Portugal under the remote work visa, they may have to look into further measures of the GDPR to maintain compliance.
Remote work stipends
Remote work stipends and home office allowances are not uncommon in Portugal — in fact, they're mandatory. If you hire employees in Portugal, there is a mandatory home office stipend. Employers must provide a monthly allowance, usually from €40 to €60. This is meant to cover the increase in energy bills, internet, and home office equipment.
Compensation for these expenses is due immediately after the employee has paid the expenses. For tax purposes, this stipend is not considered part of the employee’s salary but rather an additional cost.
It’s important to note that if you, an employer, have a digital nomad in Portugal and are still officially a resident of their home country — Mexico, for example — you will not be legally required to pay this home office allowance.
Rather, some employers choose to offer coworking office passes. Coworking spaces are increasingly common in Portugal, especially in Lisbon. Digital nomads value coworking offices; they create a community and encourage collaboration and connection among solo remote workers.
Employers who want to offer coworking as a benefit do by providing them with a monthly or yearly allowance that covers the cost.
Embrace flexibility with Borderless
Allowing employees to work from wherever they desire, like in Portugal, has many benefits like increased employee well-being and retention rates. Portugal has the necessary infrastructure and development that provides nomads with a professional community and adequate internet speed to remain productive.
For organizations to tackle international payroll effortlessly and guarantee compliance, choose Borderless. Speak with us to learn more.
