Why Portugal is cracking down on digital nomads and where it’s cheaper to remote work

Lisbon: Lisbon once welcomed digital nomads flocking to the country in their droves, thanks to cheap rents, mild winters, a young population, and a vibrant social scene.

But this influx of approximately 16,000 extra people (on top of the annual tourist figure of 6.5 million) has started to leave a sour taste that no amount of pastel de nata can fix.

This could be partly attributed to the higher salaries digital nomads typically enjoy. To qualify for the visa, digital nomads must earn at least €3,280 per month.

This is often double the salary of the locals, 50 per cent of whom earn €1,000 per month on average), and has driven inflation across the board.

It’s also worth noting that Portugal has one of the lowest minimum wages in Europe, coming in at €957 per month, compared to Ireland’s €2,146, Luxembourg’s €2,571, and neighbouring Spain’s €1,323.

The country is also in the grip of a housing crisis that is being felt most acutely in its cities. According to the International Monetary Fund (IMF), house prices in Portugal have doubled since 2018.

Rents are also crippling Lisbon locals, with the average rent for a one-bedroom apartment now standing at €1,200, an increase of 17 per cent from December 2022 to December 2023.

Digital nomads can expect to pay upward of €2,500 per month for a short-stay apartment during the summer, while a family of four now pays between €2,100 and €3,000.

Eating out has also become pricey. A meal at a mid-range restaurant costs at least €20 per person without alcohol.

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New measures

But the backlash hasn’t fallen on deaf ears and Portuguese officials are now rowing back on some of the schemes and initiatives that lured in digital nomads in the first place.

This includes ending the non-habitual tax residency (NHR), which facilitated a flat income tax rate of 20 per cent, in January 2024.

But not everyone agrees with these measures.

“Portugal was attracting some of the brightest minds in the world with the NHR, ending this talent attraction tool was the biggest mistake our previous government did,” said Gonçalo Hall, the CEO of Nomadx, a global platform for digital nomads based in Portugal.

“The NHR was a powerful tool, Spain kept their own version of it and many people who were interested in Portugal are now moving to Spain or Dubai,” he wrote on LinkedIn.

He likened the mass exodus of digital nomads to a “brain drain”.

“Portugal will lose population again in 2024, after a historical year in 2023 where we didn’t lose population,” he wrote.

Instead, he suggests that the government needs to adopt a countrywide strategy to decentralise and attract talent to other areas of Portugal including the Algarve, Porto and Madeira.

Additionally, the government’s Mais Habitação legislation, passed in 2023, aims to increase the availability of long-term rental units over short-term lets.

This programme also protects renters against rent hikes – rents cannot increase by more than 2 per cent in houses rented in the last five years.

In 2023, the government also decided to suspend new Airbnb or short-term rental licences (Alojamento Local) in apartments and accommodations that are in buildings located in popular coastal areas.

Separately, those aged 65 and over, or have an illness, cannot be subjected to the New Urban Lease Regime, legislation enacted in 2019, which allows landlords to increase rent by almost 7 per cent.

The good news for those afforded the luxury of remote work-from-anywhere policies is that Portugal’s loss is the rest of Europe’s gain––and lesser-known destinations offer digital nomad visas and an affordable cost of living.

Budapest in Hungary is 28 per cent cheaper to live in than Lisbon, where rents are estimated to be 56 per cent lower.

Estonia’s capital Tallinn is 11 per cent cheaper to live in than Lisbon, with rents that are 50 per cent lower.

Meanwhile, the cost of living in Bucharest, Romania, is 34 per cent cheaper than Lisbon and rent prices are almost 63 per cent lower.