As Digital Nomads Flock to Lisbon, Portugal's Youth Are Leaving in Droves
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Also, is it true to say the golden visa is not attractive to US citizens?
Finally, which foreign citize s benefit the most from the Portugal golden visa?
It may take some time to become law, but some time next year everything will be gone.
https://www.portugal.com/news/portugal-officially-ending-gol...
It was still attractive because it gave you a pretty fast path to a second citizenship.
The problem is that most builders need to borrow money from the bank for a project.
But the government red tape can take from 1-3 years. Plus the building phase can be 1-2 years. So a total of 2-5 years.
Builders cannot property plan project schedule, finance schedule and are feeling excessive risk.
Most builders are simply not interested in taking this risk and thus not much is done.
Another major issue the government of Portugal won’t tell you about is the fact that they own a ton of units downtown Lisbon in a completely decrepit state and aren’t doing anything about that.
It’s easy to blame nomads though…
Tourism has been a big driver of renovation (it is hard to argue with 100+euro/person/night yield), but of course that has necessitated evicting students and other 'itinerant' residents. Hence the recent protests.
Also, hopefully the airbnBust will come to europe next year , i feel the airbnb meme is way overdone
Additionally while the population is declining across the country but rising in the Lisbon area where the problem is and where the jobs are.
1. Ban Airbnb and other short-term housing other than renting out a room in your house;
2. Provide a huge stock of social housing, meaning housing at an affordable price only available to natives; and
3. Restrict foreign ownership of huge swathes of the country. This could be as simple as "new construction only".
Capitalism simply does not work where there's inelastic demand. it creates a regime where money is extracted from the poorest and most vulnerable by withholding basic human needs in the interests of profit for a few.
EDIT: qualified the AirBnB restriction to only what it should be for, meaning renting out a room in your house, not running an illegal hotel.
I'm an expat but I work locally for a local company with local wages like most people around me
The problem is working for foreign company which pays a salary that is way above what your peers live with, it creates insane inequalities.
One month of a good tech salary is one year of min wage in Portugal
Expats often come with money from having higher wages overseas even if they work at local rates. Retirees, people who sell homes in a developed country and so on.
Other than that, the Portugese government should favor Portugese people over the interests of people who simply want to relocate without any means whatsoever. This is already the case: immigrating to Portugal requires you to show you have sufficient means in terms of assets or income. This is another reason why "expat vs digital nomad" doesn't matter at all.
I and most of my friends are expat, we left our home country after graduation, we didn't bring nay money. We're far from an exception
Those inequalities are present regardless. It's just a matter of out of sight, out of mind.
Check out this global inequality calculator, you might be surprised to learn that you're in the global 1%: https://howrichami.givingwhatwecan.org/how-rich-am-i
I don't care if someone is getting paid 5x as much for the same job in another country, I care if they get paid 5x as much for the same city
This will make the problem worse as the Portuguese will complain that the foreigners own the beautiful modern buildings.
Additionally it‘s important to keep in mind that this is not feasible for EU countries with the four freedoms. It would be like Florida banning ownership of existing houses for Californians.
(1) would totally kill the Portuguese tourism industry.
(2) is reasonable and they are already doing it - but not sufficiently.
I have a better idea: Tax the nomads with a rate that matches typical tax rates (around 30-40% and waive the crippling social security if health insurance is covered from abroad, not the excessive Portuguese taxes of 53% + 35% social security for a total of 88% on a salary of > 80.000. Nomads are fully exempted because nobody would be willing to pay that much). It would bring more than enough money into the country for house construction.
I don't agree. We already have expensive housing in every country that those who aren't wealthy might covet. Also, new construction can be done in a way where you set aside, say, 20% of the units for locals in the same way that cities like NYC try to (but, you know, better).
> Additionally it‘s important to keep in mind that this is not feasible for EU countries with the four freedoms.
That's not strictly true [1] eg Malta.
Where it isn't possible, restricting non-EU citizens would still have a positive impact.
Also, where you can't actually restrict people, you can effectively do it with taxation, like having high property taxes for non-residents. This would be perfectly legal. US states do this too (eg a non-Indiana resident pays higher property taxes than an Indiana resident).
You can also discourage rampant property speculation with high transfer taxes, again targeted at foreign buyers.
> It would be like Florida banning ownership of existing houses for Californians.
I'm a big fan of doing this in Hawaii.
> ... would totally kill the Portuguese tourism industry
Build hotels. Build dedicated short-stay accomodation. Allow hoome owners to have ADUs. Build infrastructure for tourism. Don't use theoretical hits on tourism to make locals homeless.
[1]: https://realting.com/news/where-it-is-banned-or-hard-for-for...
Silly tax incentives like Non-Habitual Residency have to go (done).
2. Actually already exists in the suburbs, but maybe now needs a bit of a make over. Of course the children of well-heeled Portuguese wouldn't stoop to live in such places while studying at University, but hey that's the world we live in!
3. The Golden Visa scheme is a nonsense (I think this is also being scrapped), but perhaps property taxes for places that are not the primary home might help with this.
I believe no new licenses are being granted. Personally, I don't think this goes far enough. Revoke existing licenses.
> The Golden Visa scheme is a nonsense (I think this is also being scrapped)
IMHO this was an overreaction. If the issue was pricing out locals, you could simply remove real estate as a qualifying investment under the visa and/or increase the minimum investment amount.
This is what the ban did. The golden visa for creating 10 non-temporary jobs remains, but for 9 years, there were 250 jobs created, with 20 takers (meaning almost all of them created the bare minimum 10 jobs).
https://observador.pt/2021/12/25/vistos-gold-criterio-de-cri...
Note that the increase in housing costs has been largely driven by AirBnB etc, like much of the more desirable to tourists parts of Europe. Digital nomads (working remotely, almost by definition, and not getting paid that much in the grand scheme of things, again almost by definition) are somewhat incidental to all this, except as far as they might encourage local high skill job creation by some form of osmosis (e.g. bringing opportunities for locals to also work remotely though recommendation, and piquing the interest of outside companies in Portugal as a place to hire / do business).
I don't think you know what you're talking about. Living in Portugal while remotely working for any semi decent tech company puts you in the top 10% earners easily
However the rest of the post is about right. Salaries in Portugal are exceptionally low and taxes are high and both make the country not competitive - were it not for the sunshine and beaches.
On the other hand, the young Portuguese have been leaving the country since 2009. Millions of them earn salaries in central and northern Europe. They left without any nomads coming to Portugal.
Shouldn‘t these millions benefiting from european freedom of movement justify a mere 20k nomads in Lisbon?
edit: Maybe it‘s not millions but only half a million.
Portugal is making very little money from its emigrants anyway. I doubt they have more than 100k nomads, i suppose most of them would live in the biggest cities, and while they make the housing problem worse, most likely the problem would exist without them because portugal has the same structural problems with other southern eu countries. (Plus nomads by definition move elsewhere over a short time)
And seriously, profligate spenders generally seem to have income sources that quickly replenish their coffers. Or they are owners and have those kinds of tax advantages. Or, they inherit. There is a generational shift in wealth going on.
Actually, for 2021, earning 40k€ per year puts you in the top 10%. 4 in 5 families earn less than 27k€. Less than 5000 families earn more than 250k€. Top 1% is 100k€.
This is for a population of about 10 million.
Economic situation (and mentality) is very similar - Portugals problem seems to be more extreme though since it's located in a more interesting area (closer to developed Europe).
I would increase property tax exponentially after the 5th property or so, to hit the big landlords and investment funds, while keeping the homeowners and small landlords appeased. Then take that money and build or buy public housing to rent for cheap prices, to bring the prices down for everyone.
15 years ago Lisbon was in terrible shape, mostly collapsing due to rent controls.
And this is still the case to a degree. You have an enormous number of houses where the (older than, I think, 55) tenants pay 50 Euros per month that cannot be increased and the landlords pay more than that just in taxes and basic fees. So no renovation is done, everything is falling apart.
The rent comtrols have been there for the better part of a century, but they were only a problem when tourism boomed, rent control cannot be a cause of shortages if it was in place before without problems.
what are you talking about?? to be a digital nomad, you have to spend significantly more to sustain traveling and the added expenses of short term rentals. I could cut my costs in half if I just stayed in one spot for a few months. A typical apartment is going to cost half of an equivalent airbnb and the cost of equipping a kitchen will be offset very quickly from the savings of being able to shop at supermarkets and preparing your food at home.
my understanding is that digital nomads pay LESS than they would in their home country by choosing cheap CoL countries
Case in point, I can spend $2400 for a basic 1 bedroom apartment in San Francisco or nyc or I can spend $1000 to live in a luxury villa in Bali or a nice furnished apartment in medellin colombia.
so yes they are spending less. but they are hardly low income by any stretch.
I don't really think you can compare third world accommodations to first world. It's not comparable. The quality isn't there.
you're absolutely right that third world accommodations can't compare to first world 1:1 but you'd have to spend significantly more in the united states to live in a place with a comparable quality of life regardless. And this is based on my experiences in mexico, colombia, peru, srilanka, thailand, and indonesia. of course there are some countries where the market inefficiencies mean that even luxury accommodations just aren't going to match up. my experiences ihe the phillpines sounds a lot like what you're describing in ecuador.
Agree that flitting about every 3-6 months is not the most efficient way to provide for life's necessities, hence why nomads might struggle in e.g. Zurich, but be fine in e.g. Bali (or Lisbon, before things got crazy).
Do you think that is reasonable?
Additionally everyone I know has their own insurance and pays for all of their health bills. And that‘s only for urgent things, planned surgeries are usually done in the home country anyway.
The way you wrote this makes it sound like people only take home €9600 on €80000 and thats rather misleading.
What you call the marginal rate is applied to the full salary as far as I know. And the social security is also applied to the full amount unless the person is employed by a Portuguese company that would pay half.
Even the most optimistic tax accountants say around 70% minimum is to be paid with various options applied. That would leave 24.000. Portugal has many loopholes of course, but the idea of the article or OP was that these loopholes are not needed or unfair. While I‘m saying they are needed or otherwise nobody would go there.
Now let me add that many nomads also have to pay into various things from their home countries. While there are double taxation agreements the story on health insurance and retirement funds and social security is much more complicated.
Unless you cut all ties to home you can come out with even less.
So if it's facts, got sources?
https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/c...
The top marginal rate is 48% at 78834 €, so if you earn 80k€, that 48% is applied to 2k. Regular marginal tax rate stuff.
Social Security is separate, just checked my own salary sheet and it's 11% for a regular employee. The employer pays the rest, if you are both employee and the employer you must pay both parts.
So yes, it would be more but it would be doable. While the non-tax issues largely lack these agreements causing more problems.
This gives you a monthly pay after tax of 3811€ (way above average in the country, which unfortunately is really low)
Leaving around < 2000 net. And as I said that‘s without the mandatory social security problem on foreign income.
However you will need to contribute for at least 15 years before you qualify for a pension, and as you say there are no deductions for private pension plans, so you lose out there.
I suspect you are being 'taken to the cleaners', but not necessarily deliberately by anyone.
1. Nomads are not employed by Portuguese companies.
2. They could give up their home health insurance, but then they cannot remain residents of their home countries where this is mandatory. And since nomads are nomadic they cannot leave Portugal. The insurance would usually only work there.
3. And the retirement fund is the far bigger chunk.
In short, the laws of different countries do not align so the tax deductable things do not align either. This is exactly the reason why the Portuguese government has introduced these measures in the first place.
2. I assume you are talking about Americans? You can't expect tax breaks just because your home country doesn't offer universal healthcare!
3. Indeed private pensions are not tax deductible here, but that doesn't mean taxes are higher, it means they are not less!
The 88% you said sounds more like your actual living expenses, not the tax you pay to the Portuguese government. So don't call it tax, because it is not.
NHR has unfortunately been abused by people who were in fact largely resident here, and the Portuguese are quite right to close the loophole. You want to benefit from Portuguese society? Then you contribute.
Of course. By a portuguese company, you say it yourself. The company pays half of the social security.
And 42% only sounds low because that‘s that final tax rate in this example after all deductions. Like in most countries that is often 5-7% lower than the nominal tax rate that we think about and compare.
The calculator here shows it's not anywhere near 88% though in most cases: https://investomatica.com/income-tax-calculator/portugal
Income Before Tax 80 000 €
Income Tax - 25 472 €
Solidarity Rate Tax 0 €
Social Security - 8 800 €
Total Tax - 34 272 €
Take Home Pay 45 728 €
Total Deductions - 8 800 €
Average Tax Rate 42,8 %
@binarycrusader: I can‘t reply below. It‘s not 35% but 34,75%. It‘s easy to find that online and this rate is not depending on the person. A foreigner or nomad does by definition not have a Portuguese employer. They have to pay the employer part themselves. It‘s that simple.
@binarycrusader: It‘s mentioned on countless sites related to the NHR and Golden Visa and all of these things. I talked this through with two Portuguese accountants. Is that enough?
> Furthermore, that social security contribution buys into one of best defined benefit pension schemes still available anywhere.
Ridiculous. It‘s not even close to being funded in the long term. It‘s one of the worst on the continent where all of them them some problems.
During the IMF "bailout" pensions were reduced nominally. This was a political choice, and the party that did that will never win an election again as long as all those pensioners live.
https://taxsummaries.pwc.com/portugal/individual/taxes-on-pe...
More importantly the social security is applied in full as well and it‘s 11% for the employee and 23% for the employer and if there is no Portuguese employer it‘s 34% on top of the regular taxes.
There are many options to work around this, all legal and there on purpose. I‘m not denying that. My point is only that these options are necessary and fair.
They were built in the 80s/90s, I'm not sure of the funding, but I doubt it was foreign investment (perhaps the EU? Portugal government?).
The reason why there is not enough housing in central Lisbon/Porto is because much of it was turned over to short term lets like AirBnB. This has resulted in much needed renovation (privately funded), but has also resulted in entire neighborhoods being eviscerated of local/long term residents.
Are there really so many digital nomads in Portugal that they raise prices? Airbnb is certainly a factor (although a lot of airbnb inventory is not houses one would like to use as home), but i think the #1 factor is the golden visa. It pumps up the prices of mediocre homes because their owner are not feeling the pressure to sell and are waiting for the big fish.
And it is easy enough to build some concrete boxes with a nice view a long way from anywhere that a Portuguese person or family might want to actually live, and turn it over to a golden visa seeker for that cool half mil euro (or whatever it is). I can point them out to you the next time you come by!
Even here, the situation is trivial: they need to pay more. As simple as that.
This is a huge problem in essentially all of Southern Europe, not just Portugal. Frankly, it's "not that bad" in Portugal, compared to for example Northern Spain.
Currently this situation is masking the same problem in North West Europe (.uk, .ie, parts of .fr, .be, .nl and parts of .de). There is a vast shortage of younger people which is temporarily somewhat covered by immigration of skilled labor from places where it's a lot worse. However, that immigration is drying up, and already cannot cover the "natural" outflow (ie. pensioners, and people outright dying). And there's also emigration, which makes the picture pretty bad.
The problem is not just very visible in the financial situation, it is very visible in actual population statistics. Despite the complaints about it, even the inflows due to conflicts such as Afghanistan, Sudan, and the same will be true now with Israel, these conflicts cannot get Europe to breakeven anymore for even a month.