Portugal declares war on digital nomads: the attempt to attract talent has ended up decimating its population

Portugal was able to jump on the wave of teleworking like few others right after the pandemic. As soon as restrictions were lifted, the Portuguese government launched a series of fiscal measures to attract highly skilled digital nomads who would serve as a local growth pole by encouraging consumption.

On paper, it was a good plan. The problem is that the local market adapted to the economic capabilities of these new neighbours, forgetting about the meager salaries and purchasing power of the Portuguese themselves, who could not even afford to rent a home. And what had to happen happened: young Portuguese are leaving Portugal.

Digital nomads and tax privileged individuals. In 2022, Portugal introduced its “digital nomad visa”. This visa allows teleworkers from countries with stronger economies. One of the few requirements needed To obtain this visa, it was necessary to have a work income of at least four times the Portuguese Minimum Interprofessional Salary. According to Portugal Newsas of January 2024, has risen to 820 euros, leaving the salary for digital nomads at 3,280 euros to access the digital nomad visa in Portugal.

To encourage the arrival of digital nomads with pockets full of money, Portugal introduced a series of tax breaks. However, the measure has only widened the gap between newcomers and locals who, in addition to earning less and paying more for goods, must pay more taxes. Like Spain and other European countries, Portugal froze this tax exemption at the beginning of 2024.

Portuguese talent drain. Efforts to attract foreigners to Portugal have generated great collateral damage: Portugal now faces a serious brain drain among its young people. According to data from the Lisbon Emigration Observatory published by Schengen News25% of the Portuguese population lives outside Portugal.

Almost 40% of young Portuguese graduates emigrate every year in search of better job opportunities, according to data of Business Roundtable Portugal. Vítor Ribeirinho, CEO of KMPG in Portugal, told this newspaper: “We are reducing the ability to retain the best. The government and everyone has to understand that something has to be done about young people. If we don’t do it, we run the risk of them starting their careers abroad.” The manager pointed to salaries as the decisive factor in stopping the situation.

The reason: low wages, expensive housing. The minimum monthly wage in Portugal is 820 euros, and 50% of the population earns less than 1,000 euros per month, according to Euronews. This corroborates the estimate of average wages in Europe, which places Portugal at the bottom of the European wage scale, ahead only of Greece, Slovakia and Hungary. consolidated data According to the 2021 National Statistics Institute (INE) data, the average monthly salary in Portugal is 1,289.50 euros. Provisional data for 2024 indicate an average salary increase of 4.3% compared to 2023, rising to 1,463 euros, Portugal News.

For its part, the price of rents in Portugal has increased by an average of 10.5% in the last year, according to data INE. This increase in the cost of living seriously affects local residents, who, unable to access a housing market with reasonable prices, intensifies the emigration of young people in search of better conditions.

Squaring the circle of nomads. The Portuguese government is trying to balance attracting foreign investment and improving local conditions. Fortune published Portugal’s Prime Minister Joaquim Miranda Sarmento announced the reintroduction of tax advantages for foreigners. Among these measures was the restoration of the reduced 20% tax rate on wages and income for certain “high added value” jobs, while excluding the exemption for dividends, capital gains and pensions.

The reinstatement of this exemption seeks to re-present Portugal as an attractive destination for digital nomads, navigating a delicate balance between attracting qualified foreigners and caring for the well-being of its local population.

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