In a remarkable narrative of growth and transformation, Portugal’s sun-drenched coastline is drawing tech-savvy minds from across the globe. The technological metamorphosis that began in Portugal around 2010 has been nothing short of extraordinary, as narrated by Ricardo Marvão, head of the Portuguese innovation Advisory Firm Beta-i. As he explains, Portugal’s competitive edge on the international stage has significantly increased over the years, making it an appealing destination for several foreign founders.
These founders have decided to make Portugal their home-base, importing their expertise, establishing innovation centers, investing in local industries, and even setting up co-working spaces. However, Portugal’s appeal extends beyond its sunny shoreline—the nation’s lenient tax policies have also been instrumental in drawing overseas tech workers and entrepreneurs.
Foreign individuals, under the Non-Habitual Resident (NHR) statute, pay a fixed 20% rate on their income for a decade; a stark difference from local tax rates ranging between 15% to 48%. Additionally, the introduction of Golden Visas, allowing foreigners to trade investments for a Portuguese passport, also contributed to an influx of professionals and retirees. By 2022, 74,258 foreign individuals resided in Portugal under this regime—an impressive 28% rise from the previous year.
However, this decade of exponential growth may be nearing its turning point. In 2024, the Portuguese authorities plan to dismantle this advantageous tax regime for new entrants, leaving existing beneficiaries enjoying the 20% income tax rate unaffected until the completion of their 10-year period. Instead, the authorities aim to implement a new program with a narrower focus on attracting global scientists and researchers. The final details of this program, however, remain undisclosed.
Ricardo Marvão emphasizes the critical role this program played in attracting highly skilled individuals who wouldn’t be otherwise tempted to move to Portugal and establish themselves in the country. Despite the government’s reasons for revoking the tax benefit schemes, including the skyrocketing housing prices, there are still opposing perspectives on the move.
Rita de La Feria, a specialist in Portuguese tax law and a professor at the University of Leeds, supports the government’s decision, citing competitive disadvantages and strains on public services. However, the question remains: Will Portugal’s other competitive advantages be enough to keep attracting professionals without the NHR regime?
Regardless of the discontinuation of the NHR regime, the tech hub Portugal has fostered over the years will continue to strive to attract skilled migrants. Although the tax break has proved influential, its discontinuation may not be a deal-breaker, especially for individuals who have made Portugal their home since the boom of its tech industry. Like Swedish software designer Felix Lange, who arrived in Lisbon in 2016, the end of his NHR statute may not be the defining factor in his decision to stay or leave. Despite speculations and concerns, the future of Portugal’s tech industry remains brightly illuminated under the vibrant Mediterranean sun.
