As Portugal cracks down on special tax regimes for foreign residents amid skyrocketing rental costs that have priced locals out of their own neighbourhoods, could Spain soon be forced to do the same?
Digital nomads around the world raised their eyebrows when Portugal announced it would be scrapping its special tax regime for non-habitual residents from 2024. The U-turn comes after an influx of remote workers and digital nomads inflated the rental market, caused prices to spiral, and priced many local Portuguese out of their own neighbourhoods.
And now, following news that Spain’s Iberian neighbour is adopting a less welcoming stance to affluent and mobile foreigners, some are wondering if Spain could soon follow suit as there are similarities between what’s happening in both countries.
The Portuguese model, which attracted 16,000 digital nomads to the capital Lisbon alone, offered tax incentives to people who moved to the country, with foreign income largely tax-free and any income earned in Portugal taxed at just 20%.
Spain has a similar special tax regime for foreign remote workers called the ‘Beckham Law’ and recently passed a Startups Law with other fiscal and residency benefits for newcomers from overseas.
For some perspective, Portuguese citizens, who generally earn far less than these wealthier, remote workers on foreign salaries, can be taxed up to 48% on their income. Meanwhile, the cost of housing has gone up by a staggering 78% in a decade, according to a study by the Francisco Manuel dos Santos foundation.
After studying the impact such a large influx of foreign workers has had on locals and the local rental market, the Portuguese government announced this week that it will not continue with the tax-incentivised regime.
Portugal introduced numerous incentives to attract foreign money and talent in the early 2010s, and Spain did so soon after. For example, the Golden Visa was introduced in Portugal in 2012; Spain did so in 2013. Similarly, Portugal’s digital nomad visa was brought out in October 2022 and Spain rolled out its own a few months later in early 2023.
However, Portugal cancelled its Golden Visa in February 2023, there is no signs yet Spain will do the same, though the Spanish government is considering toughening up the visa conditions by increasing the €500,000 property price threshold which grants non-EU foreigners residency and other perks in Spain.
There is no indication either that Spain will scrap its Beckham Law – the equivalent of the now cancelled tax break for non-habitual residents in Portugal. This tax regime introduced in 2004 and named after the English footballer because he took advantage of it when he joined Real Madrid, essentially allows some foreign remote workers to pay tax in Spain as if they were non-residents at 24% up to €600,000, for a total of six years.
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