Portugal’s digital nomad bubble is about to burst – POLITICO

LISBON — Portugal have been betting big on attracting “digital nomads” – and their money – to the country, but when it comes to keeping them their hand may miss.

Belgian entrepreneur Jan Deruyck, who moved to Portugal in 2021 with his wife Morgane to create women’s health startup Guud in “total isolation” during the pandemic, is one of them. But a year and a half later, he is out: “[They have] huge ambitions, but little execution.

As COVID-19 enticed wealthy tech workers and entrepreneurs to work from anywhere – nomadism in question – Portugal sought to entice them with tax breaks, dedicated visas and the promise of sunshine. all year.

Today, the country’s agenda is facing problems on both sides, as resistance from local residents grows amid soaring property prices and gentrification, and nomads themselves report a administrative headache to settle.

Protests against the digital nomad project went to the doorstep of November’s Web Summit, an annual Lisbon-based tech fair that last year drew 71,000 attendees at full capacity.

“They’ve invested too much money in these things, and at the same time, we can’t live in the city anymore,” said Ana, a teacher protesting on opening night, as a parade of entrepreneurs in startup passed.

Installation of the welcome mat

At first glance, Portugal – and more specifically Lisbon – looks like the perfect outpost for digital nomads, a happy accident of vistas, affordable living and flexible regulations. The global pandemic has pushed restless technicians further into the arms of the country.

The country’s so-called golden visa program, which dates back to 2012, gives foreigners Portuguese residency in return for investing in the country – for example, buying old or dilapidated real estate worth £1,000. at least €350,000. More recently, it has served as an attraction for technology investments and the workers that come with them.

According to Nomad List, a web platform for hypermobile workers, from December, Lisbon was home to 15,800 digital nomads. The city is also among the top destinations for nomads, especially women, in the the latest annual “State of Digital Nomads” report from the website.

While the first beneficiaries of the policy came more from China and Latin America, in 2020 Americans began to pour in: in September 2022, the United States was becoming the country with the most golden visa holders.

Thank the Web Summit for the shift in visas to tech workers: It’s “one of the reasons Lisbon has landed on the map for Silicon Valley entrepreneurs,” says Armand Arton, Founder of the Global Citizen Forum, a membership club for the affluent. cosmopolitans. “Then COVID came along and we started getting calls from wealthy American families saying they wanted a residence permit to enter Europe anytime. [regardless of travel restriction]. They got golden visas by investing in tech companies.

Not to be outdone, EU citizens have also flocked to Portugal to work remotely during the pandemic, taking advantage of a “non-habitual resident” tax regime that exempts foreign income from tax and applies a fixed rate of 20% on income generated by Portugal. professional activities with high added value. Running a business or working in technology may qualify for such pursuits, making the program appealing to digital nomads.

The other joker: cryptocurrency. As bitcoin’s price skyrocketed throughout the pandemic (before plummeting in the spring and summer of last year), cryptos arrived were looking for a friendly jurisdiction where their earnings would not be taxed down to a pittance. Portugal, then with no capital gains tax derived from crypto, fit the bill.

“What’s funny is that people say, ‘Not having taxes [on crypto] was a super smart move,” Portuguese venture capitalist Stephan Morais told POLITICO. “It’s not super smart: nobody in the government realized there was something to tax.”

A crypto conference soon erupted in Lisbon that “solidified” the city’s status as a crypto haven, according to Hugo Volz Oliveira, secretary general of pro-crypto think tank Instituto New Economy.

Execution …

It’s one thing to attract promising entrepreneurs. It’s another to keep them around – and to make sure their presence doesn’t get in the way of the locals, something Portugal are struggling to come to terms with.

Deruyck, the co-founder of Guud, initially liked the “grand vision” touted by the social-democratic mayor of Lisbon, Carlos Moedas, who is also a former European commissioner for innovation.

Now, however, Deruyck said the country made a classic startup mistake: He promised a vision he never fully executed. Entrepreneurs expect a certain level of service in their daily lives — administration, childcare, healthcare — and Portugal is struggling to deliver, Deruyck said.

“There is a lot of bureaucracy; the government is moving very slowly and not even making it easy to register as a contractor,” he said, adding that he and his wife had also struggled to find help with daycare and cleaning .

Deruyck lived in Sintra, 30 kilometers from Lisbon, which could also impact the availability of administration and services, he said.

Local residents also say Portugal’s infrastructure and housing stock are struggling to cope with the influx of newcomers. Some blame short-term rental platform Airbnb, which is popular among digital nomads, for crowding out locals.

“We now have neighborhoods that are mostly Airbnb,” Ana, the Portuguese language teacher, said during a protest on the Web Summit’s opening night. “We no longer have our homes. Nearby, activists from the housing advocacy group Habita held signs reading “1 digital nomad = many forced nomads”.

The protest was inconvenient for Moedas, who appeared on stage at Web Summit two days later alongside Airbnb co-founder Nathan Blecharczyk, touting the “remote work revolution”.

Speaking to POLITICO after his appearance, the mayor of Lisbon defended his goal of making Lisbon “the capital of innovation in Europe”, and said that Portuguese institutions must manage “both sides of the coin” when it’s about attracting talent.

“I’m building 1,000 homes for people who don’t have homes or can’t pay rent. I put in place a major plan to renew the neighborhoods that were very old,” Moedas said. Critics “need to understand that there is no dichotomy” between attracting foreigners and caring for locals.

… and the excesses

Portugal is now showing signs of mastering some of the excesses that made it a hit with the digital nomad crowd.

Portuguese Socialist Prime Minister Antonio Costa at the Web Summit alluded to plans to scrap the golden visa regime, saying it had “fulfilled its function”. Later in November, however, Portuguese MPs – including those from Costa’s ruling Socialist Party – rejected a Communist Party proposal to scrap the program in 2023. In comments to the pressa government spokesman said the issue was still being assessed and a vote in parliament was premature.

A new “digital nomad” visa, launched in october and allowing non-EU remote workers earning four times Portugal’s average salary to live in the country for up to a year, could provide an alternative if golden visas are eventually abolished – but that will be cold comfort for world’s rich accustomed to just rushing in and staying put.

Change is already coming for crypto enthusiasts: with the EU Cryptoasset Markets Rulebook Due to come into force soon, Portugal has decided to align itself with the rest of the bloc, filling regulatory gaps.

“We carried out a study comparing crypto legislation across the European Union. And we were the only country that lacked legislation on this,” António Mendonça Mendes, Portugal’s secretary of state for fiscal affairs, told POLITICO in October.

In November, the Portuguese finance law for 2023 introduced a capital gains tax on crypto-assets at 28%, unless the assets have been held for more than a year. The policy also created new tax rules for crypto companies and organizations that mint cryptocurrency through the energy-intensive mining process.

Volz Oliveira of Instituto New Economy said the changes were largely acceptable to the Portuguese crypto industry, which had been furiously lobbying the government on the legislation and had managed to get some parts of it, such as the taxation of peer-to-peer crypto transactions. , deleted.

Nonetheless, changes to how crypto is taxed are pushing some out the door: “A few people are canceling plans to move here or are considering moving,” Volz Oliveira said.

Center-right Moedas, for his part, said that while clarity on crypto and taxes is welcome, “when you start taxing innovation too soon, you can kill innovation. And so I don’t disagree with the government on this.

His caution is not without merit: the competitors, sensing an opening, are ready to take advantage of the cooling of Portugal. On December 22, Spain “Law on startups” was published in the country’s official gazette, along with a series of measures to attract digital nomads, such as lower income tax rates and a special five-year visa.

Nomads with options and means can still vote with their feet, moving elsewhere if it suits them. For Deruyck, his stay in Portugal is over. His new destination? Brussels, closer to traditional European startup hubs like Paris and London.

He does not, however, feel cheated by promises of digital nomads from Portugal: “For us it was a good experience. But, like in many countries, they have an interesting system in place to attract people, but they forget to think about retention.”

Bjarke Smith-Meyer contributed reporting in Brussels.

This article has been updated to correctly reflect the residency of the Belgian entrepreneur.