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LISBON – Portugal has made a big bet on attracting “digital nomads” – and their money – to the country, but when it comes to retaining them, its hand may fall short.
Belgian entrepreneur Jan Deruyck, who moved to Portugal in 2021 with his wife Morgane to create women’s health startup Guud in “complete isolation” during the pandemic, is one of them. But a year and a half later, he’s out: “(They have) big ambitions, but there’s little execution.”
As COVID-19 spurred wealthy tech workers and entrepreneurs to work from anywhere (the nomadism in question), Portugal sought to attract them with tax breaks, exclusive visas, and the promise of year-round sunshine.
Now the country’s plan faces problems on both ends, as resistance from local residents grows amid rising housing prices and gentrification, and nomads themselves point to an administrative headache in settling down.
Protests against the digital nomad project reached the doors of November’s Web Summit, an annual technology fair based in Lisbon that last year attracted 71,000 attendees at maximum capacity.
“They invest 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 new entrepreneurs passed by.
Laying out the welcome mat
At first glance, Portugal (and more specifically Lisbon) seems like the perfect outpost for digital nomads, a happy accident of scenic views, affordable living, and flexible regulations. The global pandemic further pushed restless technicians into the arms of the country.
The country’s so-called golden visa scheme, which dates back to 2012, grants foreigners Portuguese residency in exchange for investing in the country; for example, purchasing old or dilapidated real estate worth at least 350,000 euros. More recently, it has served as a draw for investment in technology and the workers that come with it.
According to Nomad List, a web platform for hypermobile workers, from In December, Lisbon welcomed 15,800 digital nomads. The city is also among the top destinations for nomads, especially women, in the The website’s latest annual report “The State of Digital Nomads”.
While the initial beneficiaries of the policy came more from China and Latin America, in 2020 Americans began arriving in droves: in September 2022, the United States was on the way to becoming the country with the largest number of golden visa holders.
Thanks to the Web Summit for the change in visas for technology workers: it is “one of the reasons why Lisbon entered the map of Silicon Valley entrepreneurs,” said Armand Arton, founder of the Global Citizen Forum, a club of wealthy members. cosmopolitans. “Then COVID hit and we started getting calls from wealthy American families saying they wanted a residency permit to enter Europe at any time (regardless of travel restrictions). “They got golden visas by investing in technology companies.”
Not to be left out, EU citizens 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 charges a flat rate of 20 percent. percent on the income generated in Portugal. high-value professional activities. Running a business or working in the technology field may qualify for such activities, making the plan attractive to digital nomads.
The other wild card: cryptocurrency. As the price of bitcoin soared during the pandemic (before plummeting in the spring and summer of last year), cryptocurrencies careerists They were on the hunt for a friendly jurisdiction where their profits wouldn’t be taxed down to a pittance. Portugal, which then had no tax on capital gains derived from cryptocurrencies, fit the bill.
“The funny thing is that people say, ‘Not taxing (cryptocurrencies) was a very smart decision,'” Portuguese venture capitalist Stephan Morais told POLITICO. “It’s not very smart: no one in the government realized there was anything to tax.”
A cryptocurrency conference soon emerged in Lisbon, which “cemented” the city’s status as a crypto haven, according to Hugo Volz Oliveira, secretary general of the crypto-friendly Instituto Nueva Economía think tank.
It’s one thing to attract promising entrepreneurs. Another is to retain them and ensure that their presence does not annoy the locals, something Portugal is struggling to come to terms with.
Deruyck, Guud’s co-founder, first liked the “grand vision” promoted by Lisbon’s social democratic mayor, Carlos Moedas, who was also European commissioner for innovation.
Now, however, Deruyck said the country has made a classic startup mistake: It promised a vision it never fully executed. Business owners expect a certain level of service in their daily lives – administration, child care, healthcare – and Portugal is struggling to meet it, Deruyck said.
“There is a lot of bureaucracy; “the government acts very slowly and does not even make it easy to register as an entrepreneur,” he said, adding that he and his wife have also had difficulty finding help with daycare and cleaning.
Deruyck lived in Sintra, 30 kilometers from Lisbon, which could also affect 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 the short-term rental platform Airbnb, popular among digital nomads, for driving out locals.
“Now we have neighborhoods that are mainly Airbnb,” Ana, the Portuguese professor, said at a protest on the opening night of Web Summit. “We don’t have our houses anymore.” Nearby, activists from the housing advocacy group Habita held signs that read: “1 digital nomad = many forced nomads.”
The protest was an inconvenience for Moedas, who appeared on the Web Summit stage two days later alongside Airbnb co-founder Nathan Blecharczyk, touting the “remote work revolution.”
Speaking to POLITICO after his appearance, the Lisbon mayor defended his goal of making Lisbon “the innovation capital of Europe” and said Portuguese institutions must address “both sides of the coin” when it comes to attracting talent .
“I am building 1,000 homes for people who are homeless or cannot pay rent. I launched an important plan to renew neighborhoods that were very old,” Moedas said. Critics “must understand that there is no dichotomy” between attracting outsiders and caring for locals.
Portugal is now showing signs of reining in some of the excesses that have made it a hit among digital nomads.
The Portuguese socialist prime minister, Antonio Costa, hinted at the Web Summit plan to discard the golden visa plan, saying it had “done its job.” However, later in November, Portuguese parliamentarians, including those from Costa’s ruling Socialist Party, rejected a Communist Party proposal to scrap the plan in 2023. comments to the pressA government spokesman said the matter was still being evaluated and that a vote in parliament was premature.
A new “digital nomad” visa, released 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 little consolation to the rich of the world accustomed to simply floating around the country. and stay still.
Changes are already coming for cryptocurrency enthusiasts: with the EU Markets in cryptoasset regulations Portugal, which will come into force soon, decided to align itself with the rest of the bloc, filling regulatory gaps.
“We did a study comparing cryptocurrency legislation in the European Union. And we were the only country that lacked legislation in this regard,” António Mendonça Mendes, Portugal’s Secretary of State for Fiscal Affairs, told POLITICO in October.
In November, Portugal’s 2023 budget law introduced a 28 percent tax on capital gains from crypto assets, unless the assets have been held for more than a year. The policy also created new tax rules for cryptocurrency companies and organizations that mint cryptocurrencies through the intensive energy “mining” process.
Volz Oliveira of the New Economy Institute said the changes are broadly acceptable to Portugal’s crypto industry, which had furiously lobbied the government on the legislation and managed to get some parts of it, such as taxes on peer-to-peer crypto transactions. , removed.
However, changes to the way cryptocurrencies are taxed are pushing some out the door: “Some people are canceling their plans to move here or initiating plans to move,” Volz Oliveira said.
Center-right Moedas, for his part, said that while clarity on cryptocurrencies and taxes is welcome, “when you start taxing innovation too early, it can kill innovation. That is why I am not aligned with the government on this.”
Their caution is not unfounded: competitors, sensing an opportunity, are ready to take advantage of Portugal’s cooling. On December 22, Spain “Startup Law” was published in the country’s official newspaper, 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 always vote with their feet and move somewhere else if it suits them. For Deruyck, his stay in Portugal has come to an end. His new destiny? Brussels, closer to traditional European startup centers such as Paris and London.
However, he does not feel deceived by the promises of digital nomads in Portugal: “For us it was a good experience. But, as with many countries, they have established an interesting plan 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 residence of the Belgian businessman.