Digital Nomad Showdown: Portugal, Spain, and Italy – IMI
6 min read
Siren Chen
Shenzhen
The COVID-19 pandemic has dramatically transformed the global work landscape. Between 2015 and 2023, the percentage of remote workers surged from 7% to 28%, representing a fourfold increase.
Attracting digital nomads offers significant economic benefits, as these remote workers contribute to the local economy through spending on housing, food, transportation, and other living expenses.
Add to the mix the favorable policies recently adopted by several of the countries listed below, and it is evident that digital nomadism has emerged as a prominent and modern work trend.
The rise of digital nomad visas
Digital nomad visas (DNVs) are specialized permits that allow individuals to live and work remotely in a foreign country for an extended period.
These visas aim to attract remote workers who contribute to the local economy without taking jobs from the local workforce. The emergence of DNVs is a clear indication of how countries are recognizing and capitalizing on the digital nomad trend.
Countries like Estonia, Barbados, and Croatia have pioneered DNVs. Estonia’s DNV, launched in August 2020, allows remote workers to stay in the country for up to a year, provided they meet certain income requirements and can prove their remote employment status.
Similarly, Barbados introduced the Welcome Stamp, which permits remote workers to live on the island for up to 12 months. Croatia’s DNV, introduced in January 2021, offers remote workers and their families a one-year residency permit.
Since then, an increasing number of countries have introduced visas for digital nomads, a demographic that is steadily becoming a significant component of the global workforce.
Popular places for DNVs
Several countries, particularly in Southern Europe, have tailored their visa and tax policies to attract digital nomads. By examining the policies of popular destinations like Spain, Portugal, and Italy, we can observe a clear trend toward accommodating this emerging workforce.
Spain: Spain recently introduced its DNV, allowing remote workers to stay in the country for up to a year, with the possibility of renewal. Applicants must prove an income of at least €2,140 monthly and have health insurance coverage.
Spain’s attractive climate, vibrant culture, and relatively low cost of living make it a popular destination for digital nomads. Additionally, Spain offers favorable tax rates for remote workers through the Beckham Law, which caps income tax at 24% for the first six years of residency.
Portugal: Portugal’s DNV, part of the country’s Tech Visa program, allows remote workers to live and work in Portugal for up to one year, with the possibility of renewal.
Applicants must show proof of income and have sufficient funds to support themselves. Portugal’s Non-Habitual Resident (NHR) program provides significant tax breaks for foreign residents, including digital nomads. It offers a flat 20% tax rate on income earned in Portugal and exemptions on foreign income for the first ten years of residency.
Italy: In April this year, Italy officially launched its DNV. This country attracts remote workers from all over the world with its captivating history, breathtaking scenery, and dynamic culture.
Applicants must have a minimum annual income of €28,000 and health insurance. Italy also offers tax incentives to attract remote workers, such as a 50% exemption on income taxes for up to five years.
IMI Pro Members can check IMI’s Complete Digital Nomad Visa Guide to explore and compare over 45 different DNVs throughout the world.
Direct comparison of tax and cost of living for digital nomads in Portugal, Spain, and Italy
To give a better idea about how these destinations compare, we want to use two people as examples:
- Alex: Annual income of 100,000 euros.
- Maria: Annual income of 500,000 euros.
We assumed the living costs for both as the average cost per couple for each destination.
Let’s compare the tax implications and cost of living for the two hypothetical digital nomads, Alex and Maria, in Portugal, Spain, and Italy.
Portugal
- Non-Habitual Resident (NHR) Regime offers tax exemptions on foreign income in Portugal, but remote workers may need to pay taxes in their country of employment
- Assuming all income is foreign, both Alex and Maria would pay no income tax in Portugal under the NHR regime
Cost of Living:
- Monthly Cost: €1,100 (mid-range estimate)
- Annual Cost: €13,200
Spain
- Beckham Law applies a 24% flat tax rate
- Alex’s Tax: €24,000 (24% of €100,000)
- Maria’s Tax: €120,000 (24% of €500,000)
Cost of Living:
- Monthly Cost: €1,300 (mid-range estimate)
- Annual Cost: €15,600
Italy
- Progressive Tax System with a 50% exemption
- Alex’s Tax: €15,320 (calculated using tax brackets and the 50% exemption)
- Maria’s Tax: €100,670 (calculated using tax brackets and the 50% exemption)
Cost of Living:
- Monthly Cost: €1,400 (mid-range estimate)
- Annual Cost: €16,800
Conclusion
For both entrepreneurs, Portugal remains the most financially favorable destination due to its tax regime and low cost of living. Italy also presents an attractive option with its tax incentives. Spain’s high tax means it proves too costly compared to its neighbors.
Future Trends and Outlook
The future of digital nomadism looks bright, with more countries expected to introduce DNVs and enhance their existing programs. According to a study by MBO Partners, the number of American digital nomads increased by 50% from 2019 to 2020, highlighting the growing appeal of this lifestyle.
As remote work becomes more entrenched in the global workforce, the demand for flexible living and working arrangements will likely continue to rise.
Technological advancements such as 5G and improved remote collaboration tools will further facilitate the digital nomad lifestyle. Governments and businesses must continue to adapt to these changes, creating supportive environments for remote workers.
The current active adjustment of visa and tax policies of various countries demonstrates that the digital nomad has become mainstream. Digital nomads have undoubtedly become a staple in the global workforce, driven by technological advancements and changing work preferences.
However, the rise of digital nomads may increase the complexity of taxation in various countries. Determining the source of income and conducting tax audits on domestic taxpayers will become more challenging for tax authorities.
Additionally, the unexpected cessation of favorable tax regimes, such as Portugal’s NHR, which will end on December 31, 2024, adds another layer of complexity to decision-making. The future remains uncertain regarding which country will attract the most digital nomads.
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Alexander Osetinskiy | 🇪🇸 Valencia, Spain | Residence and Citizenship by Investment, International Tax and Wealth Planning | 🇪🇸Spain | English, Russian | ||
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Antoine Saliba-Haig | 🇲🇹 Malta | Residence and Citizenship by Investment, International Tax and Wealth Planning | 🇲🇹Malta | English, Maltese, Italian | ||
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Csaba Magyar | 🇭🇺 Budapest, Hungary | Residence and Citizenship by Investment, International Tax and Wealth Planning | 🇭🇺Hungary | English, Hungarian, German | ||
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David Lawrence Lincoln | 🇵🇾 Asunción, Paraguay | Residence and Citizenship by Investment | 🇵🇹Portugal 🇬🇷Greece 🇲🇹Malta 🇮🇹Italy 🇪🇸Spain 🇧🇷Brazil 🇱🇻Latvia 🇭🇺Hungary | English, Portuguese | ||
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Demetris Demetriades | 🇨🇾 Paphos, Cyprus | Residence and Citizenship by Investment | 🇨🇾Cyprus | English, Greek | ||
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Elena Ruda | 🇦🇹 Vienna, Austria | Residence and Citizenship by Investment | 🇵🇹Portugal 🇲🇹Malta 🇪🇸Spain 🇮🇹Italy 🇭🇺Hungary 🇲🇺Mauritius | English, Russian, German | ||
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Gökçe Emer | 🇹🇷 Istanbul, Turkey | Residence and Citizenship by Investment | 🇵🇹Portugal | English, Turkish | |
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Joana Ferreira Reis | 🇵🇹 Lisbon, Portugal | Residence and Citizenship by Investment | 🇵🇹Portugal | English, Portuguese, Spanish | ||
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Mo Shaban | 🇭🇺 Budapest, Hungary | Residence and Citizenship by Investment | 🇭🇺Hungary | English, Farsi | ||
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Navdeep Singh | 🇱🇻 Riga, Latvia | Residence and Citizenship by Investment | 🇱🇻Latvia | English, Hindi | ||
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Nerses Isajanyan | 🇦🇲 Yerevan, Armenia | Residence and Citizenship by Investment | 🇦🇲Armenia | English, Armenian | ||
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Roberts Valpiters | 🇱🇻 Riga, Latvia | Residence and Citizenship by Investment | 🇱🇻Latvia | English, Russian, Hindi, Latvian | ||
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Rogelio Caceres | 🇺🇸 Miami, US | Residence and Citizenship by Investment | 🇵🇹Portugal Greece 🇲🇹Malta 🇱🇻Latvia 🇪🇸Spain | English, Spanish | ||
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Siren is the Group Head of Project Research and Development at Globevisa, the world’s largest investment migration company, which she joined in 2013.
She is also a member of the company’s Executive Committee.
A China-licensed attorney who studied Internal Law at Zhongnan University of Economics and Université de Cergy-Pontoise, she has more than a decade of experience from the immigration industry.
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