Portugal has long been a favorite for digital nomads due to its tax benefits, affordable living, and great quality of life. However, recent changes to its Non-Habitual Residency (NHR) program – replaced by NHR 2.0 in March 2025 – have raised questions about its appeal. The updated program limits tax perks to highly qualified professionals working in Portugal, leaving many remote workers excluded. At the same time, other countries like Spain, Greece, Croatia, and Mexico are stepping up with attractive tax breaks and visa options.
Here’s what you need to know:
- Portugal’s new NHR 2.0 offers fewer benefits, focusing on Portuguese-source income and excluding many foreign earnings.
- U.S. citizens face compliance challenges, including double taxation risks.
- Competitors like Spain, Greece, Croatia, and Mexico now provide more accessible options for remote workers.
- Cost of living in Portugal remains moderate, but tax advantages have decreased.
Portugal still offers a great lifestyle, but the NHR changes mean it’s no longer the clear leader for digital nomads. Exploring alternatives may be worthwhile, especially for those prioritizing tax savings.
Portugal’s NHR Changes and Their Impact on Digital Nomads
Portugal’s landscape for digital nomads shifted significantly on March 31, 2025, when the original NHR program closed its doors to new applicants. In its place, the country introduced NHR 2.0, officially called the Fiscal Incentive for Scientific Research and Innovation (IFICI) Program. This new framework brings a tighter focus and changes how digital nomads can access tax incentives in Portugal.
What NHR 2.0 Brings to the Table
Under the original NHR program, Portugal became a magnet for digital nomads, largely due to its generous tax benefits. With NHR 2.0, however, the scope has narrowed considerably. Now, only highly qualified professionals, researchers, and entrepreneurs who are actively employed or serving on boards of eligible Portuguese companies can benefit. This leaves many digital nomads – particularly those working for foreign clients or running online businesses – out of the equation.
For those who meet the criteria, NHR 2.0 offers a flat 20% tax rate on Portuguese-source employment or self-employment income for up to 10 consecutive years, with no option to renew. Foreign income, such as dividends, interest, capital gains, and rental income, remains exempt from Portuguese taxes as long as it’s taxed in the source country or originates from a country with a Double Taxation Agreement (DTA) with Portugal. Portugal currently has DTAs with 81 countries, including the United States.
However, there’s a major downside for retirees: foreign-sourced pensions are no longer tax-exempt under NHR 2.0. These pensions are now taxed at Portugal’s progressive rates, which range from 14.5% to 53%.
The U.S. Digital Nomad Challenge
For U.S. digital nomads, the updated program introduces additional hurdles. Because U.S. citizens are taxed based on citizenship rather than residency, they must file tax returns with the IRS regardless of where they live. This creates the possibility of double taxation, which the U.S.-Portugal tax treaty aims to mitigate.
Unfortunately, the treaty includes a "saving clause" that allows the U.S. to tax its citizens as if the treaty didn’t exist. To avoid double taxation, U.S. expats often rely on the Foreign Tax Credit (FTC) or the Foreign Earned Income Exclusion (FEIE). For 2025, the FEIE limit has increased to $130,000, offering some relief for moderate-income earners.
Extra Compliance Obligations for Americans
On top of Portugal’s tax requirements, American digital nomads must also handle additional U.S. reporting obligations. These include filing an FBAR (FinCEN Form 114) if foreign account balances exceed $10,000 at any point during the year, and submitting Form 8938 (FATCA) if foreign assets surpass $200,000 for single filers or $400,000 for joint filers at year-end.
These reporting requirements add layers of complexity and extra costs, which can further reduce the appeal of relocating to Portugal, especially for digital nomads who no longer qualify for the same tax benefits.
What This Means for Digital Nomads
The transition from the original NHR program to NHR 2.0 marks a significant shift in Portugal’s attractiveness as a hub for digital nomads. The stricter eligibility requirements, reduced tax advantages, and additional compliance burdens make it a less appealing option for many remote workers.
Portugal’s 23% VAT rate – standard for Europe – remains unchanged. But with fewer tax perks under NHR 2.0, the overall cost of living and operating a business in Portugal becomes harder to justify when compared to other countries actively courting digital nomads.
Ultimately, these changes reposition Portugal from a broad destination for digital nomads to a more niche market, appealing mainly to highly skilled professionals and entrepreneurs ready to establish stronger ties within the country.
1. Portugal (Post-NHR Changes)
Portugal remains a top destination for digital nomads, even with the adjustments to its Non-Habitual Residency (NHR) program. The country’s appeal now depends on how individuals qualify for the updated rules and navigate its changing tax policies.
Taxation of Foreign Income
The revised NHR program still offers tax perks, but with some changes. Certain types of foreign income – like dividends, interest, capital gains, and rental income – can be exempt from Portuguese taxes if they’ve already been taxed abroad or fall under a Double Taxation Agreement. However, remote workers who don’t meet these conditions are subject to Portugal’s standard progressive tax rates.
For U.S. digital nomads, the tax situation is more complex. They must continue filing with the IRS and may need to leverage tools like the Foreign Earned Income Exclusion or Foreign Tax Credits to avoid double taxation.
Portugal’s tax policies are just one piece of the puzzle, as various residency options also shape its attractiveness for remote workers.
Residency Requirements
Portugal offers several residency pathways tailored to digital nomads and remote workers:
- The D7 Visa, often called the Passive Income Visa, requires proof of a stable income that meets or exceeds the national minimum wage.
- The D2 Visa targets entrepreneurs planning to start a business in Portugal. Applicants need to show sufficient funds and submit a viable business plan.
- A specific visa for digital nomads has also been introduced. This visa requires proof of steady remote income above a set threshold and provides an initial residency period with renewal options.
Both the D7 and D2 visas can lead to permanent residency and eventually citizenship, as long as applicants meet residency, language, and integration requirements.
Cost of Living
Portugal’s cost of living varies widely depending on the location. In Lisbon, rental prices are higher, while Porto and smaller towns offer more affordable housing options. Day-to-day expenses for dining, groceries, and transportation are generally reasonable, but they also depend on lifestyle and personal choices.
Quality of Life and Infrastructure
Portugal delivers on quality of life with its reliable high-speed internet, modern healthcare system, and efficient public transportation. The country is known for its safety and its warm, welcoming expat community. Add to that a mild climate with plenty of sunshine, especially along the coast, and Portugal becomes an appealing base for digital nomads. Even with the updated NHR program, the combination of lifestyle perks and infrastructure keeps Portugal on the radar for remote workers.
2. Spain
Spain has emerged as a strong option for digital nomads, especially as Portugal’s recent NHR changes have made it less appealing for some. With its supportive framework for remote work, Spain offers an attractive alternative.
Taxation of Foreign Income
Spain’s Beckham Law provides significant tax benefits for eligible individuals, offering reduced rates on income earned within Spain during their initial residency period. For those who don’t qualify, progressive income tax rates apply. However, in certain cases, income earned abroad may be exempt, depending on residency conditions.
Residency Requirements
Spain offers a variety of visa options tailored to remote workers:
- The Non-Lucrative Visa requires proof of sufficient passive income.
- Self-employed professionals have specific visa pathways.
- The Digital Nomad Visa is designed for individuals working for international employers.
These visas not only allow digital nomads to live and work in Spain but can also lead to permanent residency and, eventually, citizenship. Compared to Portugal’s stricter NHR 2.0 rules, Spain’s visa options provide more accessible pathways for long-term residency.
Cost of Living
Spain’s cost of living depends on where you choose to settle. Larger cities like Madrid and Barcelona come with higher rental prices, while smaller towns and rural areas offer more affordable options. Daily expenses, such as eating out and public transportation, remain budget-friendly in most parts of the country.
Quality of Life and Infrastructure
Spain combines modern infrastructure with a high standard of living. It offers reliable high-speed internet, an efficient public transportation system, and excellent healthcare services. Add to that the sunny climate, diverse landscapes, and thriving expat communities, and it’s easy to see why Spain is a top choice for digital nomads looking for both comfort and convenience.
3. Greece
Greece has become a popular spot for digital nomads, thanks to its affordable lifestyle, favorable tax policies, and the charm of its Mediterranean culture. Below, we’ll break down Greece’s tax system, visa options, cost of living, and infrastructure to help you decide if it’s the right fit for your remote work lifestyle.
Taxation of Foreign Income
Greece uses a progressive tax system, with rates ranging from 9% to 44%. For freelancers and self-employed individuals, there are specific provisions that can help reduce the overall tax burden, especially for those with moderate earnings.
Residency Requirements
Greece offers several visa options tailored to remote workers. The Digital Nomad Visa allows eligible individuals to live and work in Greece for up to 12 months, with the possibility of extension if income requirements are met. For those looking to stay longer, the Golden Visa program is an option. This program requires a real estate investment starting at €250,000, although properties in prime locations may demand a higher investment.
Cost of Living
Living in Greece is relatively affordable compared to much of Western Europe. For example:
- In Athens, a one-bedroom apartment in a good neighborhood costs between €400 and €700 per month.
- In Thessaloniki, similar accommodations range from €300 to €500.
- Smaller cities or islands often offer even lower rental prices.
Daily expenses like dining out and public transportation are also wallet-friendly. Depending on your location and lifestyle, you can live comfortably on a monthly budget of around $1,500 to $2,500.
Quality of Life and Infrastructure
Greece has been upgrading its digital infrastructure, with high-speed fiber internet now widely available in cities and even on some islands. Co-working spaces are modern and plentiful, and healthcare services are accessible, with many English-speaking professionals. The Mediterranean climate, offering over 250 sunny days a year in many regions, encourages an active, outdoor lifestyle. Plus, Greece’s location makes it easy to travel across Europe, adding to its appeal for remote workers.
4. Croatia
Croatia combines European charm with affordability, making it an appealing destination for digital nomads. With its breathtaking Adriatic coastline, improved digital infrastructure, and a straightforward visa process, the country is becoming a go-to spot for remote workers looking for alternatives to more traditional hubs. Like Spain and Greece, Croatia is gaining attention for its mix of tax benefits, lifestyle perks, and modern infrastructure. Let’s dive into what makes Croatia a standout choice for digital nomads, including its tax policies, residency options, cost of living, and overall quality of life.
Taxation of Foreign Income
Croatia’s tax system is friendly to non-residents. It only taxes income earned within Croatia, leaving foreign income untouched – a big plus for remote workers with international clients.
Residency Requirements
In January 2021, Croatia introduced its Digital Nomad Visa. This visa allows remote workers to live in the country for up to a year without becoming tax residents. Applicants need to demonstrate a stable monthly income and have valid health insurance. Additionally, self-employed individuals can apply for temporary residence permits, which are valid for a year and can be renewed after a 30-to-60-day processing period.
Cost of Living
Croatia offers a comfortable lifestyle at a reasonable cost. Rent and daily expenses are affordable, though they can vary depending on the location. Whether you’re in a bustling city or a quieter coastal town, living on a moderate budget is very achievable.
Quality of Life and Infrastructure
Croatia has made significant strides in upgrading its digital infrastructure. High-speed fiber internet is available in cities, and connectivity in smaller towns is steadily improving. The country also boasts a growing co-working scene and reliable Wi-Fi in most cafés, making it easy to work remotely. Add to this a pleasant climate, rich history, and endless outdoor activities, and it’s clear why Croatia is an increasingly popular choice for digital nomads.
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5. Mexico
Mexico has become a favorite spot for digital nomads, thanks to its affordability, vibrant lifestyle, and close proximity to the United States. While the country doesn’t have a visa specifically for digital nomads, it offers flexible residency options that make it an appealing alternative to Portugal’s now-restricted NHR program. With its rich history, varied landscapes, and expanding expat communities, Mexico provides a strong draw for remote workers. Let’s dive into how its residency policies and tax system benefit digital nomads.
Residency Requirements
Mexico’s Temporary Resident Visa is a popular choice for remote workers. This visa allows individuals to stay for up to one year, with the option to renew annually for a maximum of four years. To qualify, applicants need to show financial stability, typically requiring proof of a monthly income ranging from $2,600 to $4,100, or savings between $43,000 and $73,000. The application fee is reasonably priced, ranging from $40 to $51.
One key requirement is that applicants must work for a non-Mexican company or earn income from sources outside Mexico. After arriving in the country, visa holders have 30 days to register with the National Migration Institute (INM) to receive their physical temporary resident card.
Taxation of Foreign Income
Mexico operates under a territorial tax system, meaning it only taxes income earned within its borders. For digital nomads working for non-Mexican companies, this setup allows them to keep their foreign earnings untaxed.
Cost of Living
One of Mexico’s biggest perks is its affordability. Compared to European destinations like Portugal, living costs are significantly lower. Cities such as Mexico City, Guadalajara, and beach towns like Playa del Carmen offer a high quality of life at a fraction of the price. Housing, food, and transportation are budget-friendly, allowing digital nomads to enjoy a comfortable lifestyle without overspending.
Quality of Life and Infrastructure
Mexico combines practical benefits with a high standard of living. The country has made significant strides in digital infrastructure, with reliable high-speed internet now widely available in major cities and popular remote work hubs. Co-working spaces are plentiful, offering remote workers a productive environment.
For American digital nomads, Mexico’s proximity is a huge advantage. The shared time zones make it easier to stay connected with clients or teams back home. Beyond work, Mexico’s diverse geography caters to a variety of lifestyles – from bustling cities to serene beach towns and charming colonial areas. Its rich cultural experiences and welcoming expat communities make settling in both enjoyable and straightforward.
Advantages and Disadvantages
Every destination comes with its own set of pros and cons for digital nomads. Here’s a closer look at how these locations stack up when it comes to taxes, residency rules, cost of living, and overall quality of life.
| Destination | Taxation | Residency Requirements | Cost of Living | Quality of Life |
|---|---|---|---|---|
| Portugal (Post-NHR) | Standard tax rates now apply, as the NHR benefits have been replaced by the IFICI incentive. | The D8 visa requires a steady monthly income of at least €3,480. A proposed law may extend citizenship eligibility from 5 to 10 years. | Moderate to high, especially in major cities. | Strong infrastructure, EU access, and stable governance (unemployment rate of 6.2% as of January 2025). |
| Spain | Offers tax policies favorable to expatriates, though specific details are not provided in the sources. | Digital nomad residency requirements are not fully outlined in the available materials. | Costs vary by region. | Known for excellent healthcare and a vibrant lifestyle. |
| Greece | Competitive tax measures for foreign income are mentioned, but exact policies are not detailed. | Specifics on digital nomad visa requirements are not provided in the sources. | Affordable, especially outside tourist hotspots. | Known for its pleasant weather and rich cultural experiences. |
| Croatia | Follows a territorial tax system, though detailed policies are not specified. | Offers renewable digital nomad visas, but further details are lacking. | Costs vary, with coastal areas often being more expensive. | Famous for its natural beauty and coastal living. |
| Mexico | Uses a territorial tax system that exempts foreign income, though further specifics are not detailed. | Offers temporary residency options, but precise income requirements are not outlined. | Generally affordable compared to European countries. | Proximity to the United States and diverse landscapes add to its appeal. |
Portugal, once a top choice for digital nomads due to its tax perks, has seen its attractiveness shift with the end of the NHR program. While it still boasts a high quality of life, excellent infrastructure, and EU access, the loss of these tax benefits is a notable drawback. The regulatory changes could impact its long-term competitiveness, especially for those prioritizing tax optimization.
Meanwhile, alternatives like Spain, Greece, Croatia, and Mexico are stepping up with appealing packages. Spain and Greece offer EU residency benefits alongside a comfortable lifestyle, Croatia combines coastal charm with EU membership perks, and Mexico stands out for its affordability and proximity to the U.S.
Portugal’s economic stability, reflected by its 6.2% unemployment rate in January 2025, remains a strength. However, the adjustments in its tax and visa policies may prompt digital nomads to reconsider its position, especially when compared to destinations with more predictable tax and residency options. For those weighing their options, Portugal remains a contender but requires careful evaluation against its competitors.
Conclusion
Portugal remains an attractive destination for digital nomads, but recent changes to residency rules and tax benefits have reshaped its appeal. While the country still offers a vibrant lifestyle, excellent infrastructure, and access to the EU, the financial incentives that once drew many nomads have become less favorable.
For digital nomads, this means taking a closer look at the trade-offs. Reduced tax perks and stricter residency requirements now call for a careful evaluation of costs, visa options, and lifestyle priorities.
Ultimately, the decision comes down to what matters most. If minimizing taxes is the top priority, exploring other destinations might be worth considering. But for those who value access to Europe and Portugal’s high quality of life, it may still be a worthwhile choice.
FAQs
How do Portugal’s updated NHR rules affect digital nomads working for foreign clients?
Portugal terminated its NHR tax regime in 2024, which previously provided foreign income exemptions and 20% flat tax rates Top Virtual Address Providers for LLCs in 2025. The new IFICI program only covers scientific research and innovation work.
Impact: Most digital nomads (marketing, consulting, design) no longer qualify for special tax treatment and face standard Portuguese tax rates if resident 183+ days. The generous tax benefits that attracted remote workers to Portugal are essentially gone unless you’re in qualifying research fields.
Portugal’s Updated Non-Habitual Residency (NHR) Program
Portugal’s revamped Non-Habitual Residency (NHR) program, often called NHR 2.0, still provides appealing tax benefits for digital nomads. One standout feature is the 20% flat tax rate on qualifying foreign-sourced professional income. This allows remote workers to enjoy considerable tax savings while sidestepping the complications of double taxation.
That said, the updated program has introduced stricter application procedures and demands more detailed documentation. While these adjustments may add a layer of complexity to the process, Portugal continues to be an enticing destination for digital nomads. Its attractive tax policies, excellent quality of life, and thriving remote work community make it a top choice for those seeking a balance between work and lifestyle.
How can U.S. digital nomads avoid double taxation while living in Portugal under the updated NHR rules?
U.S. digital nomads settling in Portugal under the revised Non-Habitual Residency (NHR) program can sidestep double taxation thanks to the U.S.-Portugal tax treaty. This agreement ensures you won’t pay taxes twice on the same income. On top of that, the Foreign Tax Credit (FTC) allows U.S. citizens to apply taxes paid in Portugal as a credit against their U.S. tax obligations.
To make the most of these benefits and stay compliant with both U.S. and Portuguese tax laws, it’s wise to seek advice from a tax professional experienced in international regulations. With the right guidance, you can reduce your tax liabilities and enjoy the perks of working remotely in Portugal.
What are the main differences between Portugal’s D7, D2, and digital nomad visas in terms of residency and benefits?
The D7 visa is a great option for people with a steady passive income, like retirees or those earning through investments. To qualify, you need to demonstrate an annual passive income of at least $10,440 (roughly $870 per month) and secure a place to live in Portugal. This visa also requires very little physical presence in the country.
The D2 visa is aimed at entrepreneurs and investors who want to start or invest in a business in Portugal. Your residency depends on actively contributing to the economy and keeping your business operational within the country.
The digital nomad visa (D8) is specifically for remote workers. To apply, you’ll need to show a monthly income of at least $3,480. This visa allows you to stay in Portugal for up to 12 months initially, with options to renew. It’s designed for those working remotely or earning through freelance projects.
To sum it up: the D7 is for passive income earners, the D2 is for business-minded individuals, and the D8 is for remote workers who meet the income criteria.
