Although remote work was already a tendency, the Covid-19 pandemic forced companies and employees to implement remote work. The experience has been generally positive and the number of companies that stated that they wish to maintain remote work after the pandemic is over, is substantial. Either allowing employees to be fully remote workers or employing a mix of work from home and office work.
The goal is to create opportunities and challenges, both for the employer and for employees. Saving on office space, improving job satisfaction and finding talent outside their geographical zone of influence are the opportunities for the companies. In particular, they may start looking for talent in other countries, in particular in countries with lower wages.
There are factors that need to be taken into consideration contracting for remote work, for example the time differences.
Remote Work for the employees
For employees there are also benefits. Cutting on commute costs and time and being able to look for remote jobs outside their geographical area are things that remote workers are able to do. May inclusively accept jobs with lower wages while still improving their available income.
The remote work has definitely modified the way that people organize their daily schedule and balance their work life and free time activities. This mobility will allow employees, to move abroad looking for locations that give them better living conditions and tax benefits and do remote work from there. On the other hand, employers will be looking for employees abroad for certain functions, which will increase the number of remote work executed abroad.
Portugal Remote Work Opportunities
a) Cost of living and others. Portugal, and Lisbon in particular, has been one of the places that is in the top of preferences of digital nomads. Usually ranking high in best places to remote work due to reasonable cost of living, good internet and infrastructure. The perfect conditions to love remote work are created by a great Mediterranean weather just minutes from the beach safety, health, access to culture and fun.
Remote Work – What about the visas?
b) Easy visa. While European citizens do not require any visa, highly qualified employees or entrepreneurs would not have a problem in getting a visa. Filling the requisites to apply to the so called tech visa or maybe in the near future see a remote work visa being created as an incentive to bring to Portugal the digital nomads.
c) Beneficial tax regime for people in remote work conditions. From a tax perspective employees would likely be able to apply for a special non habitual tax resident status. A 20% tax on their income received in Portugal could grant be granted, while, as a general rule, tax from foreign origin would not be taxable.
Remote Work and Working conditions
d) Available qualified talent. The Portuguese education system, has been improving and ranks relatively high based on OCDE rankings and the number of workers with higher education has been increasing. Also, the percentage of Portuguese citizens speaking English as a second language is very high, especially if compared with other European countries. This puts Portugal high on the lists for foreign companies that may be looking for employees.
e) Salaries. Salaries in Portugal are not high, compared with other European Countries being the average gross salary in Portugal for an employee with a university degree around € 1600.00. Again this is a very favorable check for the companies that are starting to think outside their country and outside their salary standards. Once the remote work conditions are granted by the company, Portugal is definitely a country to take into consideration.
Remote Work challenges
Employing someone in a different country and on remote work regime brings challenges and such employers should be aware of the it:
a) Applicable Law. As a general rule Portuguese employment law shall apply to employees performing work in Portugal, even if the remote work is performed to a foreign entity.
b) Personal Data. If the functions to be performed may imply the processing of personal data, the European General Data Processing Regulation shall apply. The processing of personal data in Europe and the transfer of personal data from Europe to the United States may require the compliance with legal requirements. Ultimately it may imply the need to appoint a data protection representative in Europe.
Remote Work – Payroll and Taxation
c) Payroll and social security. Social security shall be due in Portugal even with a remote work situation (either the employee becomes a tax resident or not). Also, in case an employee is tax resident, tax withholding shall apply. Thus, the employer has to obtain a Portuguese tax number as a non-resident entity without activity and ideally the payroll should be made by a local company.
d) Risk of creating a representation office. Depending on the number and the functions performed by the employees, there may be the possibility that the company qualifies as a local representation office, which may have a tax impact. However, there are forms of reducing this risk, don’t forget remote work can be done from everywhere.
Although opportunities and advantages do exist, both for employees and employers, before embarking in the hiring in a different country brand new adventure learn more about it. A careful assessment should be made to tackle the foreign jurisdiction challenges imposed by foreign remote work.