Tax & Migration: Spain or Portugal? Both?

Certain investors approaching the Iberian Peninsula for migration, property and tax purposes might express a personal preference for one of the two countries. However, others will base their decision after careful consideration of the pros and cons each of them has to offer. In this article, which is not intended as an in-depth guide, we’ll take a brief look at some of the more popular tax and migration programs currently available in Spain and Portugal.

Credits: Supplied Image; Author: Client;

I.- Taxes

When it comes to taxes, both countries have designed specific programs to attract new tax residents with lower rates and exemption on foreign income. The former Portuguese program (Non-Habitual Residence - may it rest in peace) was clear, comprehensive and competitive. Naturally, the Government jumped at the chance to make it less clear and more restrictive; and so we arrive at the current IFICI program which requires careful matching of the applicant’s qualifications and the company’s activity. Acceptance of submissions and processing of applications have been split between several public entities, where just the Revenue Service was in charge of handling NHR submissions.

Spain’s so-called Beckham law, while no longer open to sport professionals, is, nevertheless, not as restrictive. Now even digital nomad visa applicants qualify automatically and family members may also be included. On the minus side, the duration is 6 years vs. the 10 years of the Portuguese program.

	Spain – Beckham Law	Portugal IFICI
Personal Requirements	No Spanish tax residency in the 5 years prior to application	No Portuguese tax residency in the 5 years prior to application
Potential applicants	a) Employees of entities established in Spain; b) entrepreneurs pursuing innovative activities or of special economic interest; c) highly qualified professionals; d) company directors of Spanish companies, regardless of shareholding percentages in said company (exception: asset-holding companies where shareholding is capped at 25%; e) digital nomads.	(Non-comprehensive list) a) C-Suites; b) doctors; c) engineering, physics and maths specialists; d) IT specialists; e) university and higher education teachers. Applicants must work in specific industries such as: a) extractive and manufacturing industries; b) hospitality; c) IT; d) finance and insurance; e) higher education institutions.
Benefits	Tax rate for worldwide salary/freelance income up to € 600,000: 24%. Foreign income exempt.	Tax rate for Portuguese salary/freelance: 20%. Foreign income exempt.
Duration	6 years	10 years
Family included?	Applicant’s spouse and children under 25 (no age limit if disabled). The sum of the net tax bases of the family members may not exceed that of the applicant.	No

II.- Migration

Until April of this year it was possible to compare the relative merits of the Spanish and Portuguese Golden Visa (GV) programs. Since the Spanish Government decided to scrap the program altogether (another one bites the dust), this left Portugal a wide-open field to capitalize on its low minimum-stay requirement (7-days per year) and no taxation in the country for non-Portuguese tax residents who invest in local private equity funds.

A lesser-known Spanish alternative (but highly effective) is the Entrepreneur Visa. It provides the same advantages as the defunct GV (speed of approval, simultaneous family reunification) although it does require a more hands-on approach than the latter.

	Spain Entrepreneur Visa	Portugal Golden Visa
Financial Requirements	Investor: € 600/month; Family member: € 300/month/family member	Investment: eg, private equity fund option – minimum investment of € 500,000
Other Requirements	a) Innovative business proposition; b) Supporting business plan; c) Company incorporation; d) Auditor report; e) Certificate of approval by the Spanish Innovation Agency.	N/A
Visa duration	1 year	N/A
TRC duration	3 years + 2 (renewal)	2 years + 3 (renewal)
Family reunification	a) spouse/partner; b) children under legal age (18); c) children 18 and above, if dependent: ie, single and still studying; d) financially dependent ascendants.	a) spouse/partner; b) children under legal age (18); c) children 18 and above, if dependent: ie, single and still studying (in or outside of Portugal); d) financially dependent ascendants.
Tax benefits	Eligible for Beckham Law	Eligible for IFICI

In the Digital Nomad Visa (DNV) category, we don’t find that many differences between the two countries. Similar duration and possibilities for family reunification but a lower financial threshold for Spain and the chance to avail of the benefits of the Beckham law.

	Spain DNV	Portugal DNV
Financial Requirements	Spanish minimum monthly salary x 2: € 1,381.33 x2 = €2,762.66/per month	Portuguese minimum monthly salary x 4: € 870 x4 = €3,480/per month
Other Requirements	a) Foreign client/company in existence for at least 1 year; b) relationship with foreign client/company for at least 3 months	Proof of relationship with foreign employer/client
Visa duration	1 year	120 days
TRC duration	3 years + 2 (renewal)	2 years + 3 (renewal)
Family reunification	a) spouse/partner; b) children under legal age (18); c) children 18 and above, if dependent: ie, single and still studying; d) financially dependent ascendants.	a) spouse/partner; b) children under legal age (18); c) children 18 and above, if dependent: ie, single and still studying in Portugal; d) financially dependent ascendants.
Tax benefits	Eligible for Beckham Law	Non eligible for IFICI

The ever-growing numbers of new residents in both countries are testament to the popularity and attractiveness of the Portuguese and Spanish programs. It is also not infrequent to see country-hopping between the two, especially to enjoy long-term low taxation for up to a maximum of 16 years. Geographical and language proximity make these opportunities all the easier for the taking. For more information on these and other programs please see the following link.

Reach out to AVCO Legal Portugal for more information (lisboa@avco.legal).

This article is not intended nor should be construed as legal or tax advice.