DIGITAL NOMADS AND SOCIAL SECURITY

As already mentioned in previous publications, over the last few years, Portugal has been the destination chosen by foreigners as a place to establish residence, permanent or temporary.

In this context, emphasis has been placed on professionals who, by virtue of their duties, can work virtually and without geographic restrictions – the so-called digital nomads.

For these professionals, Portugal presents exceptional conditions: geographic location, good national internet coverage, general attractive cost of living and the English language widely spoken.

At the same time, and as mentioned, Portugal has very attractive tax regimes for these professionals, namely the “Non-Habitual Residents”. Likewise, specific temporary residence permit regimes were instituted for these professionals, in order to speed up their transition to Portugal.

However, there is one detail that is often overlooked, and that has to do with subjection to contributory payments for Portuguese Social Security. And this issue is not a mere detail because the contributions to Social Security are a burden many times higher than the IRS (personal income tax).

The general rule is that there is subjection to Social Security contributions whenever the work, whether dependent or independent, is carried out from Portugal.

Thus, as “nomads” living and working in Portugal, they meet, from the outset and in theory, the requirements for being subject to the obligation to contribute to Social Security.

In the case of self-employed workers, the Law provides for the possibility of excluding the contribution obligation of (…) workers who carry out a self-employed activity in Portugal on a temporary basis and who prove their inclusion in a mandatory social protection regime in another country.

However, it is imperative to point out that this exemption is not automatic, and it is up to the worker to demonstrate that he is covered by a mandatory Social Security regime in his country of origin.

But more, the social security regime (in the country of origin) must have characteristics that equate it to the Portuguese social security regime. Indeed, the exclusion of subjection in Portugal is only recognized if the material scope of the foreign social protection regime protects the contingencies of disability, old age and death.

The proof required for the worker to benefit from exclusion from being subject to Social Security contributions must be provided using a specific form (called A1), and if a country outside the European Union is in question, the worker must obtain a “certificate coverage”.

Finally, it is important to point out that the general rule is that this exclusion regime is only applicable for one year, and may be extended for another period of one year (without prejudice to more favourable regimes in the case of workers with special technical knowledge or special skills or international protocols to which Portugal is bound to.)

In the case of employees, the situation is not different.

Indeed, if the worker is carrying out his/her duties from Portugal, he/she will fulfil the requirements of subjection to Social Security contributions.

In this context, the worker may also benefit from exclusion from the obligation to contribute, as long as he demonstrates that he is covered by a mandatory social security regime in the country where he comes from.

Proof must be provided, as mentioned above, by presenting the specific form – Model A1 -, or in case the country of origin does not belong to the European Union, by means of a “certificate of coverage”.

The exclusion of subjection is, also in this case, limited in time.

We must also point out that in the case of employees, the contributory obligation does not fall only on the employee, but also on the employer.

Thus, in the event that the worker does not benefit from the exclusion regime, there will be two possibilities:

1. a) the employer registers in Portugal, for social security purposes;
2. b) the employer is not registered in Portugal for social security purposes.

In the first situation, the company must register in Portugal and create a “shadow payroll” in order to calculate the contribution base, appointing here a representative to ensure compliance with the declaration and payment obligations.

In the second scenario, it should be the worker who assumes compliance with all Social Security obligations, both his own and those of the employer.

It is therefore imperative that “nomads” and, where appropriate, employers anticipate and consider all scenarios, so that digital nomads can efficiently benefit from their residency in Portugal.

Martinez-Echevarria & Ferreira has at your disposal professionals with the technical capacity to help you find the solution that best suits your personal, professional or business situation so that you can properly structure, economically, regulatory and fiscally, your activity.

Dr Francisco Carvalho Furtado