Portugal’s policies for innovation

Portugal is one of European tech’s great success stories. But what are the policies, and what are the natural advantages that make this possible?

Portugal has established itself as a hub of innovation in Europe. Historically Portugal, and Lisbon in particular, have been at the forefront of technological development from the Age of Sail onwards.

President of Portugal, Marcelo Rebelo de Sousa, believes that this trend continues into the present day: “Lisbon is at the centre of the world – of the digital world, because Portugal and Lisbon are platforms among cultures, civilizations, oceans, and continents, and the digital is what really is helping us to change the world.”

So what are the current policies and initiatives that the government of Portugal is undertaking to sustain this development of innovation?

Pro-immigration

Almost all lists of top global destinations for digital nomads include Portugal. While there are aesthetic and environmental reasons for this, such as the sunshine and beautiful cities, there is also policy at the heart of its attractiveness.

“We have a very simplified and open immigration policy. We have the strong vision that we need more people that come abroad to Portugal, and they can make their lives here in Portugal,” said Fernando Medina, Portugal’s minister of finance.

At the heart of this approach is the new digital nomad visa that was launched in October 2022. It’s open to non-EU applicants who are self-employed and earning more than €2,800 per month.

“The most important thing is to create a regime where it is very easy to get a working licence here in Portugal,” said Fernando.

With an average of 2,500-3,000 hours of sunlight each year, Portugal has long been an attractive tourist destination. However, a new one-year ‘digital nomad’ D7 visa is inviting remote workers from across the world to stay longer and discover what the country has to offer.

However, this policy has its problems, as Fernando himself recognised. There are concerns that the recent influx of high-tech, high-paid jobs is driving up living costs for citizens and long-term residents of Portugal, which has a relatively low average national gross salary of €1,314 per month.

“We need to get a balance, so people don’t think that we are penalising the people that live here all their lives,” said Fernando. “I have to tell you, frankly, it’s not easy.”

Patents, research and development

Attracting skilled tech workers worldwide is just one part of the puzzle. To foster a culture of innovation, Portugal has also reformed its taxation for research and development via a hybrid R&D tax credit called Sifide, which was recently renewed through 2025.

“We have here in Portugal one of the most competitive tax systems for companies that invest in research and development,” said Fernando. “It’s very important because it allows us to strongly reimburse expenditures that are made at that level.”

Similarly, in 2022, the Portuguese government expanded its patent box tax regime, which aims to reduce taxation on income from the use of copyright from computer programs, patents, industrial models, and drawings registered from July 1, 2016 onwards.

“The patent box [is] very low taxation to all the incomes that are related to industrial property and innovation, one of the most beneficial systems in all Europe,” said Fernando.

A thriving ecosystem for tech

“In Portugal, in Lisbon, in the last six or seven years, we have developed an ecosystem of innovation and technology that is providing answers for the country and for the economy,” said minister of the economy António Costa Silva. “And we have today one of the highest number of unicorns in Europe per GDP.” As of 2022, Portugal is home to seven unicorns and is ranked by the European Central Bank as the second-best country in Europe for business innovation.

“In the last six years we were able to attract 20 times more venture capital for our startups, and the value of these technological companies increased 50 times,” said António.

Fernando believes that Portugal’s success is down to more than “fiscal issues or red tape issues.” Portugal’s strength is its people, and specifically its young people. The minister went further: “The younger generations, everyone speaks English, speaks another language; they have travelled a lot; they are very well educated, and an open, young generation that has strong education skills they can put at work.”

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Main image of Fernando Medina, Portugal’s minister of finance: Harry Murphy/Web Summit (CC BY 2.0)