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MOVING TO SPAIN

Spain vs Portugal: Which country is better to move to?

Trying to decide to if you want to move to Spain or Portugal? Want to know which country is better for taxes, which one has a cheaper cost of living and which offers more diverse culture and landscapes? Here's everything you need to know.

Spain vs Portugal: Which country is better to move to?
Cádiz or Lisbon? Spain or Portugal? Here is a breakdown of some of the factors you may want to consider if you're trying to decide which country in the Iberian peninsula you should move to. Photo: Dkatana/Pixabay, Liam McKay/Unsplash

Ultimately the decision of whether you move to Spain or Portugal may come down to personal preferences – the areas you like, the language you want to learn and the types of cuisine you want to enjoy, but there are several factors that can make living somewhere more difficult than others, such as taxes, visas and cost of living.

So which one of these two countries that form the Iberian Peninsula (along with tiny Andorra) offers the most to newcomers – Spain or Portugal? Here’s everything you need to know. 

Taxes

The tax systems in both Spain and Portugal are complicated, so it will of course depend on your individual circumstances as to where you’d pay less tax. At first glance, it seems that whether you’re a low earner or a high earner, the tax brackets for 2022 are generally more favourable in Spain than in Portugal, where they are slightly higher. 

In Portugal the general income tax rates for 2022 are: 

28.5 percent for those earning €15,217 – €19,696
35 percent for those earning €19,676 – €25,076
37 percent for those earning €25,076 – €36,757
43.5 percent for those earning €36,758 – €48,033

While in Spain the tax rates for 2022 are: 

24 percent for those earning €12,450–€20,200 
30 percent for those earning €20,200–€35,200
37 percent for those earning €35,200–€60,000
45 percent for those earning €60,000–€300,000

However, if you plan on being self-employed, Spain may not be more beneficial to you. As a freelancer you will have to pay social security on top of your income tax in both Spain and Portugal.

Portuguese Social Security (Segurança Social) is generally 21.4 percent of your earnings and payments are made monthly. In Spain however, the minimum contribution is around 30.60 percent. Currently this is paid as a flat monthly fee of €294 per month, no matter what your earnings are. 

READ ALSO – Self-employed in Spain: What you should know about being ‘autónomo’

There are further benefits in Portugal when you look at the country’s ‘non-habitual residents’ (NHR) scheme. This allows new residents to access special tax benefits for their first ten years in the country. It also offers a lower income tax rate of 20 percent if you’re employed in Portugal in a ‘high value’ activity and allows you to earn some foreign income tax-free. 

Foreigners from any country can benefit from Portugal’s NHR scheme if they qualify as a tax resident in Portugal and have not been taxed as a Portuguese tax resident in the five previous years. 

Spain doesn’t offer any similar type of scheme for foreign residents. 

Sunset in the beautiful Portuguese city of Porto. Photo: Everaldo Coehlo/Unsplash

Golden visa

If you’re a non-EU citizen who wishes to move to either Spain or Portugal, one of the ways to be gain residency is through a sizeable investment.

Before 2022, you could qualify for residency in Portugal by investing €280,000 in one or more properties, one of the lowest investment thresholds in Europe. But the country’s golden visa rules were toughened on January 1st and now you have to buy a property worth €500,000 or invest €350,000 in a rehabilitation project, as well as other restrictions on “qualifying” areas where you can buy. 

That puts Portugal on a par with Spain, where you have to  you have to invest €500,000. Both countries offer other monetary investment residency options involving shares, bonds and donations.

It’s also worth noting that in Portugal you are eligible to apply for Portuguese citizenship in five years, while in Spain you also renew your residency status, but can only apply for citizenship after 10 years. 

READ ALSO – Pros and cons: What foreigners should be aware of before applying for Spain’s golden visa

Digital nomad visa

While Spain only just announced it would be introducing a digital nomad visa in 2021 and has yet to finalise all the details, Portugal currently offers the D7 visa for digital nomads. 

To be eligible you must prove you have an income of at least €8,424 a year, but they are more likely to grant you the visa if you earn more. You’ll also be required to have a minimum of €7,500 in a Portuguese bank account. 

Spain does offer a non lucrative visa (NLV) scheme, but it is a lot costlier than Portugal’s D7 visa and as the name suggests you are not allowed to work on the NLV.  For 2022 you need to prove you have an income of €27,792 for the year to be eligible for this visa. 

READ ALSO – Tax cuts and visas: Spain’s new law for startups, investors and digital nomads

Cost of living

The costs of living in Spain and Portugal vary considerably depending on where you choose to live in the country. Several cost of living comparison websites state that Portugal is slightly cheaper than Spain, but others state that it’s virtually the same. 

According to expat price comparison website Expatistan the cost of living in Madrid is seven percent higher than in Lisbon, while Barcelona is 10 percent higher than Lisbon.

Monthly rent for an 85 m2 (900 sqft) furnished flat in a standard area of Lisbon will cost an average of €970 per month, while in Barcelona a flat of the same size will cost an average of €1,040 per month. 

Eating out and grocery shopping are both slightly higher in Spain than in Portugal. Up until recently, you would usually pay more for electricity, gas and petrol in Portugal than in Spain, but energy costs are sky-high in both countries currently due to record inflation. 

In Spain, generally speaking the south and western parts of the country are cheaper than Madrid and northern regions, while in Portugal it’s generally the central and northern regions that are cheaper. The cost of living in both countries is a lot less if you stick to smaller towns and steer clear of the likes of Barcelona, Madrid and Lisbon. 

Even though Lisbon has a good nightlife and hospitality scene, Madrid (pictured) has the highest rate of bars per capita in the world. Photo: Josefina Di Battista/Unsplash

Lifestyle and culture

Both the Spanish and the Portuguese are friendly, easy-going people, and while it really depends on the area you visit and the people you meet, the Portuguese can be quieter and more reserved than the Spanish.

The Portuguese are also known to be more melancholic than the fun-loving passionate Spanish and you’ll notice this in the music and the way festivals are celebrated. While Portugal does celebrate a few events such as Easter and Carnival, as well as local festivals, nothing in Portugal can come close to Spain’s fiery Las Fallas festival, Catalonia’s human towers, the crazy Canary carnival and southern Spain’s Semana Santa parades. 

Culturally, Spain is also a lot more diverse than Portugal. While Portugal’s regions of course do have slight differences in their culture, it’s not as obvious as the differences between Spain’s 17 different regions. In Spain, five different languages are spoken and each region has its own cuisine, festivals, dances and traditions which differ greatly from one to the other.

Spain also has 49 UNESCO World Heritage Sites, while Portugal only has 17. While of course, Portugal’s two largest cities of Lisbon and Porto have plenty going on, many museums and cultural events, in Spain than are many more cultural centres than just Madrid and Barcelona. The likes of Valencia, Seville, Bilbao, San Sebastián, Málaga and Granada are also known for their great museums and cultural offerings too.

The bizarre rock formations of Bardenas Reales in Navarre, northern Spain. Photo: joannadal/Pixabay

Nature and landscapes

Both Spain and Portugal are great for nature lovers, especially those who love hiking, cycling and water sports.

Spain’s landscapes are more diverse than Portugal’s however. The country has a longer coastline, more mountain ranges and more national parks. Spain boasts a total of 16 National Parks, while Portugal only has one national park. Spain also offers more opportunities for winter sport lovers, with more ski resorts – there is only one place to do this in Portugal, while Spain offers many places throughout the Pyrenees and north of the country, as well as one in the Sierra Nevada. 

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WORKING IN SPAIN

Which startups succeed in Spain (and which ones fail)?

Foreigners thinking of setting up a startup in Spain should keep in mind that one in five new companies here doesn't last longer than 12 months. Here's what the data available says about the businesses that find success and those that don't.

Which startups succeed in Spain (and which ones fail)?

There are various interpretations about the differences between a startup and a company but, broadly speaking, a startup is a company in its early stages that’s looking for an attractive and innovative business model, whereas a company already has a pre-existing business model and is focused on executing it successfully.

According to a study by the Spanish Tech Ecosystem, Spain has 10,500 startups and more than 300 scaleups, innovative and more established companies that are already growing.

The introduction of Spain’s new Startups Law in early 2023 promises to make the country far more attractive for foreign entrepreneurs, investors and digital nomads.

READ MORE: Spain’s new law for startups and digital nomads – 15 things you need to know

But the road to success isn’t just guaranteed by less bureaucracy, tax cuts and special visas.

Twenty-three percent of new companies set up in Spain don’t survive past a year, according to the country’s National Statistics Institute (INE). 

Of those that do make it past the first 12 months, 45 percent are not in business after five years. 

When it comes to startups specifically, nine out ten startups don’t make it past the three-year mark, according to the Map of Entrepreneurship drafted by Spain Startups, but they do grow at faster rates than SMEs. 

Although these figures may not seem very promising for anyone considering setting up shop in Spain, the Iberian nation isn’t last on the list when it comes to the longevity of startups in the EU.

Lithuania, Denmark, Latvia, Estonia, Malta and Portugal all have lower rates of success than Spain, according to Eurostat data. 

Spain also lost 311,000 SMEs in 2020 as a result of the Covid-19 pandemic, so authorities are now keen to breathe new life into all types of sectors with foreign talent drawn in by the new startups legislation. 

Spain is also the fifth country with the most so-called ‘unicorns’ companies with a market value above €1 billion.

READ ALSO: What do the experts think of Spain’ new startups law?

Which startups and companies find the most success in Spain?

Insurance companies, reinsurance groups and pension funds are those with the companies with the highest survival rate, as 82.6 percent are still operational in Spain five years after their creation, INE data reveals. 

They’re followed by new companies involved in the supply of electricity, gas and air conditioning (80 percent survival) and those in the tobacco industry (75 percent).

Companies that offer financial services, assistance in residential matters, legal and accounting companies, pharmaceutical manufacturers and those that deal with the extraction of metals and minerals also have a good life expectancy in Spain.

That’s not to say that if you have a business idea in a different sector or that your startup is completely innovative you should get discouraged. 

According to industry specialists Meetwork, among the 50 biggest growing startups in Spain in 2022 are a travel management company, a copyright protection business, a language app for kids, a digital platform for freight transport, a vegetable-based meat manufacturer and other businesses from a wide variety of sectors.

The same applies to most highly valued startups in recent years in Spain; many are companies focused on innovation or the improvement of pre-existing ideas.

Self-employment and entrepreneurship website autonomosyemprendedor.es reported that the ten Spanish startups which have found the most success in Spain and abroad are Brooklyn Fitboxing International (gyms), Freepik (image downloads), Bigbuy (dropshipping), El Tenedor (restaurant bookings), Heura Foods (vegan food), eDreams (flight and holiday bookings), Clicars (online vehicle sales), Mr. Wonderful (an ‘online store for happy products’), Cabify (e-hailing) and Glovo (food delivery). 

And it’s not as if a startup that’s set up in Spain should necessarily have to cater to a Spain-specific market – fintech, tourism, logistics, mobility, cybersecurity, education, foodtech, energy, cryptocurrencies, gaming, employment, retail or health are all sectors with signs of growth potential in Spain and around the world.

Which companies and startups find less success in Spain?

According to INE, among the companies that struggle to survive past the five-year mark in Spain are leather and shoe manufacturers (20 percent success rate), maritime industry businesses (29.8 percent success rate) clothing companies (33.2 percent) and entertainment and artistic businesses (33.7 percent). 

Civil engineering companies are the ones that struggle the most to make it past the first year (30.2 percent survival rate), followed by those involved in arts and entertainment.  

The life expectancy of new companies in Spain has worsened since the pandemic, according to the latest report by Spanish business database Iberinform, who wrote: “The critical moment for any business project usually occurs after the third year, since the initial injection of capital allows the vast majority to complete the first 24 months of life without problems.”

Interestingly, during the pandemic, the sectors which saw the biggest increase in earnings in Spain but also the most businesses closing down were hospitality and retail, which together with tourism are the pillars of Spain’s service-based economy.

Iberinform’s general director Ignacio Jiménez told El Mundo newspaper that “the incomplete and uneven recovery that we are going through, marked by new challenges such as price escalations and supply problems” directly affect business survival in Spain.

“Companies, especially SMEs, which have less capacity to transfer these cost increases to prices are suffering a reduction in margins and loss of profitability,” Spain’s confederation of SMEs reported. 

READ ALSO: What will Spain’s income requirement for the new digital nomad visa be?

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