Lisbon and Barcelona: The perfect expat destinations

Lisbon and Barcelona are often paired when it comes to top expats destinations. Over the last few years, we can’t count the number of times the two cities have been on the top of mind of expats and the headlines of newspaper articles claiming the cities had the best quality of life. Distinguished by their living conditions and thriving tech communities, both cities are culturally vibrant and offer a vast array of activities and sights worth exploring. From the captivating food scene in Lisbon to Barcelona’s energetic night scene, both cities continue to lure expats from across the globe year after year.

In a broader context, this can also be taken as a Spain and Portugal article, but focusing on Lisbon and Barcelona, in particular, is more critical, as those two cities have a very different feel to the rest of the cities in each country. While they benefit from the country-wide benefits, as well as problems, there are many more things that are quite specific to each of these two cities.

Both have their pros and cons for living, which we will now explore. 

Quality of life

According to a ranking conducted by Monocle magazine that assesses the quality of life of 25 cities worldwide, Lisbon is the world’s third-best city to live in, and the second on the Nomad List of best cities for digital nomads. However, The Telegraph considers Barcelona the best city in the world, topping a ranking that compares the 50 best cities across the globe, putting the two cities at the top. 

We have Barcelona, with its lifestyle that makes it unique around the world. Its Mediterranean character encourages visitors to go to its neighbourhoods and meet its people, visit its natural spaces, and enjoy their leisure time with a vast range of cultural, culinary and shopping options.

On the other hand, we have Lisbon, which was described last year by the expat website Dispatches as “arguably the most popular expat destination in Europe at the moment,” as it has reinvented itself as a hipster destination, offering a mix of culture, nightlife and warm weather within easy reach of some of Europe’s most spectacular beaches.  

So, we have culture, spectacular weather, and unique cuisine in both cities. Where do they differ?

Communication

On this matter, a much higher percentage of Lisbonites speak English compared to the Barcelona natives. Contracts can be in both Portuguese and English, and you will have no problem navigating your daily needs if you only speak English. This has made Portugal a hotspot for native English speakers, who are less likely to speak other languages. For Europeans who are used to learning and speaking multiple languages, the barrier is usually lower in Spain. Still, in Barcelona, you also need to deal with the fact that most of the official documentation is in Catalan. For those struggling even to learn Spanish, having to deal with Catalan can be a deal-breaker.

Cost of living

The rental cost in Barcelona used to be higher. Still, the boom in Lisbon has seen property prices steadily rise as an influx of High Net Worth Expats prefer to buy houses in the capital, so now, accommodation costs are the same in both cities, according to HousingAnywhere Rent Index, but energy costs are more expensive in Portugal. There are also many toll roads, and fuel is more expensive too. Eating out costs just the same in both cities, but Barcelona wins this one, as in Portugal, purchasing a vehicle is also more expensive. 

Barcelona and Lisbon still offer a relatively low cost of living compared to neighbouring locations such as Amsterdam or London. So when you’re living in Barcelona or Lisbon, you’ll pay less for the same things than in other parts of the world. Despite the high cost of living within these cities, expats love them because they offer a higher quality of life than other global cities.

Security

Lisbon wins this one, without any doubt. Portugal is ranked as one of the safest countries in the world, with Spain being quite away off in the rankings. Barcelona is generally safe, but some crucial problems exist, such as pickpockets. Violent robbery, while almost unheard of just a few years back, is now also a significant problem, especially in the centre of Barcelona.

Pollution

Barcelona is the 6th worst city in Europe regarding air pollution, according to Barcelona Institute for Global Health. The Spanish capital Madrid is number one, while Lisbon is ranked 116th. Therefore Lisbon wins in this aspect. 

Mobility

In terms of mobility, moving around within the city is hands-down easier in Barcelona than in Lisbon, not least because of the hilly terrain that Lisbon is famous for. The cobblestone streets don’t help either. Both cities have many transport options available, but we would say Barcelona wins at this.

Entrepreneurial Scene

​​Barcelona is a big city with a strong startup history and remains one of the leading cities for startups in Europe. 

Thanks to the internationality of the city, there’re a large number of international companies in Barcelona. And it’s not just big companies, but also startups attracted to what Barcelona offers. To accommodate the high density of startups, the city’s 22@Barcelona project has transformed a previously industrial area, Pobleneu, into a modern tech and innovation hub.

Coworking spaces have also flourished over the past five years in Barcelona. The city is now blessed with a multitude of big and comfortable spaces where you can focus on work while being served food and even have the opportunity to exercise within the same complex. On this matter, Lisbon is not close to the spaces of Barcelona, but that can easily change in the future.  

But it is not only good news! In Barcelona, it is quite frequent to see newspaper articles asking whether there are enough help programs for entrepreneurs and businesses. This led to the question: “Are there too many obstacles to entrepreneurship?” The response, unfortunately, is yes! Anyone who embarks on an entrepreneurship journey will not find it easy. 

Spain manages to attract many High Net Worth Expats and entrepreneurs. Still, it then discourages them from taking an active part in the economy with high taxes, complicated procedures for operating businesses, as well as language barriers. Portugal, on the other hand, is more wide open for business. 

Lisbon is committed to entrepreneurship, which assumes the ecosystem as a determining factor for its economic development. This is why Portugal has made the attribution of visas easier and faster. 

To attract skilled tech labour and boost the country's technology sector, Portugal created the Tech Visa, a programme for highly qualified immigrants working in the area of technology and innovation who already have a promise or a work contract in sight with national companies. This particular visa has been relied on by IT professionals, such as software engineers, data scientists, programmers, designers, and infrastructure architects, among others, currently in high demand by companies in Portugal. Also, Portugal has created a five-year residence for investment activity in the country designed for non-EU citizens - the Golden Visa. And let's not forget that in the past month of August, the Portuguese State has made an amendment to the regime for the entry, stay, exit and removal of foreigners, with new visas for seeking work in Portugal, new visas for remote workers, and amendments on the EU Blue Card (also available in Spain) and on visas for nationals of the Community of Portuguese Language Countries. 

There are 18 accelerators and incubators in Lisbon, and of course, with so many expats coming to the city, there are plenty of English-speaking events organised by and for digital nomads. So be prepared to make friends and business connections very quickly. 

Taxation

Generally speaking, Spain's VAT standard rate is 21%, while Portugal's is higher at 23%. Yet the general corporate tax rate in Spain is 25%, while businesses p ay corporate tax in Portugal at a rate of 17% (levied on the first €25,000 of profits) and of  21% (on the global amount of taxable income). But let's dig a little deeper.

Taxes in Spain are split between state and regional governments. This means that Spanish tax rates can vary across the country for income tax, property tax, wealth tax, capital gains tax, and inheritance tax in Spain. The 17 autonomous regions decide on their tax rates and liabilities. Barcelona has the highest.

If you want to live in Spain for 183 days or more or are thinking about having your main vital interests there, then you will be classed as a Spanish resident for tax purposes. In addition, you will start paying income tax on your worldwide income, which includes income obtained both in Spain and in any other country.

The exact percentage you pay is progressive, increasing as your income increases. It goes from 19% on the lowest income gap and rises to 45% when you earn more than €50,000. 

If you want to live in Spain for less than 183 days, you will be a non-resident and will only pay taxes on the income from Spain. Taxes apply to your income at flat rates with no allowances or deductions (19% for residents in the European Union, Iceland and Norway; 24% for all other taxpayers). However, capital gains, interest and dividends will always be taxed at the flat rate of 19%. 

However, many expats are making use of a special tax regime - the Beckam Law - which lets them pay 24% tax on their income up to €600,000 for a period of 6 years, plus no obligation to pay wealth tax nor fill the tax form Modelo 720. Under the Beckham Law, no matter if you spend over 183 days in the country (hence becoming a tax resident), you will pay taxes under taxation rules similar to those who are non-residents. This basically means that you just pay Spanish income tax on the income you obtain in Spain. Furthermore, you don’t have to pay that tax at a progressive rate that grows at the same time your income increases. Rules in 2021 saw the government increase the tax rate on income exceeding €600,000 to 47%. Additionally, posted employees now pay a 3% tax on income above €200,000 that is generated from dividends, interest, or capital gains.

According to Tax Foundation, Portugal is worse than Spain when it comes to taxes. However, it only compares "normal" rates of income tax and doesn't take into account the NHR (Non-Habitual Resident) tax regime, which is open to newcomers to Portugal and can soften the blow of Portuguese taxes. Also, Barcelona has higher income taxes compared to Lisbon.

Arguably the biggest reason for the influx of expats to Portugal in recent years has been this NHR programme which allows entrepreneurs, investors and retirees to receive their incomes in Portugal under a special tax regime for a period of 10 years. For non-habitual residents in Portuguese territory having obtained income abroad, there is an elimination of international legal double taxation by means of exemption. As for the income obtained in Portugal on high added value activities, whether scientific, artistic or technical, by non-habitual residents, a special rate of 20% applies, which is a substantial reduction from the progressive rate applicable to the remaining Portuguese residents, which can go up to 53%.

You must spend 183 days in Portugal or have a Portuguese address be your primary address worldwide. This latter option is ideal for digital nomads who might not want to spend 183 days in Portugal. 

This programme has not yet pleased all, and Portugal has been attacked and blamed for unfair competition with Nordic countries since, under the NHR, retirees who moved to Portugal paid way less tax than they would in their home country. Portugal has, since 2021, appeased these concerns by introducing a minimal level of taxation for retiree expats in the NHR scheme who receive their pension from abroad. This does not affect the NHR scheme for entrepreneurs, though.

There are also no wealth taxes in Portugal, only local taxes on Portuguese real estate apply. You only need to inform Portugal about any bank accounts (and not their value) held abroad. Portugal does not require such reporting, which is a significant relief given that it is what most expats feel most burdened by in Spain. According to Tax Foundation, Catalonia's net wealth progressive tax ranges from 0.21% to 2.75% on wealth stocks above €500,000.

Citizenship

Both Spain and Portugal allow you to apply for citizenship (and that coveted “EU passport”) after a certain period of living there. In Portugal, that period is five years whereas in Spain it’s generally 10 years. Spain has a few exceptions, and it’s faster if you’re a refugee (five years) or two years if you’re from Portugal, the Philippines, Andorra, Equatorial Guinea, or any Latin-American country.

Both Spain and Portugal offer citizenship via marriage. In Spain, you can apply for citizenship through marriage after one year of being married and living in Spain. In Portugal, you have to have been married for three years or in a long-term relationship or “stable union,” but you don’t have to have lived in Portugal.

Portugal allows dual citizenship. Spain does, but only with specific countries and in limited circumstances. This fact alone could make Portugal the winner as most people will want to hold onto their other passport.

Accommodation

As the rental costs were already covered, we will now pass on the search for the perfect place to call home. While the prices are also on the high side, if you look at the premium market in both cities, you’ll find more opportunities in Lisbon. However, you will have more luck finding furnished apartments in Barcelona compared to Lisbon.

Keep in mind that it is easier to find heating in Barcelona apartments than it is in Lisbon’s old apartments. If you’re stuck with a non-heated apartment, be prepared for a very cold few winter months. Those coming from cold countries think this is a joke until they go through their first winter without good heating. 

Your Thoughts?

Barcelona and Lisbon are both great cities in Europe, but whether you want to start your own business or work at one as an expat, weigh the pros and cons of both. We would love to hear, especially, from people who have lived in both cities, or have moved from one to the other due to specific reasons, what you think. 

Our sources

Data: Monocle magazine’s annual Quality of Life Survey; HousingAnywhere Rent Index; Idealista; Eurostat; Global Peace Index; Barcelona Institute for Global Health; Avalara; Tax Foundation

Magazine articles: Forbes 2022 February article; Forbes 2022 March article; Forbes 2022 June article; Forbes 2022 July article; Conde Nast Traveller; The Telegraph UK; Bloomberg’s Europe Edition

Expats websites: Dispatches; Barcelona.de; HSBC Expat; Expatica’s Spain guide; Expatica’s Portuguese guide

Startup fonts: Startup Heatmap Europe; Barcelona’s International Business School; MayorsofEurope; EU-Startups

Country entities: Lisbon City Council; IAPMEI; eportugal.gov; Portuguese Immigration and Borders Service; Tax and Customs Authority; ICEX Trade and Investments

Date published
September 28, 2022
Category
Portugal
Schedule call

Other Articles