Act Now if You Want These Tax Benefits as a Portuguese Resident
Rumors of the death of Portugal’s Non-Habitual Resident (NHR) tax regime may have been exaggerated.
The NHR program allows immigrants to pay a flat 20% tax on Portuguese-source income and no tax at all on foreign-source income for 10 years after acquiring residency. It’s proven immensely popular with foreigners—especially citizens of other European Union countries eager to reduce their own tax burdens. It’s also been a magnet for digital nomads from all over the world.
It’s been so successful, in fact, that the government of Prime Minister António Costa declared its intention to terminate the NHR in early 2024, when the new budget comes into play. His government has been under enormous pressure from Portuguese locals complaining about the immigration’s impact on housing availability.
Earlier this week, however, Costa resigned as Prime Minister after the police raided his residence and office as part of a corruption case against Costa related to lithium mining and hydrogen energy projects. Although Costa denies any involvement, he decided to fall on his sword in recognition of the seriousness of the charges.
It will take some weeks to form a new government. In the meantime, the annual state budget for next year, which is still in the approval stage, cannot be submitted to parliament because it came from Costa’s government. Since that budget included provisions for terminating the NHR regime, the tax benefit will remain available until a new government takes office and submits a new budget.
But Portuguese analysts say that given the seriousness of the charges against Costa’s officials, Portuguese president Marcelo Rebelo de Sousa will probably call an election for January. That means the timetable for a new budget—including any changes to the NHR—will extend into the second half of 2024.
This is a critical development for anyone intending to apply for Portuguese residency and the NHR regime. The inbox of my new Global Citizen service, which focuses on opportunities for personal and wealth diversification, has been flooded with inquiries about how to apply for the NHR before it ends.
It’s impossible to say whether a new government will resurrect the proposal to terminate the NHR. Costa’s Socialist Party is highly sensitive to voter concerns about housing costs. That’s what prompted Costa to eliminate the residential investment option for Portugal’s vaunted Golden Visa, which parliament approved in September.
But the Social Democratic Party, and the right-leaning People’s Party, strongly opposed the changes to the Golden Visa, and would be expected to oppose termination of the NHR as well.
The big question is whether voters agree, and whether they would give the right wing a majority in parliament if it proposed to retain the tax benefit for foreigners. A victory for the Socialists would probably see the proposal back on the table, but not fully until late in 2024.
The bottom line is that if you are interested in taking a Portuguese residency and enjoying the benefits of the NHR, you must act now.
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