Portugal cancels tax benefits for foreigners

05.12.2023 Portugal is going to abolish the preferential tax regime (Non-Habitual Resident, NHR), which allows certain categories of foreigners to pay reduced taxes for 10 years after moving to the country.

Currently, the NHR regime can be used by foreigners who have spent more than 183 days a year in Portugal and have become tax residents. For example, representatives of professions with "high added value", such as doctors, teachers and architects, can pay taxes at a rate of 20%. A fixed tax rate of 10% is set for pensioners receiving pensions in other countries. Previously, such income was not taxed at all, but Portugal introduced a low rate after complaints from other EU countries, including Sweden and Finland, faced with the outflow of pensioners to Portugal. The special tax regime also exempts from paying tax on income from foreign sources (for example, from renting housing) if they are taxed at home.

According to the Portuguese Ministry of Finance in July, 89,000 people took advantage of the preferential tax regime.

Tax breaks have helped attract a wave of wealthy foreigners to one of the poorest EU countries, but have triggered a housing crisis due to rising property prices.

For new immigrants, the preferential treatment will cease to operate in 2024, for those who have managed to use it, it will continue to operate.

Link to source: https://news.bloombergtax.com/daily-tax-report-international/portugal-to-end-its-non-habitual-resident-tax-regime-costa-says