Beyond NHR: Changes Ahead for Portugal's Tax Regime

10 Oct 2023

The Portuguese Prime Minister, António Costa, recently announced the evolution of the Non-Habitual Resident (NHR) tax regime. This decision, set to take effect in 2024, underscores Portugal's commitment to a balanced and just fiscal policy while continuing to ensure its position as a top destination for global professionals, retirees, and high-net-worth individuals.

Since its inception in 2009, the NHR scheme has played a pivotal role in bolstering Portugal’s economic recovery after the global financial crisis. The programme's benefits, including a 20% flat rate tax on Portuguese-source income and exemptions on most foreign-source income, has long attracted a diverse range of individuals to the nation. In light of evolving economic circumstances and the ever-growing appeal of Portugal as a residence destination, the government believes the time has come to update this programme.

One cannot deny the success of the NHR, which in 2021 witnessed tax exemptions surpassing the €1 billion milestone. This, along with a community of over 10,000 beneficiaries who have made Portugal their home, stands as a testament to the scheme’s success. Indeed, as Prime Minister Costa highlighted, even after the end of their NHR tenure, a significant 59% of beneficiaries have chosen to remain in Portugal, a nod to the nation's allure and quality of life.

Those who already have non-habitual residence status won't be affected by this update.

The budget has reaffirmed that individuals currently benefitting from the NHR scheme will maintain these benefits until their 10-year period concludes.

Nevertheless, it's a reminder to ensure you're maximising all the advantages of your NHR status, such as considering the sale of overseas assets before the end of your 10-year duration.

While the specifics of the NHR discontinuation will be further detailed in the upcoming budget law proposals, it is noteworthy to mention that Portugal has a rich history of thoughtful legislative transitions. There is an anticipation that provisions might be made for individuals who have already initiated their residency visa applications. Plus, the legislative process in Portugal often provides ample time for changes, offering a window of opportunity for those keen on accessing current NHR benefits.

Beyond NHR

For those exploring the possibility of moving to Portugal in the near future, the D7 ('passive income') visa programme remains an efficient pathway, reinforcing Portugal's welcoming stance towards global citizens.

Beyond the NHR, Portugal continues to shine as an attractive destination, given its strategic geographical position in Europe, rich cultural heritage, and a favourable overall tax regime. The country boasts of a robust healthcare system, world-class infrastructure, and a high standard of living, making it a sought-after locale for both work and retirement.

While the sunset of the NHR scheme seems inevitable, Portugal’s charm as a vibrant and economically stable nation remains undiminished. Those considering Portugal as their next home will still find a wealth of opportunities and benefits awaiting them in this beautiful coastal nation.

Gibro Group Associated Business Portutax is based in the Algarve and specialises in Tax, Accounting and Fiscal Representation Services for Expats in Portugal. Its team of experts will be delivering a seminar at an upcoming 'Living in the Algarve' event. Book your free space below.

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