Those currently eligible will still be able to get the benefit if they register by the end of the year
Portugal’s prime minister António Costa announced in October that the country would be terminating its non-habitual resident tax regime, which provided reduced tax benefits for foreigners moving to Portugal for the first 10 years.
What is the NHR Tax Regime?
In 2009, the government passed a tax scheme to increase Portugal’s global competitiveness and attract foreign investment via tax exceptions on almost all foreign sources of income, tax-free transactions and other benefits. Digital nomads and Tech Visa holders spending a minimum of 183 days in the country were also eligible to apply. Come January 1st, 2024, the regime will be discontinued, though still applicable to individuals already registered as NHR and apply for the tax law program by December 31st, 2023. Those already benefiting from the law will not be affected by it.
Why the change?
The overturning of the regime came after increased pressure from the country’s left-leaning politicians who maintained that Portugal had already reaped all possible benefits of the tax law, which was introduced at a time of the country’s financial decline. The government believes that, after serving its purpose, the tax regime now contributes to Portugal’s rapidly rising housing costs and inflation. In an interview with CNN Portugal, Prime Minister Costa called it “a biased way of inflating the housing market.”
The move comes not too long after significant changes were made to Portugal’s popular Golden Visa residency program, citing the same reasons. Opponents argue that discouraging foreign investment will do little to curtail the high cost of living. The government has been under pressure with the country’s current housing crisis.
Portugal has long been a favored destination for high-net-worth individuals seeking a new home, retirement, or an additional residency. The country offers an array of benefits, including a favorable climate, rich cultural heritage, and a high quality of life.
Those looking to relocate to the Western European paradise should not be deterred by the new ruling. The conclusion of the NHR tax regime does not mean that Portugal is closing its doors to foreign residents. In the same budget proposal, the government introduced an “incentive to scientific research and innovation” for specific categories of professionals. Additionally, Portugal’s commitment to a transparent and efficient tax system ensures that residents, both old and new, can navigate fiscal responsibilities with clarity. Finally, it bears repeating that while time is running out, it is not too late for qualified individuals to register for an NHR status and still receive full 10 years of tax benefits.
While the end of the Non-Habitual Resident tax regime marks a shift in Portugal’s approach to attracting foreign residents, the country’s appeal remains strong. Portugal continues to be a welcoming destination, offering a rich lifestyle, diverse cultural experiences, and alternative immigration pathways for those seeking to call this country home. As Portugal evolves, so do the opportunities for those looking to invest and reside in the vibrant and dynamic nation.