The Portuguese Prime Minister announced that the Non-Habitual Resident Tax Regime (NHR) will end in 2024 as it no longer makes sense.
In an interview with CNN Portugal, António Costa, the current leader of the Portuguese Government, informed that, in his opinion, the current non-resident special tax regime is no longer beneficial.
This special tax regime for non-habitual residents was introduced in 2009, as a means to attract valuable talent and wealth to the country. Only those practicing “high-quality activities” of scientific, artistic, or technical nature could apply.
Moreover, applicants could not have been residents (for tax purposes) in Portugal during the 5 years prior to the application. If accepted, the NHR was granted for 10 years, and could not be renewed.
Note that those benefiting from the special regime are taxed at a flat rate of 20% on personal income, and are exempt from paying taxes on global income, whilst those already enjoying retirement have their pensions taxed at 10%. There is a big difference when compared to the normal Portuguese tax regime.
According to the Prime Minister, the NHR does not make sense anymore. It was introduced in 2009, during a time of crisis, when it made sense to attract foreign talent.
Today, Portugal produces plenty of national talent. However, the nation cannot retain what is being created. For the talent, emigration makes sense because the current conditions are unsustainable.
The NHR is arguably ceasing to make sense because it can be perceived as sending the wrong message. Many believe that the inequality between the special regime and the traditional regime is doing more harm than good to Portuguese society. Foreign workers have benefits, whilst native workers have the opposite.
According to the words of the Prime Minister, the NHR “is a biased way of inflating the housing market, which has reached unsustainable prices”.
The unequal nature of the policies led to inevitable social problems for Portuguese residents, who have found themselves increasingly incapable of living a sustainable life because of the increase in prices, which evolved as a result of wealthy visitors and foreign investment-friendly policies.
Given the recurrent manifestations from many native Portuguese citizens and the actual state of Portuguese society, authorities have been trying to figure out what to do in order to reinstate some balance.
Bear in mind that the measure is not formal, and does not yet have a date to come into effect. During the interview, the Prime Minister expressed his opinion and justified it, but that was it.
For the NHR to actually end in 2024, new laws and regulations must be created, approved, and applied within Portuguese society. Note, however, that if the special regime does actually end in 2024, those who already have it will be able to keep it until the end of the 10-year period.