How to retire to Portugal with financial peace of mind

New tax incentives created to ‘keep foreign investment coming to Portugal’

“Out with the old NHR, in with the new”

With very little in the way of political enthusiasm for the Socialist government’s State Budget for 2024, there is good news still for foreigners who may lose the chance of taking up NHR – “Europe’s best kept tax secret” – more correctly termed ‘the non-habitual resident tax regime’.

The idea is for a new tax incentive “along the same lines (as NHR), but directed at scientific investigation and innovation”.

The new regime “will allow a series of professions to continue to benefit from reduced income tax”, explain reports today.

Like NHR, it “will apply to working people “who have not been resident in Portuguese territory in any of them five previous years”, but this time the tax breaks are directed specifically at “careers in higher education teaching and scientific research”.

The explanation given in the draft State Budget small print refers to the regime applying to people involved in “scientific employment in entities, structures and networks dedicated to the production, dissemination and transmission of knowledge, integrated into the national science and technology system; qualified jobs within the scope of contractual benefits for productive investment research and development jobs, for staff with minimum qualifications of level 8 of the National Qualifications Framework, whose costs are eligible for the purposes of the system of tax incentives for research and business development”.

And again, like NHR, the tax incentive will be a 20% flat rate on earnings, during a period of 10 years.

Presenting the measures yesterday, finance minister Fernando Medina said there may no longer be a “universal, transversal” tax regime to entice foreign pensioners/ high earners, but “the conditions for attracting relevant investment to the Portuguese economy are intact” and this new mechanism, coming in 2024, will ensure “the capture of structural investment”.

Meantime, as he stressed, NHR does not end until 2024 (and there are still two and half months of 2023 to go).

All processes (meaning all applications to the regime) whose processing takes place until the end of the year are covered by the current law”, he reiterated – very much along the lines that Bloco de Esquerda’s coordinator Mariana Mortágua has complained (“this is a PR exercise for NHR”).

The State Budget is clear: NHR will continue to apply “to taxpayers who, on the date of entry into force of this law, are already registered as non-habitual residents in the AT taxpayer register, as long as the period referred to in paragraphs 9 to 12 of article 16 of the IRS Code (ten years) has not been exhausted” and also to “taxpayers who on December 31 2023 met the conditions for registration as non-habitual residents, as well as holders of a residence visa valid on that date”.

NHR was created in 2009, when it actually offered a full 10 year tax amnesty to successful applicants. Over the years, the terms, and perks, changed – largely because some countries disagreed with it altogether.

The regime’s demise has long been anticipated. As the prime minister said recently, there is no longer a need for it: particularly as it is without doubt one of a number of measures to attract investment that have contributed to the dire crisis in Portugal’s housing market.

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