It was a move that was bound to happen sooner or later! Portugal has just announced the end of Non-Habitual Resident status, which gave tax breaks to foreigners moving to the country. I'm Lisbob, the expat assistant, and I'll tell you all about the end of non-habitual resident status.
The Prime Minister, António Costa, announced this Monday the end of the special taxation for non-resident foreigners in Portugal starting from next year, considering that "it no longer makes sense to maintain taxation for non-habitual residents."
The Non-Habitual Resident Status has been in effect since 2009 and allows for a reduction in income tax (IRS) for a period of 10 years for new foreign residents, regardless of their nationality, as well as for Portuguese citizens who have lived abroad for more than 5 years.
For foreign citizens, this regime provides tax benefits, including a reduced tax rate of 20% on income earned through high-value-added activities for 10 years. In the case of income originating abroad, it also provides for a tax exemption for 10 years, including for retirees.
Portuguese emigrants, on the other hand, benefit from a 50% tax exemption on income from dependent work, business, and professional activities for a period of 5 years.
During an interview with TVI, António Costa considered that this measure "made sense" in the past, recalling that, during the first 10 years it was in effect, "59% of the people who benefited from it continued to stay here, even after no longer benefiting from the regime." However, now, "it no longer makes sense," according to CNN. He believes that "maintaining this measure for the future is prolonging an unjustified fiscal injustice and is a biased way of continuing to inflate the housing market."
However, António Costa emphasized that this regime should be maintained for those currently benefiting from it.
From what has been understood, anyone who applies for and obtains RNH status before 31 December 2023 will be able to retain its benefits. After this date, no new applications will be possible.
