Portugal ends special tax for non-habitual residents from 2024.

In an interview with TVI’s Jornal Nacional, Prime Minister António Costa announced the discontinuation of special taxation for foreigners not habitually residing in Portugal, effective from 2024.

“It no longer makes sense to maintain a special tax for non-habitual residents,” he stated, referring to the Non-Habitual Resident Statute, a regime that offers a ten-year reduction in the Personal Income Tax (IRS) for new foreign residents, regardless of nationality, and Portuguese citizens who have been expatriates for more than five years.

For foreigners, the regime provides IRS benefits, including a reduced tax rate of 20% on income earned in high-value-added activities (from doctors to architects and university professors) for ten years. Emigrants also benefit from a more favorable tax regime, with a 50% exemption on dependent, business, and professional income for five years.

This measure has been in effect since 2009 and “made sense” in its first ten years, admitted the Prime Minister, noting that “59% of the people who had benefited continued to stay, despite no longer enjoying the regime.” However, now this measure “no longer makes sense,” he asserts.

“Maintaining this measure for the future is prolonging an unjust fiscal practice that is not justified, besides being a skewed way of continuing to inflate the housing market,” he argued, emphasizing that the regime will remain for those already benefiting from it.

The government is aligning itself with the Left Bloc and the Portuguese Communist Party, both of which have been calling for the end of this regime. The Left Bloc, in fact, submitted two bills on September 15 aimed at ending the non-habitual resident regime in IRS and altering specific deductions for this tax. For the Left Bloc, this regime is “evidence of fiscal inequality” and a reason to embarrass the country.

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