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After much anticipation, Portugal’s Prime Minister António Costa has recently announced the end of the Non-Habitual Resident (NHR) tax regime, which had been considered Europe’s best-kept tax secret.

This special scheme offered attractive tax incentives for foreign residents of Portugal and those who have already benefited from it will continue to do so.

Although yet to be officially passed by law, it is rumoured the NHR will come to an end in 2024.

 

António Costa announces the end of the tax regime

In a surprising turn of events, Portugal’s Prime Minister, António Costa, recently declared the end of the much sought-after Non-Habitual Resident (NHR) tax regime. This announcement has sent shockwaves through the expat community and has left many individuals reconsidering their plans to relocate to Portugal.

The NHR tax regime was renowned as “Europe’s best-kept tax secret” and was a major draw for foreigners looking to establish residency in Portugal. Under this scheme, non-habitual residents were able to enjoy attractive tax incentives, including exemptions and reductions on certain types of income, such as pensions and foreign-sourced income. Many saw Portugal as a tax haven, offering a highly appealing option for those seeking to optimise their tax liability.

However, with the abrupt end of the NHR tax regime, individuals planning to take advantage of this opportunity are left in a state of uncertainty. Foreign residents, who have already benefited from this regime will be able to maintain their tax benefits, but has the door closed for newcomers? What does this mean for expats?

It implies that individuals seeking to relocate to Portugal will need to explore alternative tax options.

 

Overview of Portugal’s NHR tax regime

The Non-Habitual Resident (NHR) tax regime in Portugal was a game-changer for many individuals looking to optimise their tax liability. This unique scheme allowed foreign residents to benefit from attractive tax incentives, including exemptions and reductions on certain types of income. For years, Portugal had been hailed as “Europe’s best-kept tax secret”, luring in expats seeking to make the most of their financial situation.

Under the NHR tax regime, individuals had the opportunity to relocate to Portugal and enjoy a more favourable tax environment. This opened up doors for those looking to escape high taxes in their home countries and find a new haven on the sunny Portuguese shores.

However, with the recent announcement by Prime Minister António Costa, the NHR tax regime is now set to end. This news has left many expats in a state of uncertainty, unsure of how to proceed with their plans of relocating to Portugal. With the proposed end of the NHR tax regime, Portugal’s expat landscape will undoubtedly undergo a significant transformation.

Without the NHR tax regime, individuals considering a move to Portugal will need to explore alternative tax options.

 

Impact on foreign residents in Portugal

It remains to be seen what impact this will have on the country’s appeal to foreigners and its status as an attractive destination for expat living. That is – when the law is passed.

Those who have already benefited from the NHR tax regime will be able to maintain their tax advantages, providing some reassurance for current residents. However, for newcomers hoping to establish residency in Portugal and enjoy the tax benefits, the door may be closed by the end of 2024.

This news has led to frustration and disappointment among expats who were drawn to Portugal for its reputation as a tax haven. Many individuals had carefully planned their moves based on the financial advantages offered by the NHR tax regime.

Fortunately, there is still time. While António Costa has indicated his willingness for the end of the NHR regime; it has yet to be passed as an official law. The Portuguese State Budget is also yet to be released, which may provide more insight into what happens next.

The impact the end of the NHR tax regime will have on foreign residents in Portugal after 2024 is undeniable. It remains to be seen how individuals will adapt to these changes and whether Portugal’s appeal as an expat destination will be affected. Nonetheless, it is clear that a significant transformation is underway in Portugal’s expat landscape.

For now though; expats can be confident in the fact they can still apply for the NHR and receive the tax benefits it brings, for years to come.

 

Reaction from tax experts

The announcement of the end of Portugal’s Non-Habitual Resident (NHR) tax regime has sent shockwaves through the expat community, leaving many individuals seeking expert advice on how to navigate this new landscape. Tax experts from around the world have been quick to weigh in on the implications of this decision.

Some tax experts believe that the end of the NHR tax regime will have a negative impact on Portugal’s appeal as an expat destination. The tax incentives offered by the regime were a major draw for foreigners looking to optimise their tax liability. Without these benefits, Portugal may lose some of its allure for those seeking a tax-friendly environment.

However, others argue that Portugal’s attractiveness as a destination for expats will not be significantly affected. They point to the country’s other favourable factors, such as its quality of life, affordable cost of living, and welcoming culture. These experts suggest that individuals who were drawn to Portugal primarily for tax reasons should consider exploring alternative options in countries that still offer similar tax incentives.

Ultimately, the reactions from tax experts highlight the need for individuals to carefully consider their options and seek professional advice when planning their relocation to Portugal. Each individual’s financial situation and goals are unique, and expert guidance can help navigate the changing tax landscape effectively.

 

Alternative options for non-habitual residents in Portugal

For those who were hoping to take advantage of Portugal’s now-ending Non-Habitual Resident (NHR) tax regime post-2024, the news may feel disheartening. However, there are still alternative options to consider.

Individuals may consider exploring other countries that still offer similar tax incentives for foreign residents. Countries such as the UAE, Malta, and Cyprus have their own tax regimes and investment programmes that are worth considering. There are also still countless benefits to moving to the Portuguese shores.

It is essential for non-habitual residents to carefully research and consult with tax professionals to determine the best course of action based on their individual circumstances.

While the end of the NHR tax regime may be disappointing for many, there are still options available for those looking to make Portugal their new home.

 

For any individuals looking to move to Portugal – or any other country – or who are simply in need of tax advice, we urge you to get in touch with our tax experts at RHJ Accountants. As English-speaking accountants, we can provide you with sound advice for your international tax burden and more.

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