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Will Portugal Eliminate Its Non-Habitual Resident (NHR) Tax Regime In 2024?

4 min read

Will Portugal Eliminate Its Non-Habitual Resident (NHR) Tax Regime In 2024?

Portugal is a country known for its delicious gastronomy, sunny weather and cheap cost of living. This superb quality of life has attracted many expats around the world.

One of the main draws has been the Non-Habitual Resident (NHR) tax regime. This program has allowed thousands of digital nomads, freelancers and business owners to reduce their taxes for up to ten years. In some cases, foreign income is tax-free, while the regular tax rates are up to 48%. 

According to Prime Minister Antonio Costa, this program has stopped making sense for Portugal because it is now a form of “fiscal injustice.” The government could eliminate it in 2024. This could mean the end of the tax and lifestyle appeal that many expats enjoy at the moment.

In this article, we’ll delve into the possible termination of the NHR tax regime and its benefits. Also, you’ll find alternatives to Portugal with similar or even better tax benefits. 

 

Belem Tower of Lisbon, Portugal

Belem Tower of Lisbon, Portugal

THE BREAKING NEWS: PORTUGAL'S PLAN TO END THE NHR PROGRAM

Imagine a country that offers an affordable cost of living and low taxes. Portugal has attracted profiles like entrepreneurs, digital nomads, freelancers and even qualified professionals. 

The financial crisis of 2008 hit Portugal hard, and this country was even considered one of the “PIIGS” of the EU (PIIGS is the most recent acronym released by the media, created with the initials of Portugal, Ireland, Italy, Greece and Spain, the five economies that need the most help at the moment). Despite its economic weakness, Portugal released this program to attract foreign talent and recover its economy. So far, it’s been a success, but the government plans to shut it down in 2024.

The last thing a poor country should do is punish foreign investment and talent, which is exactly what Portugal has in mind. Portugal would shoot itself in the foot if it eliminated this tax regime. 

However, Antonio Costa, the Prime Minister of Portugal, wants to address the housing crisis that’s going on in Portugal, blaming it on Non-Habitual Residents. The Portuguese government is listening to the whims of the Communist Party, and this is not an exaggeration. 

Costa deems this program “fiscal injustice” because the locals have higher tax rates, which will make Portugal less of an attractive expat destination. If you’re interested in this program, know the clock is ticking. The government’s plan to remove the NHR program is on the table and could be carried out soon. The exact date is still undetermined. 

 

Alfama Lisbon, Portugal

Alfama, Lisbon, Portugal

OVERVIEW OF THE NHR PROGRAM

Most European countries are far from tax-friendly, with some even enforcing wealth and inheritance taxes, along with confiscatory income tax rates. In this context, the Non-Habitual Resident tax regime is a breeze, offering phenomenal benefits.

Imagine a flat 20% tax rate on Portuguese-sourced income, while foreign-sourced income is tax-exempt most of the time (see double taxation agreements of Portugal). However, the treasures don’t end there. No wealth tax, tax-free remittances, no inheritance tax, no gift tax, white-listed country, or minimum stay requirement. And all these benefits last 10 years!

As you can see, it’s a breath of fresh air in a world of increasingly higher taxes and a door to a lifestyle many expats dream of – affordable cost of living, great lifestyle and little to no taxes. This program has brought in multiple high-networth and high-income individuals, who, of course, have invested and spent money in Portugal. 

 

Porto, Portugal-Dec-06-2023-02-34-30-9959-PM

Aerial view of Porto, Portugal

ALTERNATIVES FOR TAX-FRIENDLY RESIDENCY

I’m a firm believer in free markets and competition. Portugal is making a terrible move that could tarnish its reputation within the expat community, pushing thousands to find alternatives. I insist that if this country and program interest you, by all means, go ahead and apply as soon as possible. 

Those already NHR holders and those who get that status before the program ends will enjoy all the benefits. But once the program is over, there’s no going back. 

However, the world is still a huge place, and while I strongly disagree with Portugal’s stance, it’s their decision. Countries should compete for your money and talent. If Portugal ends this program, where could you go instead? You can pick and choose between multiple countries all over the world. Here are a few examples. 

Andorra has a top tax rate of 10% for both individuals and corporations. It takes immigration seriously and only wants people who will contribute to its economy. To apply for a freelancer residency permit, you must pay a deposit of €50,000 ($53,000 USD). Bulgaria offers a flat 10% income tax, and Montenegro’s is a delightful 9%. If you want to pay no income tax at all, you can also consider Monaco, although the cost of living will be significantly higher. 

Europe still has some good tax regimes, but I prefer other countries like Uruguay and my current home, Panama. Latin America has interesting jurisdictions, especially if you earn your income abroad. Some of these countries have territorial tax systems, so foreign-sourced income is tax-free. Territorial tax systems include Nicaragua, Guatemala and Belize. 

 

Azores, Ponta Delgada, Portugal

Azores, Ponta Delgada, Portugal

ACTING NOW: DEADLINE FOR NHR APPLICATIONS

If you still want to enjoy the perks of the NHR program, take action quickly. In the last couple of months, the immigration world has changed dramatically, with opportunities vanishing overnight. 

The Saint Kitts and Nevis Citizenship By Investment program doubled its investment requirement, so getting this passport was more challenging. As of the time of writing, Panama’s Qualified Investor Visa requires you to invest $300,000 USD in real estate, but this will go up to $500,000 USD in October next year. 

Paying no tax on foreign income for 10 years is absolutely amazing, and many expats are still enjoying the benefits of the NHR regime. My point is, if Portugal is a country you’d like to reside in, delaying your decision could close the doors of a lifetime opportunity. 

 

Azenhas do Mar, Sintra near Lisbon on a beautiful sunset

Azenhas do Mar, Sintra, near Lisbon, on a beautiful sunset

CONCLUSION

Things are changing a lot, and this plan to shut down the NHR program is just another proof of it. The whims of the Communist Party of Portugal and recent protests are making the government take a decision that would hurt Portugal’s economy. Any country that wants to boost its economy knows how important it is to attract wealth and talent, not to reject it. 

Fortunately, multiple countries are competing hard to attract capital by offering enticing tax incentives. Countries like Andorra, Monaco, Uruguay and Panama are some alternatives you can consider if you want to protect and multiply your wealth. All in all, your money should stay where it belongs – in your pocket. If Portugal decided to eliminate this program, you would still have options.

My job is to help people like you secure their new lives abroad, so fill out this form, and we’ll examine your case together. 

 


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Mikkel Thorup

Written by Mikkel Thorup

Mikkel Thorup is the world’s most sought-after expat consultant. He focuses on helping high-net-worth private clients to legally mitigate tax liabilities, obtain a second residency and citizenship, and assemble a portfolio of foreign investments including international real estate, timber plantations, agricultural land and other hard-money tangible assets. Mikkel is the Founder and CEO at Expat Money®, a private consulting firm started in 2017. He hosts the popular weekly podcast, the Expat Money Show, and wrote the definitive #1-Best Selling book Expat Secrets - How To Pay Zero Taxes, Live Overseas And Make Giant Piles Of Money, and his second book: Expats Guide On Moving To Mexico.

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