The recent announcement by the Prime Minister of Portugal, António Costa, about the (potential) end of the Non-Habitual Resident program has taken everyone who is planning to immigrate to the country by surprise. It is important to say, however, that those already registered in the program will not lose the tax benefit to which they are entitled for a period of 10 uninterrupted years.
The program was created in 2008 and its premise was to minimize the tax burden on those who immigrate to Portugal (or return to the country, given that Portuguese nationals are also eligible to benefit) and who have not been tax resident in Portugal for the previous 5 years. In general, it was a measure designed in the post-crisis context with the aim of attracting foreign capital to the country. Although immigrants have benefited from a significant mitigation of taxes due at IRS level, the indirect contributions have always been diverse: IUC, IMT and VAT are just some of the consumption-related taxes that have certainly seen increasing contributions since the measure was implemented.
At the moment, the text proposed in the 2024 State Budget reveals an intense modification to the program: for those who change their tax address as of January 1, 2024, the flat rate of 20% on employment income, for a period of 10 years, will only be possible for those working in research, teaching and scientific development, and the previously applicable list of professions with high added value will no longer apply, as well as the exemptions commonly applied to other taxable income.
Given the imminent validity of the measure, we encourage those in a position to change their tax address to Portugal to do so immediately. The following cases are eligible for this:
- Residence visa approved by a Portuguese Consulate abroad and appointment at SEF already booked, or;
- Proof of appearance at SEF to issue a Residence Permit, or;
- Residence Permit issued, or
- Holder of a European Union Citizen’s Certificate of Residence.
In all cases, a permanent address in Portugal – a rental contract registered with the Tax Authority or your own home – will be an essential part of the process of changing your tax residence, which precedes the NHR application.
If your visa application has just been submitted but has not yet been approved, you will have to wait for a response from the relevant authorities. It is possible that the well-known delays at SEF and its imminent rebranding into a new entity will be taken into account by the legislature and that, in the vote on the 2024 State Budget, a transition period for those affected by this situation will be granted.
At the moment, the best thing to do is to wait for the vote, which will take place on November 29, to find out more about the measure and whether it will, in fact, mean that only those resident until 31/12/2023 will be able to apply for the NHR under the terms currently in force.