The government intends to restore the Non-Habitual Resident (NHR) regime for both self-employed and paid workers. According to claims made by the Finance Minister to the Financial Times, anyone who stays in Portugal for at least 183 days and establishes tax residence on national territory will once again pay only 20% of the personal income tax for ten years. This innovation will be part of the package of measures that the Minister of Economy, Pedro Reis, presented to the Council of Ministers today, which is expected to reduce corporate income tax by two percentage points per year (up to 15%), with a budgetary impact of 1.5 billion euros.
According to a British newspaper, Luís Montenegro’s government (EPP) intends to reinstate contentious tax breaks that drew many international investors. One of the innovations is that these benefits are exclusively available to working individuals, excluding seniors. Miranda Sarmento believes that reducing these advantages will allow her to “attract some people” to Portugal, thus promoting the country’s economy.
Remember that these tax breaks were enacted in 2009 to aid the country’s recovery from the financial crisis. Last year, António Costa’s administration (PES) scrapped the provision, calling it a “fiscal injustice” that contributed to increased property prices. According to claims made by Joaquim Miranda Sarmento, the government will keep the 20% rate but will only cover “salaries and professional income”. “It will exclude dividends, capital gains, and pensions, which was a problem between Portugal and countries like Finland and Sweden.”
In between comments, the Finance Minister stated that Portuguese persons who have lived abroad are eligible for these tax breaks and that purchasing a home is not required to receive these benefits. However, Miranda Sarmento insisted that the government would not reverse its decision to stop the golden visas associated with home purchases. He revealed that the Executive is optimistic that these tax breaks will be passed, with opposition parties backing the legislation or perhaps abstaining.
However, there is a political risk associated with this measure, as reintroducing the NHR would need to be through the Portuguese State Budget Law, whose approval is dependent on either PS or Chega’s (ID) abstention or approval. PS and Chega have already stated their opposition to this form of tax benefits.
Our team of professionals at MCS will be following this matter and keep our stakeholders updated.
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