Collapse of Portugal’s Government Delays End of Scheme

The low tax regime introduced in Portugal over a decade ago may continue for at least another year after the collapse of the government.

Portugal’s Prime Minister Antonio Costa recently announced the end of the country’s Non-Habitual Residency Scheme. However, Costa was forced to resign yesterday after being caught up in a corruption scandal. Police raided his official residence, and his chief of staff was arrested. Various individuals linked to Costa, including the infrastructure Minister, have been placed under formal investigation for corruption and influence peddling. The Justice Department is investigating Costa’s involvement. This is connected to Lithium mining concessions and significant infrastructure projects in the country.

This means that the government’s business in parliament is suspended. That includes passing the budget for 2024, which included abolishing the NHR scheme. Portugal’s President has yet to decide whether to call new elections next year or allow the ruling Socialist party to select a new Prime Minister. Either way, the budget will be delayed until next year, and it’s thought that the end of NHR will be postponed until at least the end of next year. In the case of new elections, no single party will likely gain an overall majority, which may mean NHR continuing indefinitely.

Good News for Prospective New Residents

This is good news for anyone looking to move to Portugal and take advantage of low tax rates. Registering for NHR is a simple procedure. It allows anyone who’s a tax resident of Portugal to take advantage of low tax rates, which can be effectively zero for dividends and other income types. Pensions are taxed at 10%. There’s a fixed tax rate of 20% for certain professions. Even if the legislation to end NHR is passed next year, anyone registering now gets the ten-year tax exemption.

Portugal also has many residency options, including the Digital Nomad and D7 visas. The Golden Visa is still available by investment or donation. Any resident can apply for NHR. Acceptance is generally automatic.

Majority of Those Who Move to Portugal Say Low Tax Regime is a Factor

As many as 65% of new residents considering Portugal claimed that the special tax regime significantly influenced their decision to move to Portugal. Portugal has tax rates of up to 48% for high earners. Portugal faces competition from other European countries like Greece, offering low taxes to new residents.

This political corruption scandal in Portugal is good news for prospective new residents. Anyone interested in becoming a non-habitual resident of Portugal should take action soon.

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