The Portuguese government is planning to reintroduce tax breaks for foreign residents on Thursday despite criticism in the past that the scheme stoked housing prices, the finance minister told the Financial Times.
Launched in 2009, the scheme gave people who became residents by spending more than 183 days a year in the country a special 20% tax rate on Portuguese-sourced income derived from "high value-added activities", such as practicing medicine or teaching in universities.
It was introduced to attract investors and professionals as the financial crisis hit Portugal, one of western Europe's poorest nations.
Other benefits of the scheme - known as Non-Habitual Resident - included tax exemptions on almost all foreign income if taxed in the country of origin and a 10% flat tax rate on pensions from a foreign source.
Portuguese citizens who lived abroad for five years or more could also apply.
Former Prime Minister Antonio Costa said last October the scheme had inflated the housing market and called it a "fiscal injustice that was no longer justified". His government decided to ditch it.
In November, parliament extended the scheme until the end of 2024 but applicants had to prove they prepared their move to Portugal during 2023.
Finance Minister Joaquim Miranda Sarmento told the Financial Times that salaries and professional income would still be covered by the tax breaks but not pensions, dividends or capital gains.
"We need skilled workers and economic growth," he said.
The official announcement was expected after the cabinet meeting later on Thursday but the scheme still has to be approved by lawmakers, which could prove challenging as Prime Minister Luis Montenegro is governing without an outright majority.
Data showed that over 74,000 people benefited from the tax exemptions scheme in 2022, costing the state budget more than 1.5 billion euros ($1.62 billion), an annual increase of 18.5%.
Source : https://economictimes.indiatimes.com/nri/migrate/portugal-plans-to-reintroduce-controversial-tax-breaks-for-foreign-residents/articleshow/111492294.cms
