In a move aimed at bolstering its economy and attracting skilled workers, the Portuguese government has announced plans to reintroduce tax breaks for foreign residents. The scheme, initially launched in 2009 to lure investors and professionals during a period of financial turmoil, offers a 20% special tax rate on Portuguese-sourced income from "high value-added activities" for residents spending over 183 days a year in Portugal.
Termed the "Non-Habitual Resident" scheme, it also includes tax exemptions on almost all foreign income if taxed in the country of origin and a flat 10% tax rate on foreign-sourced pensions. Despite being discontinued last year by the prior administration, the scheme has been extended until the end of 2024 for applicants who have solidified their relocation plans to Portugal by 2023.
Economy Minister Pedro Reis highlighted that the revised scheme will continue to cover salaries and professional income but exclude pensions, dividends, and capital gains. The government's objective is to attract talented individuals whose expertise contributes significantly to the country's economy.
With over 74,000 individuals benefitting from the tax exemptions in 2022, costing the state budget over 1.5 billion euros, the government is facing pushback from critics. However, the administration also approved a reduction in the corporate income tax rate to 15% by 2027 and introduced a mandatory minimum tax rate of 15% for all multinationals and large Portuguese companies.
Furthermore, the government aims to encourage private investment and facilitate the merger of companies to enhance their competitiveness in the European market. Despite facing challenges such as low productivity, the government remains steadfast in its efforts to improve the economic landscape and elevate Portugal’s standing in the global economy.