NHR in 2024?
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Update: António Costa has since resigned as Prime Minister, on 7th Nov. 2023. The provision to end NHR was included in the draft budget presented by his government, however, that budget will now not be submitted to Parliament. A new government could of course submit a budget that includes the end of NHR, however it is likely that any discussions on a new budget will not happen before March of next year, if not later.
ONE Select Properties - an independent real estate agency that specializes in properties in the Quinta do Lago and Vale do Lobo areas of the Algarve - takes a look at the possible reasoning behind this change in policy, which the new government may or may not also follow.
In a recent announcement that has captured the attention of both domestic and international audiences, Portugal's Prime Minister, António Costa, has proclaimed the forthcoming conclusion of the special tax benefits for new Non-Habitual Residents (NHR) in 2024. This decision signifies a noteworthy departure from Portugal's tax policy and has ignited inquiries regarding its influence on expatriates, the real estate sector, and the nation's economic landscape.
The Rationale Behind the Decision:
António Costa has cited several key reasons for this decision to terminate the NHR program. One of the primary motivations is to address what he calls "fiscal injustice." The NHR initiative, initially designed to attract foreign expertise and investments, accorded substantial tax advantages to eligible individuals, particularly concerning income derived from abroad. Nevertheless, over time, it has come under scrutiny for its contribution to the escalation of property prices, particularly in high-demand regions such as Lisbon and Porto. This surge in housing costs has rendered homeownership progressively unattainable for locals, prompting concerns about fairness and affordability.
Existing NHR Beneficiaries:
While the special tax relief for new non-habitual residents will come to an end on the 1st of January 2024, the Prime Minister has reassured existing NHR beneficiaries that their tax privileges will be preserved. This means that those already benefiting from the program will remain unaffected by its discontinuation.
The Evolution of the NHR Program:
Costa emphasized that the NHR program served its intended purpose during its earlier years. It successfully attracted foreign residents, with a majority of beneficiaries choosing to remain in Portugal even after the program's initial timeframe had ended. This highlights the program's historical effectiveness in promoting residency and investment in the country.
Economic Implications and Housing Market:
The decision to end the NHR program is anticipated to yield diverse economic consequences. While it may serve to moderate the real estate market and mitigate property price inflation, it also raises inquiries about its potential impact on foreign investment and Portugal's overall competitiveness in the global economy.
Prime Minister António Costa's announcement regarding the termination of the NHR tax relief for new non-habitual residents in Portugal marks a significant policy change. While it aims to address concerns about housing affordability and fiscal fairness, it also leaves room for debate about the potential impacts on the country's economy and its appeal to foreign residents and investors.
As these changes unfold, it is imperative for current and prospective NHR residents, as well as those with an interest in the Portuguese property market, to stay well-informed about the evolving landscape and contemplate seeking professional guidance regarding their financial and residency strategies in Portugal. The effects of these adjustments are likely to remain a prominent subject of conversation and examination in the months ahead.
See the original article published by ONE Select Properties
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