Struck by the housing crisis, the Portuguese Government has decided to put an end to a special regime by which certain foreigners, many of them Spaniards and retirees, pay less taxes, in a decision that above all affects those thinking of moving to this country.
In an interview this week, the Portuguese Prime Minister, António Costa, announced that his Executive was going to eliminate starting next year the “Special regime for non-habitual residents”, a measure in force since 2009, because, he justified, “now Has no sense”.
This tax mechanism is considered one of the causes of the increase in house prices in the country, having attracted high-income foreigners who can afford more expensive homes, while the Portuguese can barely afford the rent, much less buy a property. because of the low salaries they have.
Since Costa's announcement, economist Juan Carlos Pérez, executive director of the consulting firm CE Consulting Portugal, which operates in the Portuguese country and in Spain, assured that they have received numerous calls from clients concerned that their tax situation may be affected.
However, he explained, “those who are already covered by this regime maintain the same tax advantages that they maintained, they do not disappear”, since it will only have an impact on those who were planning to move to Portugal and benefit from this mechanism from 2024. .
Special regime for non-habitual residents
This regime was created in 2009 to attract both “qualified residents with added value” and beneficiaries of pensions obtained abroad, the Portuguese Ministry of Foreign Affairs indicates on its website.
According to Government data, in 2022 there were a total of 74,258 non-habitual residents registered in Portugal, whose tax expenditure – that is, the amount of income that the Public Treasury stops receiving for granting tax treatment different from the general one – was 1,670 million euros.
Those 1,670 million euros were the highest fiscal expenditure that year after that related to VAT, accounting for 67.2% of what the Treasury stopped receiving, so the Portuguese authorities do not have the accounts.
Pérez explained that in general terms it is a regime in which non-habitual residents who have not had tax residence in Portugal in the previous five years can benefit.
Citizens of other countries who live in Portugal and who receive pensions from private employment can benefit, and pay taxes at 10%. “Not public, because there they are taxed at the source where they are paid, that is, a Spanish citizen who comes here, if his pension is from a public job, he will be taxed in Spain, because that is what the double taxation agreement imposes.”
“And if you worked in a private company, although there are exceptions, you are taxed in Portugal and would only do so at 10%” if you apply for this regime, he explained.
Other beneficiaries are foreigners with income that comes from abroad that is not income from work, since they are not taxed on Portuguese soil.
For example, a non-habitual resident of Portugal who has a company in Spain and receives dividends. “In general terms, these dividends will be taxed a little in Spain, while the rest in Portugal would not be taxed at all,” said this economist.
The third case is foreigners with professions with “high added value”, such as company managers, but also architects, engineers, plastic artists, actors, musicians, doctors or university professors, who pay taxes at 20%.
“Imagine an engineer who earns 100,000 euros in Spain, there he could pay taxes of around 35,000 or 40,000, while in Portugal he would pay taxes of 20,000 euros,” Pérez added.
The process to benefit from this special regime is not very complicated, especially if you are citizens of the European Union (EU).
Broadly speaking, you need to have a rental home, an address and a Portuguese NIF; and both self-employed and employed workers can do it.
The duration of this privilege is ten years and after this time it cannot be renewed, so the elimination of this regime from 2024 will not affect those who will have it expire soon because they would have been left without it anyway. .
Pérez indicates that in his company, which has been in Portugal for five years, although it has operated in Spain for 34 years, the client profile that usually benefits from this mechanism are liberal professionals, such as computer scientists.
Consequences in Spain
The expert rules out that its elimination will benefit other countries, such as Spain, which also offers tax incentives for foreigners, because they are different situations.
In Spain, “the misnamed 'Beckham law', because athletes are not covered by it, has some interesting advantages, but they are not similar to this regime because it is for people who travel for work and then pay taxes at 24 % income up to 600,000 euros and the rest up to 45%, and income obtained outside of Spain is not taxed either,” he noted.
“The Spanish regime is to encourage the entry of highly qualified professionals, whereas this (Portuguese) regime is for professionals, but also for retirees,” Pérez said.