Portugal to End Golden Visa Program in 2024

The Portuguese Prime Minister António Costa announced on 3 October that the government will put an end to the commonly known “Non-Habitual Resident” tax regime. The “NHR Regime’ is a special taxation regime that grants tax benefits to non-residents who move their residence to Portugal.

The program was implemented in 2009, it gives serious tax breaks to qualifying non-resident professionals and investors who move to the country. “Non habitual residents” generally pay tax on their Portuguese-source income at a rate of 20% for ten years. While most foreign-source income is not subject to tax under the regime, foreign pensions registered with the government after March 2020 are taxable at a rate of 10 percent.

The government had announced in October 2019 that it would review the golden visa regime, which had resulted in investment mostly in the coastal areas around the cities of Lisbon and Porto. The government revised the program in February 2020 to focus on boosting employment and promoting development in low-density regions. The government had concerns about the housing issues resulting from the influx of non-habitual resident.

On 10 October 2024, the government published tje State Budget bill, it proposes to end the NHR Regime from 1 January 2024. People who hold a Portuguese residence permit or who acquire tax residence in Portugal before 31 December 2023 can still qualify for the NHR Program. The text of the final bill is expected for the end of November.

What does this mean?

Residents who have the non-habitual resident status – or who obtain it before 31 December 2023 - will continue to enjoy it for the rest of the ten-year period. There is a transitory period for people who have acquired tax residence in Portugal or who have obtained a residence permit before the end of the year can apply for the NHR regime until 31 March 2024 and receive the benefit of the NHR regime.

However, those who acquired tax residence or obtained a residence permit in 2024 will not have the benefit of the NHR regime.

New tax incentives

Employees, Contractors and Freelancers

Under the proposed bill, individuals who relocate to Portugal between 1 January 2024 and 31 December 2026 and who have not resided in Portugal in the last five years are entitled to a 50% deduction against their taxable income, with a maximum of €250,000 for a period of 5 years.
The net income, including foreign source income, will be liable to tax at the standard progressive income tax rates.
Contractors and freelancers may be entitled to additional deductions during the first two years.
These deductions are not available for non-habitual residents.

Scientific Research and Innovation

A new special tax regime will be available for a period of ten years for

• University professionals and scientific research;
• Income paid by companies with contractual tax benefits for productive investment projects (investments above 3M€, namely industry, tourism, agriculture and R&D);and
• Income paid by companies under the R&D tax incentive system (SIFIDE) to holders of a PhD.
  This assumes the beneficiaries have not resided in Portugal in the last five years. Under this new tax regime, foreign source income will be exempted (wih the exception of pensions) and a flat rate of 20% will apply to employment inomce and income from self-employed activities.
  This cannot be combined with the 50% exclusion regime and it is not open for non-habitual residents.

Other attractive tax regimes

Portugual has an attractive and beneficial tax regime for income generated through life insurance or pension funds.
Regular investment income is taxable at a flat tax rate of 28%. However, there is an exemption for income from life insurance or pension funds during the first half of the contractual term representing at least 35% of the entire insurance/fund :

• 20% of the income if the redemption, advance or other forms of anticipation or maturity occurs between the fifth and eight year of the term of the contract (this is an effective rate of 22.4%) ; or
• 60% of the income, after the first 8 years of the contract (this is an effective rate of 11.2%).