Portugal’s NHR tax regime extended for some – but only if plans are already underway

Wealthy expats looking to take advantage of Portugal’s hugely popular Non-Habitual Residency (NHR) tax regime are potentially set for a one-year extension – but only if they meet certain criteria.

Portugal’s NHR tax status was due to close to new applications at the end of December this year.

Introduced in 2009, the NHR tax regime offers beneficial tax rates for up to 10 years for successful applicants. Designed to attract wealthy investors and expats to Portugal it has proved highly successful.

However, it was announced in October the door was to slam shut for new applicants at the end of 2023.

But the shock resignation of its Prime Minister, Antonio Costa – dethroned amid a corruption probe - appeared to have potentially derailed the plans which were contained with his party’s State Budget – the key legislative agenda for the government.

After weeks of uncertainty – and a general election called for March 10 - his Socialist Party (PS party) has now modified its proposals for supporting some people who have taken action already to secure their NHR tax status before the deadline to new entrants.

In what it calls a “transitional NHR”, it will be extended for some new entrants until December 2024.

However, those wishing to take advantage need to be able to prove they were already planning their move in 2023.

This will need to be demonstrated by documentation covering key criteria.

These include proof a property has been purchased or a lease or contract signed, or children enrolled in a Portuguese school – all of which must have already been in place or progressed.

Alternatively, proof needs to be shown of an employment offer, an existing valid visa or that an application for a visa has been filed – all by December 31, 2023.

The move will be welcomed by many amid concerns of huge delays in processing visa applications following the creation of the newly formed Portuguese Agency for Integration, Migration and Asylum (AIMA).

However, as a further twist to the future of the NHR tax regime, should the Socialist Party lose control at the March elections, any incoming government could decide to extend or further alter the tax regime plans as they had suggested with the new Incentivised Tax Scheme (ITS).

Steve Philp, a spokesman for Portugal Pathways, a company focused on assisting wealthy individuals and their families in optimising their relocation or life strategy in Portugal, said: “It was only in October the Portuguese government confirmed the NHR tax regime was to close to new applicants at the end of December.  This has created a surge in applications for NHR tax status and separately for supporting visas, creating a huge problem for the professional supply chain and the new AIMA government office.

“This prompted real concern among many families who had purchased property but were waiting on visa applications being processed amid the backlog.

“This potential extension will come as a great relief to those who have invested heavily, both financially and emotionally, in relocating their families to a new life in Portugal as it could provide the breathing space they so desperately needed.

“However, the clock now appears to be ticking so we would urge anyone in the process of making the move not to delay with their plans and ensure they meet all the necessary criteria to allow them to complete their move.”

Bringing the curtain down of the NHR tax regime for new applicants and replacing it with the Incentivised Tax Scheme (ITS) had seen many express concerns over the impact on Portugal’s economy which has benefited from significant investment.

Many had called for a rethink on the plans to prevent a financial hit to the country’s inward investment.

A Europe Living spokesman and expert in visa and NHR applications based in Lisbon added: “The NHR tax regime has proved hugely popular, and this potential extension could allow some people a fair resolution for their situation as they had taken early action.

“The problem now is the political uncertainty in Portugal as we approach the general election in March.

“If the Socialist Party fail to hold on to power, then it is quite possible the NHR tax regime or ITS that’s forecast to replace it could be subject to further changes and investors don’t like uncertainty.

“It does create some uncertainty in the long-term so anyone seeking to move to this beautiful country should get immediate professional advice.”

The Portuguese government is expected to clarify the situation in parliament on November 29th which is the date of the government’s budget reforms which include the changes to the NHR tax regime.

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The information on the Portugal Pathways website and in email communications is for general informational purposes only and should not be construed as legal, tax, or financial advice. You should consult and check with a qualified professional advisor before relying on any information provided on this website or in email communications.

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