Potential reprieve for NHR tax scheme – but is it real and for how long?

Dramatic scenes at the top of the Portuguese government have resulted in a last-minute potential delay of the end of its hugely popular Non-Habitual Residency (NHR) tax scheme. to new applicants. Whilst the politics indicated that it may be delayed, this has not been confirmed and individuals should not assume it has been officially extended.

But those wishing to take advantage of its unexpected survival are being urged not to delay in applying, amid claims it could be short-lived due to pressure from both inside Portugal and the European Union.

The NHR tax scheme offers beneficial tax rates for up to 10 years for successful applicants. Designed to attract wealthy investors to Portugal, it had been set to close to new applicants by the end of 2023. ‍

(See our updated guidance and process for NHR tax status applications, dependant on whether you are an EU passport holder or non-EU passport holder that requires a separate visa exemption to expedite your tax status in Portugal.)

However, the resignation of Portugal Prime Minister António Costa has slammed the brakes on his government’s legislative agenda.

Costa quit amid a corruption probe. He denies any wrongdoing.

But as a consequence, the annual state budget, which included instructions to wind down the NHR tax scheme to new entrants, has been scrapped.

It will come as a huge relief to thousands hoping to take advantage of the scheme but were facing challenges to hit the tight deadlines. There is, in addition, a significant backlog in visa processing at the newly formed Portuguese Agency for Integration, Migration and Asylum (AIMA).

It was reporting 350,000 visa applications were currently stuck in limbo and getting a SEF appointment is taking many months.

Aziz, an NHR tax regime and visa specialist advisor in Lisbon, is part of Portugal Pathways, which supports people seeking a new life in Portugal by advising on how best to structure their life, income, tax and assets to ensure a smooth transition.

He says the extension should not be relied upon and we must act as though the deadline is still set for 31st of December 2023 until an official statement comes out.

He said: “Because the current government has resigned, its legislative programme – which was due to be approved in parliament – has to be declared null and void.

“Which means the proposals to end the NHR tax regime maybe dead in the water too. However, with no official changes to the bill yet nobody can be certain.

“Also, I think it would be a surprise for the NHR tax scheme to survive under a new administration anyway, so while it may potentially be extended – I would urge anyone looking to take advantage of the tax scheme and act now.

“With delays at AIMA and uncertainty as to the NHR’s long-term future, the quicker you can get your details submitted, the better.

“We have seen how quickly things can change and the impact it can have on people’s plans – so while this potential extension is welcome, it would be unwise to assume it will last for long.”

Steve Philp from Portugal Pathways added: “We’ve gone from a mad dash to get NHR and, separately, visa applications in by the end of the year to potential hope but we must not kid ourselves that it's automatically going to be extended.

“We would advise anyone looking to take advantage of the NHR tax regime to act now. Get advice, but don’t think you can wait six months because the chances are the NHR tax benefits will still close to new applicants very soon.

“The sooner you can get the ball rolling the more confident you can be in terms of your financial and life planning.

“We have seen incredible pressure on the professional supply chain from law firms, tax advisors, NHR and visa specialists, wealth management and real estate companies. This is unlikely to change at least in the short term as more and more people see the opportunity that was thought lost with the old deadline.”

Guidance and process advice for NHR tax status applications

See our updated guidance and process for NHR tax status applications, dependant on whether you are an EU passport holder or non-EU passport holder that requires a separate visa exemption to expedite your tax status in Portugal.