Portugal is expected to discontinue the non-habitual tax resident regime in 2024

Portugal's Prime Minister has hinted at the discontinuation of the country's non-habitual tax resident regime starting in 2024. This regime currently provides a preferential tax rate to individuals involved in high-value-adding scientific, artistic, or technical activities, including professionals like architects, doctors, engineers, artists, managers, self-employed contractors, and technicians. Their qualifying Portuguese-source employment and self-employment income enjoy a reduced tax rate of only 20%. Additionally, complete tax exemptions are offered on various foreign-source incomes, such as employment earnings, rental income, dividends, and more, as long as they can be taxed in the source state under a double tax treaty or have been adequately taxed in a non-low-tax jurisdiction. Foreign pensions are subject to a flat 10% tax rate.

To be eligible for this regime, individuals had to apply if they hadn't been tax residents in Portugal in the past five years. Once accepted, they enjoyed these tax benefits for a continuous ten-year period. However, a recent announcement by Prime Minister Antonio Costa has signalled the forthcoming end of this special regime. Costa expressed concerns about the regime's biased contribution to real estate speculation and its potential inflationary impact on the residential property market.

While detailed specifics have not been disclosed yet, and it remains uncertain if the regime will be entirely terminated, the likely revocation of the 20% 'impatriate tax' regime is on the horizon. In the event of a complete abolition, experts speculate that individuals already benefiting from the scheme and those accepted into it before the conclusion of 2023 will likely be grandfathered into the regime. This would mean that this provision should also extend to non-EU nationals with pending visa procedures as of 31st December 2023, granting them the opportunity to request non-habitual tax resident status once their visas are granted.

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