New tax law changes and the closure of the Non-habitual Residence (NHR) scheme for new entrants from next year may lead to an influx of digital nomads in Portugal who seek to benefit from the current tax regime before it expires.
The government of Portugal recently announced that starting in 2024, it plans to abolish the NHS tax regime, which gives foreigners the opportunity to benefit from reduced tax rates on income for a period of ten years.
The decision was initiated with the aim of helping improve the housing market in the country.
While announcing the new changes, Portugal’s Prime Minister, Antonio Costa, considered that the non-habitual residents (NHR) is a measure of fiscal injustice and its maintenance is no longer justified after it has served its purpose and will only contribute to increasing housing prices, according to the Portugal News.
“In 2024, special taxation for non-habitual residents will end. Whoever has it will keep it,” Antonio Costa.
However, the PM clarified that internationals already in the country who have this tax advantage will be eligible to benefit from it for the duration of their 10-year term.
According to the consulting firm Portugal Pathways, new applicants are required to submit their request by December 31, 2023, and also complete their application or approval by March 31, 2024.
Local media have reported that this deadline triggered a new influx of remote work lovers who want to take advantage of this tax scheme while it is still available.
Among the main benefits brought from the NHR scheme is the opportunity to be excluded from income tax on certain types of foreign income for ten years, taking into account pensions, dividends, and royalties.
Furthermore, the potential for double tax relief is another benefit that attracts internationals interested in the NHR program.
Still, Portugal will introduce an NHR tax regime alternative for scientific research and innovation starting next year, permitting various professions to benefit from a ten-year income tax reduction.
Portugal is among the favourite countries for digital nomads, especially its capital, bringing each year a large number of internationals planning to live and work in this country.
The government’s decision to put an end to these tax schemes came amid concerns over the increasing cost of living and real estate prices in Portugal. Similar reasons led the country to also apply changes to its Residency by Investment scheme, known as the Golden Visa.
Recently, as part of the “More Housing” program, the President of Portugal, Marcelo Rebelo de Sousa, approved new changes to the Golden Visa Program, which, among others, included the abolishment of the real estate options from this scheme.
