Portugal to Reintroduce Tax Breaks to Attract Foreigners

Portugal to Reintroduce Tax Breaks to Attract Foreigners

Key Takeaways

1. Portugal plans to reinstate tax incentives to attract highly skilled foreigners.
2. The new government will exclude foreign pensioners from these tax breaks.
3. Portugal’s golden visa program is set to end, confirmed by the Finance Minister.

Portugal’s new government is set to reinstate tax breaks for foreigners to attract skilled workers while addressing the housing crisis. This measure is part of a broader economic stimulus package of 60 initiatives.

Finance Minister Joaquim Miranda Sarmento announced that the tax incentives would exclude dividends, capital gains, and pensions. Instead, a flat income tax rate of 20% will apply to salaries and professional income.

"We need skilled workers and economic growth. We must balance this with affordable housing," the Finance Minister stated.

Taxes Will Apply to Foreign Pensioners

The government will continue to tax foreign pensioners after facing criticism in the previous administration. Initially, foreign pensions were tax-exempt, but a 10% flat rate was later introduced.

Nordic countries were among the main critics, arguing that tax breaks for retirees caused them to stop paying taxes in their home countries. Nuno Cunha Barnabé, a tax partner at Lisbon law firm Abreu Advogados, said including retirees in the previous tax regime was counterproductive, given Portugal's aging population. "We need to attract young people," Barnabé noted.

Large Companies in Portugal Welcome the New Measure

Many Portuguese companies are likely to support the new measure as it could help address the shortage of engineers, researchers, and managers. "This will attract some people. It’s not sufficient, but it’s something the government can do," the Finance Minister said.

The tax break will also benefit Portuguese citizens living abroad, who previously had to become tax residents by spending at least six months a year in Portugal or purchasing property worth a minimum of €500,000.

Miranda Sarmento confirmed that the government would not reverse the termination of the golden visa program, which has impacted the housing market.


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