It is the end of an era. After more than a decade, Portugal will no longer be a tax haven for foreigners (mostly retirees and digital nomads) who, by residing in the country, enjoyed very favorable tax conditions.
The Prime Minister, Antonio Costa, declared yesterday that as of January 1, 2024, the privileged tax treatment will end. “It no longer makes sense to maintain it,” he said, alleging that it was an “injustice.”
Until now, any foreigner who wanted to join the special regime (RHN) had the possibility of paying only 10% taxes if they were retired. In the last two years, these benefits had also been extended to the self-employed or skilled workers (doctors, engineers, architects...), who only pay a fixed rate of 20% on their income.
To enjoy these conditions, it was enough to prove that you had resided more than half of the year in Portugal. In exchange, you had the right to enjoy the services of the welfare state, such as health care.
The idea, which was born in 2009 – it was introduced to attract investors and professionals while Portugal was suffering from the financial crisis – came into force three years later. It was partially renovated in 2020 (until this date, retirees paid 0%!). It was not a success in its beginnings, but it did gain many followers in more recent times, with the rise of teleworking. It is estimated that during this period some 10,000 foreigners chose to move to Portugal for tax reasons, according to Portuguese media. The number of Spaniards who declare they reside in Portugal has increased by 23% since 2018 and reaches more than 15,000.
Among the unwanted effects of this measure, on the one hand we must discount the discomfort of the population of Portuguese nationality, who saw in this law discrimination based on nationality and a loss for the public treasury, which in 2022 was estimated to be more than 1.5 billion euros.
On the other hand, the attractiveness of Portugal contributed to inflating housing prices, not only due to the interest of Europeans but also of flows of people from Saudi Arabia, China, Russia and Australia.
The price of housing in Portugal has increased by 78% between 2012 and 2021, when in the EU it rose by 35%, according to a study by the Manual dos Santos Foundation. In cities like Lisbon, there has been a 65% increase in rentals since the start of the tourism boom in 2015.
Antonio Costa's announcement came two days after thousands of people took to the streets of Lisbon and other cities in Portugal to protest rising rents and housing prices fueled by growing gentrification and unprecedented tourism. . Given the chronic shortage of available housing supply, the Government has decided to put an end to the fat cows... except for foreigners who were already subject to said regime. For them, Portugal will continue to be (fiscal) paradise.
