Impact on tax-favored residences

Portugal recently announced that it will abolish the previously heavily used NHR status for foreign tax expatriates starting in 2024. This decision has implications for those who have benefited from the tax advantages of NHR status in recent years.

In recent years, Portugal had been a notable attraction for foreign nationals seeking a more tax-efficient environment. A key incentive was the so-called “NHR status” (Non-Habitual Resident Status), which granted tax benefits to foreign citizens. This special regime allowed foreigners to benefit from tax privileges for a certain period of time. But now this possibility ends already in 2024, as announced by the government.

It is worth noting that in the last six months, as many as four countries have announced changes in their tax laws that are detrimental to those seeking tax-optimized residences. In addition to Thailand and Costa Rica, Dubai and Portugal now join the list of places that can no longer be used as tax-exempt residences. This leaves the world of low-tax residences poorer by a few attractive countries for the time being. At the same time, this will certainly encourage other states to fill this gap and create new incentives for perpetual travelers, digital nomads and wealthy entrepreneurs. Spain, for example, has already revised its “Beckham Law” with new rules that make the program even more interesting for emigrants.

NHR status, introduced in 2009, provided foreign nationals who settled in Portugal with a comprehensive exemption from income tax in their home country. This meant that income such as pensions, dividends and interest were generally not taxed in Portugal. This scheme had attracted a significant number of retirees, investors and professionals looking for an advantageous tax environment.