The Portuguese Parliament approved the State Budget for 2024 on 29 November [1], effectively ending the Non-Habitual Resident (NHR) tax regime, which offered reduced tax rates to qualifying residents in their first 10 years in Portugal.
The end of this NHR regime does not impact those who already benefit from the NHR regime or those who meet the requirements for NHR registration by 31 December 2023.
Anyone moving to Portugal (or applying for residency) after 31 December 2023 will no longer qualify for the system as it is.
While the NHR special tax regime is to be closed to new applications by 01 January 2024 onwards, the State budget included transition provisions that will allow applicants who had already planned on becoming residents in Portugal to still apply for NHR during 2024 if that they meet the eligibility requirements through:
- An employment contract or an agreement (or promise of either) signed by 31 December 2023 and where the work is to be performed in Portugal.
- Lease or other contract granting the use/ possession of property in Portuguese territory, concluded by 10 October 2023.
- A reservation or promissory contract of a property in Portugal, concluded by 10 October 2023.
- Enrolment of a child/children at an educational establishment in Portugal, formalized by 10 October 2023.
- A Portuguese residence permit or visa valid up to 31 December 2023.
- An application for Portuguese residence permit or residence visa initiated and/or registered with the competent authority by 31 December 2023.
The NHR scheme will therefore be phased out to new candidates during 2024 and fully terminated by 2034 when the final ten-year periods expire.
Closure of the NHR regime was a political decision influenced by the data released this autumn by the Portuguese Tax Authority according to which the annual amount of tax exempted by the government under the NHR regime crossed the €1 billion mark for the first time in 2021, having risen from €770 million in 2019 to €1.21 billion.
The data did not specify the total number of NHRs benefiting from the scheme and it is known that the number of applicants has been steadily growing each year, already surpassing 10,000.
“In 2024, special taxation for non-habitual residents will be over though those who already have it will keep it,” said Portuguese Prime Minister Antonio Costa last October. “This was a necessary measure that made sense for a while. In the first 10 years, 59% of people who had benefitted continued to reside in Portugal, despite the regime having ended. Currently this system no longer makes sense.”
The Portuguese government set out its proposals in the 2024 State Budget proposal, presented to parliament on October 10th but left on hold after the resignation of the Prime Minister in early November, only to be approved on the 29th November after which President Marcelo Rebelo de Sousa accepted Antonio Costa’s resignation, and informed the country that he was dissolving the parliament with new general elections scheduled to take place in March 2024.
[1] Aprovado o Orçamento do Estado para 2024 - XXIII Governo - República Portuguesa (portugal.gov.pt)
