In a move set to reignite debate on its economic efficacy, the Portuguese government is preparing to reinstate tax breaks for foreign residents, as stated by the Finance Minister in an interview with the Financial Times.
The scheme, first implemented in 2009, offered a preferential 20 percent tax rate on Portuguese-sourced income related to "high value-added activities" like healthcare or academia for individuals spending over 183 days annually in the country.
Initially launched amidst economic turmoil to entice investors and professionals during the financial crisis, the program, known as Non-Habitual Resident, also provided exemptions on most foreign income if taxed in the country of origin, along with a flat 10 percent tax on pensions from abroad.
Additionally, Portuguese expatriates residing outside the nation for at least five years were eligible to apply.
The announcement comes despite past criticisms, notably former Prime Minister Antonio Costa, who accused the scheme of inflating housing prices and labelled it a redundant "fiscal injustice." His administration had discontinued the initiative, only for the parliament to extend it until 2024 with stringent criteria last November.
Finance Minister Joaquim Miranda Sarmento defended the revised scheme, emphasising the necessity of attracting skilled professionals for economic growth. However, the final approval hinges on parliamentary consensus, presenting a potential challenge due to Prime Minister Luis Montenegro's minority government.
Data has also revealed a significant uptake in the tax exemption program, with over 74,000 beneficiaries in 2022 alone, resulting in a budgetary impact exceeding 1.5 billion euros ($1.62 billion), marking an 18.5 percent annual escalation.
The formal announcement of the reintroduced scheme is expected following a cabinet meeting, pending legislative approval in the coming days.