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In a recent announcement that has garnered attention both locally and internationally, Portugal's Prime Minister, António Costa, declared the impending end of the special tax relief for new Non-Habitual Residents (NHR) in 2024. This decision marks a significant shift in Portugal's taxation policy and has raised questions about its impact on foreign residents, real estate, and the economy.


1. The Rationale Behind the Decision:
António Costa has cited several key reasons for this decision to terminate the NHR program. One of the primary motivations is to address what he calls "fiscal injustice." The NHR program, which initially aimed to attract foreign talent and investments, provided significant tax benefits to eligible individuals, particularly in terms of foreign-sourced income. However, over the years, it has come under scrutiny for contributing to rising property prices, especially in sought-after areas like Lisbon and Porto. This inflation in housing costs has made homeownership increasingly challenging for locals, leading to concerns about affordability and fairness.



2. Existing NHR Beneficiaries:
While the special tax relief for new non-habitual residents will come to an end on the 1st of January 2024, the Prime Minister has reassured existing NHR beneficiaries that they will be allowed to retain their tax benefits. This means that foreigners who are already taking advantage of the program will not be affected by the termination.


3. The Evolution of the NHR Program:
Costa emphasised that the NHR program served its intended purpose during its earlier years. It successfully attracted foreign residents, with a majority of beneficiaries choosing to remain in Portugal even after the program's initial timeframe had ended. This highlights the program's historical effectiveness in promoting residency and investment in the country.


4. Economic Implications and Housing Market:
The decision to end the NHR program is expected to have various economic implications. While it may help cool down the housing market and reduce housing price inflation, it also raises questions about potential impacts on foreign investment and Portugal's overall economic competitiveness.

Prime Minister António Costa's announcement regarding the termination of the NHR tax relief for new non-habitual residents in Portugal marks a significant policy change. While it aims to address concerns about housing affordability and fiscal fairness, it also leaves room for debate about the potential impacts on the country's economy and its appeal to foreign residents and investors.

As these changes unfold, it's essential for current and prospective NHR residents, as well as those interested in the Portuguese property market, to stay informed about the evolving landscape and consider seeking professional advice on their financial and residency plans in Portugal. The impact of these alterations will likely continue to be a topic of discussion and analysis in the coming months.


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