"2024 Update: Portugal's NHR Tax Changes - What New Expats Need to Know"

Welcome to the saga of Portugal's Non-Habitual Resident tax regime—where the plot thickens as quickly as your tax return! Once upon a time, Portugal decided to roll out the red carpet for expats, enticing them with the financial equivalent of a sunny beach: lower taxes! But like any good plot twist, just when everyone got comfortable, 2024 rolled around and Portugal said, "Plot twist!"—changing the rules and introducing NHR 2.0. Now, as the old tax regime waves goodbye, newcomers are met with a slightly different welcome mat, focusing on innovation rather than retirement. So, if you're thinking of moving to Portugal, grab your calculator and maybe a glass of Vinho Verde—navigating these new tax waters might require a bit of both!

The Non-Habitual Resident (NHR) tax regime in Portugal, which offered favourable tax conditions to new residents, is undergoing significant changes. Introduced after the 2008 financial crisis, the NHR regime aimed to attract global talent and investors by offering reduced taxation on certain types of income for a period of ten years. The program was particularly appealing for its 20% flat rate on personal income from high added-value activities and a tax exemption on foreign income.

However, starting January 1, 2024, new applications for the traditional NHR regime will no longer be accepted. This decision, announced in late 2023, aims to address fiscal disparities and concerns over its impact on the housing market, which has seen prices surge to levels considered unsustainable. The Portuguese government has identified the scheme as a factor in inflating housing prices and contributing to a housing crisis, which has sparked widespread public protest. Euronews

Those who were already registered under the NHR regime by December 31, 2023, or who had initiated the process and met all required conditions by that date, will still be able to benefit from the regime until the end of their ten-year period 毕马威（英国） . Additionally, a new version of the NHR, referred to as "NHR 2.0," is being introduced. This revamped regime shifts focus towards supporting employment, especially in scientific research and innovation, moving away from its previous broad applicability which included retirees and other high-value jobs. The tax benefits under NHR 2.0 will remain similar, maintaining the 20% flat tax rate on personal income.

The political landscape surrounding these changes is contentious, with significant debate within the country about the long-term impacts of the NHR regime on local communities and the economy. Some view the phase-out as a necessary adjustment to address fiscal and social inequalities, while others argue it will diminish Portugal's attractiveness to foreign talent and investment The Portugal News .

"Expert Comment" this week is from Lewis Sell - He is a Senior International Financial Planner for SJB Global with more than 10 years experience.

"From a financial planner's perspective, the changes to Portugal's NHR regime, which come to an end in 2024, is not necessarily the end of the story for people looking to relocate to the country. What we are instead seeing is a migration to a new framework known as NHR 2.0, this new framework looks set to continue some of the tax benefits on offer, such as the 20% flat tax rate on certain professional incomes and exemptions on various types of foreign sourced income but will notably exclude pension income from these benefits. This shift in the regime is very much intended to adjust the target audience and instead it looks to captivate and entice highly skilled professionals in sectors like tech, research and innovation with ties in with Portugal repositioning itself as a European tech hub. As with anything in life when one door closes, another opens but the importance for those walking through it to assess their tax strategies remains."

SJB Global

As we close the chapter on Portugal's NHR regime and peek into the pages of NHR 2.0, remember: the tax landscape in Portugal is changing faster than a chameleon on a disco floor! Whether you're a researcher, an innovator, or just someone dreaming of pastéis de nata by the Tagus, staying informed is key. So keep your calculators handy and your financial advisors on speed dial. After all, navigating tax laws might not be as thrilling as a Portuguese folk dance, but it's certainly vital for keeping your wallet in tune! Here's to hoping your transition to NHR 2.0 is as smooth as a good glass of Vinho Verde. Cheers and boa sorte (good luck)!