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What has happened?

At the time of writing, the proposal is that NHR will be closed to new applications on 31st December 2023 unless the applicant held residency at 31st December 2023. These applicants will have until 31st March 2024 to apply.

There is also the suggestion of a new ‘incentivised tax status’ being introduced.

Details may change (as the issue still needs to be debated in Parliament) so it is not yet known if it will be a hard end on January 1st, a slower ceasing over 2024 or the retention of the NHR scheme but with limitations (as we saw with the Golden Visa changes 2023).

Assuming no delays, the proposal should be finalised and agreed upon by 24th November 2023.

Action to take

Recent and new residents: if you are a recent resident and have not yet applied, or if you receive your residency status before 31st December 2023, apply as soon as you can.

Current NHRs: those with NHR can retain the advantageous tax status but even so, you should begin planning for the end of your NHR. Some important opportunities exist e.g. selling foreign property is tax-exempt during NHR but taxable afterwards, similarly, dividends are tax-free during NHR but taxable at 28% afterwards. Planning now will allow you to time and control your tax position.

For future movers: More careful planning will be needed for those who move after the deadline has passed. Likewise, if you are on the cusp of receiving your residency in time, you should work on a contingency plan should your timelines not align. The need for effective planning will be even more important with the end of NHR as new residents will immediately be subject to the standard rates of tax and will not have the grace period of the NHR period to soften the tax blow if restructuring is required.

New tax incentives?

The draft does create a new tax incentivised status for individuals exercising certain professional activities.

In its current form it will allow successful applications:

1. 20% tax rate for 10 years on professional activity income.
2. 0% tax on foreign capital income i.e. interest, dividends, rental income and property capital gains.
3. 50% tax exemption on professional income up to €250,000 for 5 years.
Final words

Regarding the end of NHR and the new incentives, we will just have to wait and see, but even if 2024 does spell the end of the scheme for new arrivers, Portugal can still be a very tax-effective place to live. There are many wealthy Portuguese nationals and expats enjoying life in Portugal, and you can too with the right planning.

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