The Portuguese government has made a pivotal announcement regarding the cessation of the Non-Habitual Residents (NHR) regime, effective from 1 January 2024. This decision marks a significant shift in Portugal's approach to attracting global talent and investment, directly affecting individuals planning to relocate to Portugal who will no longer be eligible for the special tax regime under the NHR unless they meet specific conditions and have a valid residence visa by 31 December 2023. This development, part of the State Budget Law Proposal for 2024, though not yet final, signals a strong likelihood of enactment. Immediate consultation is advised for those considering relocation to understand the implications fully. This article examines the potential impact of this change, especially on UK resident non-UK domiciled taxpayers, questioning whether this could indicate a forthcoming adjustment to the UK's 'non-dom' regime in the following year.
Portugal has long been a favoured destination for relocators, offering a sunny climate, a central location in Europe, and the attractive NHR regime, established post-2008 to draw international talent and investors. The NHR regime, valid for ten years for eligible individuals, offers reduced taxation on various income types and exemptions for non-Portuguese income, conditional upon application and approval by Portuguese Tax Authorities.
The unexpected announcement of the regime's termination by Portugal's government leader in early October 2023 came as a surprise, given the lack of prior consultation or warning. Further clarity emerged with the publication of the Portuguese State Budget Law Proposal on 10 October 2023, detailing the government's intention to conclude the regime for new arrivals post-2023 but maintaining it for those already enrolled or eligible and holding a valid visa by the end of 2023, provided they register by 31 March 2024.
With the Portuguese government's parliamentary majority, significant alterations to this proposal are unlikely, making it critical for individuals currently considering or initiating relocation plans to Portugal to seek immediate advice.
Moreover, this move by Portugal could influence the broader conversation around tax regimes for international residents, notably in light of the UK Labour Party's recent indication of plans to abolish the 'non-dom' regime if they come into power in the 2024 elections. The cessation of Portugal's NHR regime might lend weight to arguments for reforming similar systems elsewhere, including the UK, suggesting a possible trend towards tightening tax benefits for non-domiciled residents globally.
While the Portuguese Non-Habitual Resident (NHR) regime faces changes, it's important to note that the Portuguese Golden Visa program remains a viable and attractive option for those looking to invest in Portugal and gain residency. This program offers a path to residency for investors, with benefits extending to family members, without the requirement to relocate. As the landscape of tax advantages and residency options evolves, understanding the nuances between these programs becomes crucial. We recommend potential clients interested in exploring the Golden Visa or seeking alternatives to the NHR regime to get in touch with us. Our team of experts is on hand to provide tailored advice, ensuring you make informed decisions that align with your financial and lifestyle goals.
Contact us and let us guide you through the options to find the best fit for your aspirations in Portugal.