NEWS / Portugal likely to abolish special tax non-residency privilege granted to certain foreign professionals

Portuguese Prime Minister António Costa has suggested that his government will likely terminate a special tax non-residency regime granted to individuals engaged in “high-value activities of a scientific, artistic, or technical nature,” which exempted most income sourced from abroad from Portuguese income tax and imposed a 20% tax on income earned in Portugal.

According to The Portugal News, Costa argued that the regime was a “biased way” of contributing to real estate speculation.

The privilege, also known as the non-habitual resident tax benefit, allows professionals such as architects, doctors, engineers, artists, managers, as well as self-employed contractors and technicians to exempt their most of their foreign-sourced income, including employment income, rental income, and dividends, for Portuguese income tax, provided that income was from a country with which Portugal has a tax treaty or has been effectively taxed in what Portugal defines as a non-low-tax jurisdiction. Foreign-sourced pensions are taxed by Portugal at 10%. Qualified Portuguese-sourced employment and self-employment income is taxed at 20%.

It is not clear if all benefits will be terminated or only the 20% flat income tax rate for Portuguese-sourced income.

Individuals could apply for the benefit if they had not been a tax resident of Portugal in the last 5 years. Once granted, the benefit was to last for 10 years. If the benefits get fully terminated, it is likely that it will be phased out gradually, so individuals granted the benefit in 2023 would still be able to take advantage of it until 2033.

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