Portugal to Bring Back Tax Breaks In Order to Attract Foreigners

Portugal’s new government intends to reinstate tax breaks for foreigners in an effort to attract highly skilled workers to the country while also addressing the housing crisis.

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In an initiative to stimulate economic growth, the Portuguese government has adopted a package of 60 measures, one of them being tax incentives, Schengen.News reports.

According to Joaquim Miranda Sarmento, the Finance Minister, the tax will exclude “dividends, capital gains and pensions,” meaning that the tax break of 20 per cent flat rate of income tax will be applicable to “salaries and professional income”.

We need skilled workers and economic growth. We will have to balance that with more affordable houses. Obviously, if we have just one side of the policy, there will be more affordable houses but less economic growth. So we have to balance these two parts. 

Finance Minister

Taxes Will Apply to Foreign Pensioners

The Portuguese government made sure to tax foreigners with a pension after it received a lot of criticism in the previous administration. Initially, pensions were exempted from tax, but later, a ten per cent flat rate was applied.

The Nordic countries were among the leading complainers about tax breaks, saying it was causing retirees with pensions to stop paying taxes in their home countries.

Nuno Cunha Barnabé, a tax partner at Lisbon law firm Abreu Advogados, told the Financial Times that the inclusion of retirees in the previous regime was odd.

It was against demographics. It didn’t make sense,” he said. “We already have an old population. Attracting pensioners puts more burden on our health system. We need to attract young people. 

Barnabé, Tax Partner

Large Companies in Portugal to Openly ‘Welcome’ New Measure

Many companies in Portugal are likely to be happy about the new measure, as they hope to receive skilled workers for their business. They say there is a deficit in engineers, researchers and managers.

This will attract some people. It’s not sufficient, but it’s something the government can do. 

Finance Minister

The tax break will also be beneficial for Portuguese citizens who have lived abroad. Prior to this measure, beneficiaries had to become tax residents in Portugal, by spending six months (183 days) a year in Portugal or buying a property that costs a minimum of €500,000.

Miranda Sarmento also confirmed that the government would not reverse the “golden visas” termination, which impacted the housing crisis in the country.