By Picture yourself relaxing on the pristine beaches of Portugal’s Algarve coast, indulging in the country’s famous cuisine, and immersing yourself in the haunting melodies of fado music. In part, this has been made possible by Portugal’s non habitual resident (NHR) tax program, which has played a vital role in the country’s economic revival. However, with the current administration contemplating the program’s termination as early as 2024, experts like Luis Horta e Costa are raising concerns about the potential economic consequences.
Introduced in 2009, the NHR tax program has provided enticing tax benefits to foreign residents for10 yearsd. Eligible individuals, including retirees, professionals, and entrepreneurs, can take advantage of reduced tax rates on foreign income and, in some instances, even enjoy tax-free status. This program has been crucial in attracting wealthy expats to Portugal, fueling the country’s economic growth and foreign investment.
Luis Horta Costa, co-founder of Square View, a real estate property developer and asset manager based in Lisbon, cautions that eliminating the NHR program could lead to a “mass exodus” of foreign capital. He warns that this would negatively impact vital sectors such as real estate, tourism, and numerous others. Horta e Costa stresses that foreign investors have brought capital into the Portuguese economy and introduced innovation and new perspectives that have revolutionized the country’s economic landscape.
The NHR program was launched during the global financial crisis to rejuvenate Portugal’s economy, create jobs, and attract foreign investment. The program has been a remarkable success, pivotal in the country’s economic recovery and growth over the past decade.
However, Luis Horta e Costa and other experts now worry that the abolition of the NHR program could threaten Portugal’s economic momentum. They warn that the loss of foreign investment could have wide-ranging effects, hindering growth prospects and damaging critical industries. Horta e Costa highlights that Portugal’s real estate market, in particular, has experienced a resurgence thanks to the NHR tax program, and its termination would abruptly halt this progress.
Compounding these concerns is that neighboring countries, such as Spain, are introducing similar programs, potentially making them more attractive destinations for investors. Luis Horta e Costa contends that the NHR program has been instrumental in establishing Portugal’s reputation as an open, welcoming, and progressive nation. Without the incentives to attract foreign capital and talent, he fears Portugal may lose its competitive advantage and fall behind its regional rivals.
As Portugal finds itself at a turning point, the potential abolition of the NHR tax program presents a formidable challenge. The program’s economic benefits have been demonstrated over the past decade, and finding a suitable alternative will be no small feat. Luis Horta e Costa believes preserving foreign investment should be a top priority for government leaders to ensure Portugal’s continued prosperity.
The impending end of the NHR tax program serves as a sobering reminder of how a policy that once breathed new life into Portugal’s economy could be cut short prematurely. As the country navigates this uncertain terrain, it is essential for policymakers to carefully consider the long-term implications of their decisions and work to maintain Portugal’s position as an attractive destination for foreign investment. The post-mortem of the NHR program may reveal the story of a policy that revitalized Portugal’s economy, only to have its success curtailed too soon.
