An IMGW News Report:
Portugal’s new centre-right government plans to reintroduce tax breaks aimed at attracting skilled foreigners to the country, as part of efforts to stimulate economic growth.
“Industry experts believe that this latest initiative from Portugal may be a response to criticism from fellow EU member states, particularly Nordic ones, who have criticised Portugal’s Residency by Investment programme”
Here are the key points summerising Portugal’s new tax breaks:
- Tax Break Details: The proposed tax regime will feature a flat 20% income tax rate but will exclude pensions, dividends, and capital gains. This adjustment is in response to criticism from other EU countries, particularly Nordic nations, who were concerned about Portugal’s previous tax breaks luring retirees who stopped paying tax in their home countries.
- Exclusion of Retirees: The new regime explicitly excludes wealthy expatriate pensioners from benefiting, aiming instead to attract younger skilled workers who could contribute to economic growth without burdening the health system.
- Political Landscape: The minority government led by Prime Minister Luis Montenegro will need to secure support from opposition parties, such as the Socialist party or the far-right Chega party, to pass the legislation due to their opposition to the tax breaks.
- Economic Goals: The government sees these tax breaks as crucial for attracting highly skilled workers like engineers and researchers, who are currently deterred by Portugal’s higher income tax rates compared to other countries.
- Impact on Housing and Economy: The reintroduction of tax breaks is seen as potentially impacting Portugal’s fiscal surplus and EU debt rules, with concerns raised by the central bank about maintaining fiscal discipline amidst new spending measures.
Overall, the government aims to strike a balance between stimulating economic growth through attracting skilled professionals and managing fiscal responsibility in accordance with EU regulations.
A Controversial Residency by Investment Programme
Some industry experts believe that this latest initiative from Portugal may be a response to criticism from fellow EU member states, particularly Nordic ones, who have criticised Portugal’s Residency by Investment programme, citing concerns over money laundering, fiscal issues, and security. Domestically, the programme received criticism due to potential inflation in property values.
Portugal’s updated golden visa scheme has sparked controversy as it moves away from real estate investments towards investment funds. Originally intended to stimulate Portugal’s economy, the scheme now requires wealthy foreign investors to contribute €500,000 to qualifying funds for residency. Launched in 2012, it has amassed €7.3 billion, primarily in real estate, prompting criticism for driving up housing costs.
Advocates argue the new focus on funds will benefit sectors like sustainable agriculture and education, aligning with community interests. Yet, concerns remain over its reduced appeal to investors and bureaucratic complexities, amid Portugal’s evolving political landscape and legislative uncertainties.