Portugal's Ending of Tax Scheme Spurs Digital Nomad Rush

Upcoming tax law changes and the discontinuation of Portugal's Non-habitual Residence (NHR) scheme for new entrants in 2024 are expected to draw a surge of digital nomads to Portugal seeking to benefit from the current tax incentives before they vanish.

The Portuguese government recently announced its intent to abolish the NHR tax regime, which has been granting foreigners reduced tax rates on income for a decade. The decision was made with the aim of addressing housing market concerns.

Portugal's Prime Minister, Antonio Costa, emphasized that the NHR scheme was initially implemented to rectify fiscal disparities and is no longer justifiable. The Prime Minister stated, "In 2024, special taxation for non-habitual residents will end. Whoever has it will keep it."

He clarified that individuals who already possess this tax advantage in Portugal will continue to enjoy its benefits for the full 10-year duration.

According to the consulting firm Portugal Pathways, new applicants must submit their requests by December 31, 2023, and complete their application or receive approval by March 31, 2024.

Local reports have indicated that this deadline has prompted an influx of remote workers interested in capitalizing on the NHR scheme while it remains available.

The NHR scheme offers significant benefits, including a ten-year exemption from income tax on certain types of foreign income, such as pensions, dividends, and royalties. It also provides the potential for double tax relief, which has been an attractive feature for internationals considering the NHR program.

Starting next year, Portugal will introduce an alternative NHR tax regime for scientific research and innovation, allowing various professionals to benefit from a ten-year reduction in income tax.

Portugal has consistently ranked as a top destination for digital nomads, particularly its capital city. This allure leads to a continuous influx of internationals looking to live and work in the country.

The government's decision to phase out these tax schemes comes in response to concerns about the rising cost of living and real estate prices in Portugal. Similar concerns have led to changes in Portugal's Residency by Investment scheme, known as the Golden Visa. As part of the "More Housing" program, the President of Portugal, Marcelo Rebelo de Sousa, approved changes to the Golden Visa Program, including the removal of real estate options from the scheme.

By fLEXI tEAM