Portugal Plans to Reintroduce Tax Breaks for Foreign Residents

Government aims to attract skilled workers and boost economic growth, despite past concerns about housing inflation.

Portugal’s government plans to reintroduce tax incentives for foreign residents, aiming to attract skilled workers and boost economic growth, despite previous concerns that the scheme inflated housing prices. This move comes after the government scrapped the program in 2023.

The reintroduction of the tax incentives could attract a significant influx of foreign workers, particularly those in high-demand sectors like technology and healthcare.

The “Non-Habitual Resident” scheme, launched in 2009, offered foreign individuals residing in Portugal for over 183 days a special 20% tax rate on Portuguese-sourced income from “high value-added activities.” These activities included medical practice and university teaching.

The scheme was initially introduced to attract investors and professionals during the financial crisis, as Portugal struggled to recover from being one of Western Europe’s poorest nations. The program also offered tax exemptions on almost all foreign income, subject to taxation in the country of origin, and a flat 10% tax rate on foreign pensions. Portuguese citizens residing abroad for five years or more could also apply.

However, former Prime Minister António Costa criticized the scheme in October 2023, calling it a “fiscal…