Red Eric

In an interview with CNN last night, the PM announced that NHR would be closed to new applications in 2024.

Those who already have it will keep it, obviously, until the end of its term.

wellinever

Do you know how many NHRs were issued in last 3 years

Red Eric

Haven't a clue but I'll have a stab at it.

Is it "an annoyingly large number if you're paying income tax at full PT rates"?

Are such stats now available?

Loafing Along

Article in the press quote :According to data recently released by the Tributária e Aduaneira (AT), tax expenditure from the government on the NHR regime totalled €770m in 2019, increasing to €908m in 2020 and surpassing the €1bn barrier in 2021 for the first time, up to €1.21bn.

Currently, there is no information provided on the number of people who were benefiting from the scheme in that year.

wellinever

I read elsewhere that it is around 90K.in total which would seem a low figure to me.
And what impact its removal, as an incentive, might it have on property prices in key areas of PT, namely, Lisbon, Porto and the Algarve.
Why would it be removed, rather than simply increased to say 20% tax for example, if figures are so low.
Is this purely political rather than economics

Shanorme

From the FT: https://www.ft.com/content/5ea5c082-...reType=nongift

"More than 50,000 people had already benefited from the regime by 2020. The government said that the amount of income that went untaxed due to its provisions in 2022 was €1.5bn."

There is no mention of numbers of people between 2020 and now.

wellinever

Just wonder how many of those between 50 and 90K would have come to PT, and bought property, without it. So maybe a loss of tax that would never have existed in the first place without it.
If on NHR do you have to declare worldwide income even tho it may not be taxed under the regime? If not to what is the loss of €1.5bn attributed ?

EU.flag

NHR or not, one must declare all worldwide income. Not all worldwide income is tax free under NHR.

EU.flag

PM cant change NHR law, but he can lobby for change, as he's doing now.
Only parliament can change NHR law, so its not done deal.

Red Eric

I'd say it goes a good deal further than lobbying with the makeup of Parliament as it is at the moment.

Even without the support of any other, the ruling party could easily get it through and presumably, given the unequivocal manner in which he announced it, it has already been discussed internally.

Red Eric

The regime doesn't only give concessions to pensioners so whatever the figure, some of the total will be here as "high value activity" earners and paying a flat 20% on that income. There's no telling, in either case, how many of the total are people who had already decided on a move here and simply accepted the NHR regime as a very nice added bonus. Probably a lot fewer than were completely induced or where it was a deciding factor.

I should think it would be pretty difficult to apportion how much of the skewing of the property market either for buying or for renting is attributable solely to NHR. My completely uninformed opinion would be not hugely significantly of itself, although tens of thousands of properties being snapped up in areas where demand already outstrips supply has to have some effect - plus when things start overheating in one part of the market there's always knock-on effects elsewhere. But there's a host of other factors to consider, 2 of the most likely culprits being the ripping away of protected tenancies and the wholesale ousting of large numbers of inner city low-paying renters, and the rise of the internet platforms and resultant opportunies the tourist accommodation sector provided.

I can't really imagine a great economic case being made for keeping the NHR regime going nowadays. I'd like to see a properly reasoned argument, with stats, which back up its having been a good enough idea in the first place to overcome the obvious distastefulness of such a scheme. One thing the PM said the other day was that it had already justified itself because 59% of those who had benefitted from it continue to live here even after the end of the 10 year concession. I'm sure that is a figure that he was provided with and that can be sustantiated but I have to say, I'm highly sceptical that it will remain so with regard to the rest of the current beneficiaries. There can only be a dribble of numbers available so far given the low profile of the scheme in the earlier years and the difficulties encountered by those requesting the status. It wasn't until alterations were made in 2012 that it became more widely talked about and even then took a while to really get going, so the most significant stats will only emerge over the next few years.

I think it was primarily about getting solvent residents living here and spending their disposable income as opposed to purely stimulating the property market. In the face of voluble protests about price and shortage of accommodation, though, I guess it has become untenable to continue with something which, even if it isn't actually entirely to blame, is widely seen as a contributing factor. The unfairness of it when compared to other residents paying full whack will always rankle and the more that is felt, the easier it becomes to focus attention on it as a target and blame it for a host of ills.

wellinever

Would you agree that the normal income tax burden in PT, perhaps meant that the easy way to attract foreign money, at a time of need, was to offer an incentive to those that could avail themselves of the benefits. I agree that in the first instance not much was mentioned, but as a place for money, Portugal had some benefits other countries did not have, and of course with that growth, came the inevitable property value inflation giving capital growth. I know that is the case in many EU countries and indeed London,
But I agree with you that there will for sure be some doubts in peoples minds about future investment in PT, which may result in a levelling of house price inflation, but with other changes to money supply over the last 6 months (esp ECB stopping money printing) it will be difficult to know what the cause of any levelling off might be. Only time will tell, but one might expect there to be a rush to buy property until 2024 to gain that NHR before it ends.
Other thing I am not sure about, is, Could the Gov make changes to existing NHR during the 10 years they last for? As if indeed it does finish as expected, there would be no impact on any future NHR hopefuls

Red Eric

I don't agree about levelling off. Portugal's a pretty hot destination at the moment - not too demanding on immigration requirements, offers some elements akin to FoM to other CPLP countries, scores highly on climate and on safety and of course on ease of access to other EU countries. I'm not sure that removing NHR is going to knock inward migration on the head and in any case tourism seems to still be on the up year on year.

With regard to making changes to NHR terms for those already with the status, the PM did explicitly state that those who already have it will keep it. He didn't mention changes and I would assume there's no point in introducing any if it's to be closed off to new entrants. I suspect that even in the hugely unlikely event that the Govt wanted to alter the tax rates for existing beneficiaries, they would lose any legal challenges. I don't think they would even attempt it though - there'd be too much reputational damage for breach of trust.

Red Eric

On this aspect, I'm inclined to think not, for purely practical reasons.

I may have presumed too much but my immediate assumption was that it would be part of next year's budget and that it would be effective as of 1st Jan, and I'm still very inclined towards that although I would concede that putting the end date as far away as 31st December 2024 still wouldn't make a liar of the PM. I just don't see any reason to delay under the prevailing circumstances.

Supposing that I may be right with my instincts, it would be extremely difficult for anyone not already in the process of acquiring a visa (should they require one) to get that all squared away before year end. Reports abound from everywhere of slowness by the Consulates and by VFS, the company delegated in many places to handle initial requests - and then there's the SEF appointment hurdle to clear before the issue of a residency document and consequent start of tax residence.

Not a problem for EU citizens, of course so maybe a mini-stampede from them but if they were in a position to take advantage, why would they not already have availed themselves of it? Could put some plans awry though, for those who were planning on a leisurely move. This hasn't been telegraphed so it could be quite an abrupt and unexpected end. Just my speculation on the matter, though - I haven't caught up with any professional analysis of the PM's statement.

BBmatic

Thanks Eric .. this is unsettling news and thankful to receive it ASAP.
Not being overly familiar with NHR cut-off date requirements, can anyone let me know , if one possibly might NOT need a visa because EU citizen, (?) could a current non-resident still beat the 'possible' Jan 1st cutoff?
Edit: typo & adding thanks to OP