Portugal’s new government is set to reinstate tax breaks for foreigners, aiming to draw highly skilled workers to the country while simultaneously addressing the ongoing housing crisis. In a bid to stimulate economic growth, the Portuguese government has implemented a comprehensive package of 60 measures, one of which includes enticing tax incentives.
Finance Minister Joaquim Miranda Sarmento has outlined that the tax will exclude “dividends, capital gains and pensions,” signifying that a 20 percent flat rate of income tax will apply to “salaries and professional income.” This strategic move is designed to lure skilled workers and bolster economic growth.
"We need skilled workers and economic growth. We will have to balance that with more affordable houses. Obviously, if we have just one side of the policy, there will be more affordable houses but less economic growth. So we have to balance these two parts," Miranda Sarmento stated.
However, the Portuguese government has decided that taxes will apply to foreign pensioners. This decision follows substantial criticism of the previous administration’s policies, which initially exempted pensions from tax, only to later impose a ten percent flat rate. Nordic countries were particularly vocal, arguing that tax breaks encouraged retirees to cease paying taxes in their home countries.
Nuno Cunha Barnabé, a tax partner at Lisbon law firm Abreu Advogados, commented on the previous regime’s inclusion of retirees, stating, "It was against demographics. It didn’t make sense. We already have an old population. Attracting pensioners puts more burden on our health system. We need to attract young people."
The new tax measure has been met with optimism from large companies in Portugal, who anticipate that the policy will help mitigate the shortage of engineers, researchers, and managers. "This will attract some people. It’s not sufficient, but it’s something the government can do," the Finance Minister added.
The tax break will also benefit Portuguese citizens who have lived abroad. Previously, beneficiaries had to become tax residents in Portugal by either spending six months (183 days) a year in the country or purchasing a property costing a minimum of €500,000.
Miranda Sarmento also confirmed that the government would not reverse the termination of “golden visas,” a policy change that had implications for the housing crisis in the country.
By fLEXI tEAM
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