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Proposed amendments to the NHR and Golden Visa regimes

SÉRVULO PUBLICATIONS 30 Jan 2020

On January 27th of 2020, the Portuguese Socialist Party (the Party supporting the Government) has presented its proposal to amend the State Budget for 2020.

With this proposal, the Socialist Party intends to prevent the double non-taxation of foreign pensions obtained by non-habitual tax residents (“NHRs”), by means of implementing a 10% tax on those pensions in cases where the source country does not tax the same.

In alternative, taxpayers could opt for the aggregation of the foreign pension income with the remaining income, taxing the sum at general progressive rates, which go up to 53%, should they conclude that this treatment would be more beneficial.

Notwithstanding, should those pensioners pay any tax on their foreign pensions, in the source country, they would be able to deduct the tax paid abroad, totally or partially, against the tax due in Portugal.

Furthermore, the Portuguese Socialist Party proposes a readjustment of the conditions for the exemption of foreign earned and business/self-employment income obtained by NHRs, requiring that this income is effectively taxed at source.

The new rules would not apply to (i) those already registered as NHRs, (ii) those whose requests for registration as NHRs were duly filed and are still pending on the date of entry into force of the 2020 State Budget Law and (iii) those who are already tax residents in Portugal and request their registration as NHRs until March 31st of 2020 or 2021, by meeting the necessary conditions with reference to 2019 or 2020, respectively.

The above-mentioned taxpayers who are excluded from the scope of the new rules, may wish to opt for the 10% tax, for instance, in cases where the source country of their pensions intends to tax those pensions in case they are not taxed in the country of residence of their beneficiaries. In these situations, the 10% taxation in Portugal could avoid a higher taxation in the source country.

Finally, the Socialist Party proposes to include, in the State Budget for 2020, a legislative authorization for limiting the attribution of Golden Visas, when by means of investment in Portuguese real estate, to those investing in hinterland municipalities, or in the autonomous regions of Madeira and Azores. As such, those investing in the main cities, such as Lisbon and Oporto, would no longer qualify for the attribution of these special visas.

Furthermore, a legislative authorization would also be granted in view of increasing the minimum value of the investments to be pursued, as well as the number of jobs to be created, for the purposes of qualifying to Golden Visas. 

To conclude, the new rules under the NHRs’ regime aim at combating aggressive tax planning strategies, whereas the limitation introduced to Golden Visa programmes, for those applying to these visas by means of investing in Portuguese real estate, seeks to prevent real estate speculation and, at the same time, to promote the investment in hinterland areas and in the islands.

Teresa Pala Schwalbach

tps@servulo.com 

Rita Botelho Moniz

rbm@servulo.com

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Tax
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Teresa Pala Schwalbach