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End of NHR tax law in Portugal in 2020: myth or reality?

While the Portuguese state budget is approved in its entirety the next 2 months address the specifics or fiscal niches of the budget. The status allowing tax exemption for French, Belgian or Swiss pensioners (regardless of nationality) will be reviewed there

Portugal - Statut non résident habituel (RNH)

1. Little reminder:

What is the Non-Habitual-resident status or tax exemption for new arrivals to Portugal?

It is a tax status in Portugal granted to people who have not been resident in this country for the past 5 years and who establish their tax residence there.

Many French retirees, Belgian retirees and Swiss retirees have benefited in recent years. A certain number of working people who are part of a list of professions of interest for Portugal are taxed up to 20% on their working income generated in Portugal thanks to the status of non habitual resident (NHR).

Portugal since 2009 has exempted income received abroad for new non-habitual residents, including, among others, private pensions. So there is no pension tax in Portugal for a retiree settling there.

French-Portuguese, French-Belgian or French-Swiss tax treaties govern the place of tax taxation, the countries of origin are no longer the places of taxation and Portugal does not levy tax for 10 years.

 

2. Towards an Evolution of the non habitual resident NHR tax status in Portugal in 2020?

The tax status that helps attract new residents to Portugal is consensually seen to be positive for Portugal. After 10 years, the economic situation of Portugal is thriving, it generates some controversy in the breasts of the radical left parties which are allied to the socialist party currently in government.

Some European countries including Finland, Sweden and France have been asking for an adjustment of the tax status since 2018.

Mario Centeno, Minister of Finance and currently President of the Eurogroup, has already announced that the status will change without specifying how and when.

 

Are we moving towards a soft taxation of foreign tax income in 2020 for retirees?

For those who already have the status of usual resident before the change of law: The principle of retroactivity does not apply in Portugal. In short, the Beneficiaries of RNH status have acquired tax exemption for 10 years.

If the tax status changes, it is a way to perpetuate this very advantageous tax status by satisfying these Portuguese or European partners. This arrangement thus makes it possible to stabilize this regime while keeping it very attractive.

 

The end of the Portuguese tax haven?

It is completely unthinkable that the status of non-habitual resident should be extinguished. The socialist government in place has already spoken out. We are probably moving towards a revision of this tax status with a low tax rate (between 5 and 20% probably).

Portugal by setting up a minimum tax rate which symbolically would no longer be 0% but a low rate confirms its attractiveness and frees itself from a sword of Damocles.

While continuing to be very competitive in tax terms, it frees itself from the revision of complex bilateral tax treaties and appeases other countries.

The Government will certainly discuss this point between January and February 2020. We will come back to this article as soon as concrete proposals are announced

 

The end of the installations in Portugal?

After this announcement effect, Portugal undoubtedly remains fiscally attractive and it has undeniable assets:

  • Cost of living 25% lower than in France, almost 40% lower than in Switzerland
  • Social peace and security (3rd safest country in the World according to the Global Peace Index)
  • Unrivaled welcome for newcomers (most welcoming country according to Forbes – world friendliest countries 2019)
  • Geographic proximity to France, Switzerland and Belgium
  • A reliable health system (12th in the rank of the World Health Organization)
  • And an extremely pleasant climate and coastline

 

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Acheter une maison au Portugal et passer toute ou une partie de sa retraite en bord de mer permet d’augmenter son pouvoir d’achat si on compare une retraite dans le Sud de la France et dans la plupart des pays de la zone euro. L’immobilier au Portugal est accessible et la qualité de la construction excellente.

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Acheter une maison au Portugal et passer toute ou une partie de sa retraite en bord de mer permet d’augmenter son pouvoir d’achat si on compare une retraite dans le Sud de la France et dans la plupart des pays de la zone euro. L’immobilier au Portugal est accessible et la qualité de la construction excellente.

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Acheter une maison au Portugal et passer toute ou une partie de sa retraite en bord de mer permet d’augmenter son pouvoir d’achat si on compare une retraite dans le Sud de la France et dans la plupart des pays de la zone euro. L’immobilier au Portugal est accessible et la qualité de la construction excellente.
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