Measure: About Housing Tax Exemption The Portugal tax breaks for foreign residents dwellers in the country, an element that was previously challenged because of its drastic effect on the growth of house prices. Miranda was quoted by the Financial Times, insisting on the necessity of a skilled workforce and the growth of the economy. Here we take a closer look at the history, advantages, disadvantages, and future of the Non-Habitual Resident (NHR) scheme.
Assessment of the Non-Habitual Resident Scheme
First introduced in 2009, the NHREs are good for investors and professionals during the fiscal and credit crunch. Located in western Europe, Portugal, which is not one of the wealthiest countries, introduced a special 20% rate of taxation on the revenues derived from home-based activities, especially in such fields as the production of medicine and university education. It also offered almost all kinds of foreign income free from tax in the case they are taxed in their country of source and foreign-sourced pensions at 10% flat tax.
Schemes that prevail today include the National Health Reform (NHR) Scheme.
Attracting Skilled Professionals: The NHR scheme was meant to attract skilled workers and experts to the country as it will positively fuel the economy.
Tax Incentives: The tax rates were 20% for certain Portuguese incomes, and most foreign incomes were excluded from taxation, which also encouraged retirement and working-generation populations to migrate to Portugal.
Economic Boost: Foreign residents and their investment rates encouraged the Portuguese economy at certain critical periods in the country’s financial progress.
Criticisms and controversy
Former Prime Minister Antonio Costa reported on it as being a problematic one that contributed to raising housing prices and caused fiscal inequity. He considered it no longer reasonable, and hence he deemed it right to remove it. However, the following criticisms have been made, which are as follows: 7 However, the scheme has moved up to an annual of 18. In 2018, in Brazil, 0.75% of people received some form of pension: 5% of this total would be 0.75%; 0.75% would cost the state budget more than 1,000 dollars; and 74,095 people in 2022
Retaining and Reintroduction of the NHR Scheme
For the chosen country of analysis, it is worth mentioning that in November 2020, the Portuguese parliament agreed upon the continuation of the NHR scheme till the end of 2024 with some important amendments. This requirement mandates candidates to demonstrate their ability to advance their move to Portugal throughout the year 2023. Finance Minister Sarmento outlined the return to the scheme to be applied to salaries, pensions, and professional income, while other pensions, dividends, and capital gains would not be given relief. According to business daily El Economista, the official announcement is expected to be made after a cabinet meeting; however, approval by lawmakers is unclear as Montenegro governs without a parliamentary majority.
These are real issues that are so profound that they have the potential to reshape the future of the NHR scheme.
Through the provision of skills for various employees and the enhancement of the economy, the government seeks to bring back the NHR scheme. Yet, the rub here is not getting the concept passed by legislators. It is then clear that the success of this initiative will be determined by the achievement of these objectives while taking into consideration the issues of fiscal equity and the stability of the housing market.
Conclusion
This was further elaborated by the recent measures proposed by Portugal to reinstate the usage of tax incentives for foreigners planning to reside in the country; this is a clear manifestation of a classic dilemma that plagues countries worldwide, specifically the conflict between prioritising economic development and ensuring fairness in tax collection. The NHR scheme, with its advantages and disadvantages, has still been an important policy to encourage more professional personnel in Portugal. While the implementation of this scheme has been a success story, the government has thought it wise to have a second round at it; the effects on the economy as well as the housing market will be keenly observed.
