Portugal’s non habitual resident (NHR) tax scheme, which has been instrumental in driving foreign investment and economic growth since its introduction in 2009, is now facing an uncertain future. The current government is mulling over the possibility of ending the scheme as early as 2024, which has raised concerns among real estate experts like Luis Horta e Costa, who fear the potential economic repercussions.
Under the NHR scheme, eligible foreign nationals, including retirees, professionals, and entrepreneurs, are offered attractive tax benefits for ten years. These benefits include reduced tax rates on foreign income and, sometimes, even complete tax exemption. The program has successfully drawn foreign capital, innovation, and expertise to Portugal, playing a pivotal role in transforming the country into a robust economic power.
However, Luis Horta e Costa, the co-founder of Square View, a Lisbon-based real estate property developer and asset management firm, cautions that abolishing the NHR scheme could trigger a “mass exodus” of foreign investment. This, he warns, could have devastating effects on critical industries such as real estate, tourism, and numerous others that have thrived on the influx of foreign capital.
Horta e Costa stresses that the impact of foreign investors goes well beyond the businesses they establish. “They brought innovation and a new perspective that transformed our economy,” he asserts. The NHR scheme has been especially vital in rejuvenating Portugal’s real estate market, which Horta e Costa says has experienced “renewed vigor” thanks to the tax incentives.
The potential scrapping of the NHR scheme is particularly problematic given the rise of similar programs in neighboring countries such as Spain. Without the competitive edge provided by NHR, Portugal risks losing foreign investment to these rival destinations. Luis Horta e Costa warns that this could have far-reaching economic consequences, stalling progress over the past decade.
Furthermore, Horta e Costa contends that the NHR scheme has been crucial in cementing Portugal’s image as an open, welcoming, and progressive nation. Losing this reputation could have ramifications beyond economics, making it harder for Portugal to attract foreign talent and compete globally.
As the government deliberates the future of the NHR scheme, experts like Luis Horta e Costa are raising concerns about the potential fallout of its termination. While the economic advantages of the program have been evident, finding a suitable replacement presents a significant challenge. Horta e Costa believes that safeguarding foreign investment should be a top priority for government leaders, lest they risk undoing the hard-earned prosperity that the NHR scheme has helped to foster.
Should the post-mortem of NHR come to fruition, it may narrate the tale of a policy that breathed new life into Portugal’s economy, only to have that prosperity cut short prematurely. As the nation stands at this juncture, the choices made in the coming months will likely have profound implications for Portugal’s economic destiny.
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