Portugal Introduces Transition Period for 2023 Non-Habitual Resident Applicants

Portugal Introduces Transition Period for 2023 Non-Habitual Resident Applicants

The Portuguese government has announced a transitional period for non-habitual resident (NHR) applicants who had planned to move to Portugal in 2023. 

This comes after proposals earlier this year to end the NHR tax incentives from 2024 onwards.

The NHR regime offers significant tax breaks for certain groups moving to Portugal, including workers, investors, retirees, and digital nomads. It has succeeded in attracting foreign talent and investment.

However, the government now believes it has served its purpose and is contributing to housing inflation.

Transitional Arrangement for 2023 NHR Applicants

According to the Socialist Party’s latest amendment, a transitional NHR regime will be introduced in 2023. 

This aims to uphold the legitimate expectations of people who have already made concrete plans to relocate to Portugal this year.

To qualify, applicants must provide evidence they have prepared to move in 2023, such as a work contract, property purchase/rental agreement, or school enrollment paperwork. 

Approved applicants can benefit from NHR tax rules until the end of 2024.

The move provides clarity for European Union (EU) citizens planning to relocate under the scheme next year. It should prevent applications from drying up in 2023 due to the previously announced termination from 2024.

Citizens from countries like the UK and the US will need to secure an ETIAS (European Travel Information and Authorisation System) travel authorization before traveling to Portugal.

Impact on EU Visitors and Immigrants

The transitional regime will mostly benefit EU citizens planning long-term relocation to Portugal in 2023. This includes digital nomads, remote workers, investors, and retirees hoping to benefit from the tax discounts.

With NHR tax savings in place during 2023-24, moving to Portugal remains an attractive proposition for location-flexible EU citizens. 

Short-term visitors and tourists will be unaffected by the changes.

For non-EU immigrants, securing residency under NHR rules should also remain possible during 2023. However, the longer-term outlook is less clear once transitional arrangements end in 2025.

Broader Changes to Portugal’s Immigration Policy

The phase-out of NHR tax rules signals a broader shift in Portugal’s immigration policy. 

Tax incentives will be redirected towards attracting talent in areas like tech and scientific research.

There are also moves by the government to curb housing inflation, which NHR is seen as exacerbating in cities like Lisbon and Porto. 

Recent laws have increased taxes on short-term rentals and ‘golden visas’ for property investors.

Consequently, while the transitional regime maintains NHR access for 2023, wider reforms point towards more selective immigration policies in the future. 

The days of Portugal attracting swathes of mid-range talent and retirees with tax discounts appear numbered.

The Future of the NHR Regime

Portugal’s introduction of a 2023 transitional regime for NHR applicants provides important tax clarity. EU citizens with concrete relocation plans can still benefit from discounts during 2023-24.

However, the phase-out from 2025 signals a shift away from Portugal incentivizing mid-range talent and non-specialist immigration. 

In the future, the country seems likely to target narrower high net worth and specialist categories.