Portugal’s Tax Authority (AT) is automatically rejecting all applications for the non-habitual resident (NHR) tax regime from foreigners looking to move to the country this year, only asking for proof of eligibility afterward, according to a report by Portuguese economic newspaper ECO on January 16th.
Tax Breaks Require Evidence
The NHR regime allows some foreign citizens moving to Portugal to pay a reduced “flat tax” of just 20% on certain types of income for a decade.
However, new rules passed in 2023 are phasing this out.
AT is now preemptively rejecting all NHR applications from abroad for 2024, tax expert Luis Leon told ECO.
Only after rejecting them does AT ask applicants to provide documents by year’s end showing ties to Portugal that qualify them for a transitional version of the old rules.
Proofs like work contracts, children’s school enrollment, or property purchases signed by October or December 2023 could still grant the tax break to people who planned to move this year.
Bureaucracy Causing Delays
However, this “bureaucratic” method risks lengthy delays for approvals, per Leon.
Months-long backlogs have occurred before.
The two deadlines leave applicants in a challenging position.
They must scramble to submit foreign work and visa contracts signed by December 31st or documents like property deals and school registrations signed by October 31st.
AT Lacks Updated System
AT’s approach results from lacking an automated system to handle the new transitional regime, experts said.
The regime was a last-minute addition after public criticism of the original policy shift, which was seen as sudden and aggressive toward newcomers.
With no streamlined process possible, AT chose the easiest bureaucratic route — reject everyone upfront on automation, then handle exceptions manually later.
However, this risks unintended consequences in the form of delays or rejection of truly eligible applicants due to document issues.
ETIAS May See More Rejection Notices
The tax confusion risks complicating applications for some ETIAS short-stay visas to Portugal, set to launch in May 2025.
ETIAS allows EU visits up to 90 days for work or tourism.
Applicants must show onward travel and proof of accommodation or funds.
Now, ETIAS applicants seeking temporary work may also face NHR rejection letters from AT.
While eventually reversible, that bureaucratic barrier could discourage eligible travelers.
The uncertainty applies more broadly to any EU citizen eyeing long-term relocation.
Those planning investment, property purchases, or student years in Portugal face similar document hurdles.
Turbulence Clouds EU Immigration Outlook
The NHR tax policy whiplash also risks sending mixed messages on Portugal’s stability as an EU immigration destination.
In recent years, initiatives like the digital nomad visa and golden visa for investors made Portugal stand out.
Post-pandemic, remote work trends brought influxes as well.
Yet the NHR debacle gives the impression that immigration policy is subject to sudden upheaval.
Even the transitional regime came rapidly amid public pressure.
ETIAS applicants and all prospective immigrants must now waver on Portugal’s reliability.
Altered policies could again disrupt careful plans.
That perception may push interest toward alternate EU countries.
Spain, Italy, and Greece also offer appealing lifestyles and immigration options.
More stable and transparent policy regimes could benefit from Portugal’s administrative missteps on tax and immigration.
Path Forward Unclear
The situation leaves potential new residents facing unclear prospects and tax experts warning of bureaucratic troubles.
AT did not provide clarity on how long the manual application reviews might take after rejections, according to reporting.
With Portugal hoping to continue attracting skilled foreign workers even without the controversial NHR regime, the messy transition could undermine those goals.
Both tax specialists and would-be immigrants will watch closely for signs of smoothing bureaucracy or continued obstacles in months ahead.
The path forward remains clouded unless AT communicates its plans and priorities more transparently.