Will Ending the Tax Program Turn Wealthy Expats Away from Portugal?
Since 2009, Portugal has been a tax haven for wealthy foreigners or investors, primarily due to its Non-Habitual Resident (NHR) program. The Portuguese government created the program to attract business and investments from wealthy foreigners—and it worked.
However, the current administration is now considering terminating the NHR as early as 2024, leading many to speculate about the impact it will have on Portugal’s economy. According to experts like Luis Horta e Costa, foreigners already plan to move to more tax-advantaged countries. “A mass exodus of foreign capital will hurt Portuguese real estate, tourism, and countless other industries,” he explains.
Costa and other experts explain the potential ramifications of ending NHR, and what it could mean for the Portuguese economy.
NHR: Portugal’s Answer to a Struggling Economy
In 2009, Portugal grappled with the effects of the global financial crisis. The country needed innovative ways to reboot its economy, attract foreign investments, and reduce unemployment. The NHR program aimed to solve all of these issues by attracting wealthy individuals and business-savvy investors. It offered substantial tax breaks with the hope of revitalizing industries like real estate and technology. Over the years, the NHR has not only achieved this objective but also placed Portugal on the map as a prime destination for foreign investors and businesses.
Luis Horta e Costa Explains Expats’ Influence on the Portuguese Economy
Wealthy foreign investors were able to revitalize Portugal’s economy. It encouraged more investments in the Portuguese economy, which led to a growing tourism industry, real estate improvements, and support for local businesses. International investors not only infused capital into Portugal but also played a key role in creating jobs and bringing modern, competitive services to the country.
“Foreign investors didn’t just bring capital to Portugal,” says Luis Horta e Costa, the co-founder of Square View. “They brought innovation and a new perspective that transformed our economy. It’s not just about the businesses they established—it’s the fact that their investments made Portugal a powerful economic force.”
The NHR had a tremendous impact on Portugal’s luxury real estate market, which saw a surge in demand in Lisbon and Porto. Foreign investments also supported Portugal’s tech industry growth. Numerous startups relocated to Portugal for its tax benefits and higher quality of life. This created a tech boom that attracted international conferences like Web Summit, further cementing Portugal’s reputation in the tech world.
The Risks of Terminating NHR
Luis Horta e Costa believes NHR created prosperity for Portugal—and could continue to do so if the Prime Minister would allow it. “The NHR program has been a cornerstone in attracting global talent and capital. Removing it might jeopardize our momentum,” he says. “Portugal’s real estate market has found renewed vigour, thanks largely to the NHR tax program. Its termination will halt this progress in its tracks.”
Ricardo Marvão, director of the Portuguese innovation consultancy firm Beta-i, agrees. He saw firsthand how the NHR generated economic growth and a boom in the tech industry. “What has happened in the Portuguese technology sector since 2010 was something spectacular,” he says in an interview with BBC. “Portugal became enormously competitive in the international market. Several foreign founders started considering Portugal as their future home. They brought know-how, created innovation centres, invested in the local industry, and built co-working spaces. The NHR regime and the tech boom in Portugal made talent attraction possible. Fast-growing start-ups needed experienced professionals since know-how in Portugal was scarce or non-existent at the ecosystem’s beginnings.”
Jorge Bota, President of the Association of Real Estate Consulting and Valuation Companies (ACAI), also fears the termination of NHR will turn away foreign investments and talent. “Portugal is losing a factor in attracting staff, especially when the economy needs them, whether due to the low unemployment rate, the inability to retain our talents or the added value of the sectors in which they operate economically,” he says in an interview with Schengen Visa.
It’s unclear what the future holds for Portugal. If Costa, Bota, and Marvão’s predictions are right, the Portuguese economy will suffer without NHR.
Other Countries Are Now More Attractive to Foreign Investors
Not only will the termination of NHR hurt the Portuguese economy, but it will also make Portugal less powerful on a global level. Other nations are preparing more competitive tax advantages for wealthy foreigners that encourage them to move out of Portugal.
Various nations have created tax incentive programs that mirror Portugal’s NHR. Neighboring Spain now has plans to create a very similar tax scheme of its own. “Countries like Malta and Cyprus are also prime examples of the benefits of such tax regimes. Portugal risks falling behind if it ends NHR,” Luis Horta e Costa adds.
The True Cost of Ending NHR
The NHR tax program has undeniably transformed Portugal into an enticing opportunity for affluent foreign investors. However, the loss of NHR could change the trajectory of Portugal’s economy. “The essence of the NHR wasn’t just in its financial advantages, but in the message it sent to the world: that Portugal is open, welcoming, and forward-thinking. Its potential conclusion might not just alter financial dynamics, but the very narrative Portugal crafted for itself on the global stage,” Luis Horta e Costa says.
