Portugal plans to reintroduce tax breaks for foreign residents

LISBON, July 8 (Reuters): The Portuguese government is planning to reintroduce tax breaks for foreign residents in an effort to attract skilled workers despite criticism in the past that the scheme stoked housing prices, the economy minister said on Thursday.

The scheme, launched in 2009 to attract investors and professionals at a time of financial crisis, gave people who became residents by spending more than 183 days a year in Portugal a special 20 per cent tax rate on Portuguese-sourced income derived from "high value-added activities", such as practising medicine or teaching in universities.

The "Non-Habitual Resident" scheme also included tax exemptions on almost all foreign income if taxed in the country of origin and a 10 per cent flat tax rate on pensions from a foreign source.

The previous government decided last year to ditch the scheme, calling it a "fiscal injustice", but parliament then extended it till the end of 2024 for applicants who could prove they had readied their move to Portugal during 2023.

Finance Minister Joaquim Miranda Sarmento told the Financial Times, which first reported the new plan, that salaries and professional income would now still be covered by the tax breaks but not pensions, dividends or capital gains.