The Portuguese Prime Minister has taken the first steps to this end limit the number of digital nomads entering the country while local workers are increasingly dissatisfied with policies that have contributed to a serious housing problem.
Prime Minister António Costa said this in an interview with CNN Portugal That he plans to abolish the non-habitual resident (NHR) system next year.
According to Deloitte, individuals who become tax residents of Portugal are subject to a special tax regime under the NHR program for a period of ten years, in accordance with regulations designed to welcome international workers.
Most people in ‘high added value’ jobs, such as doctors, engineers and journalists, pay a fixed tax of 20% on their Portuguese income.
This is in contrast to Portuguese citizens, who pay income tax ranging from 14.5% to 48%, according to PwC.. Costa has finally admitted that this unfair approach is doing Portugal more harm than good.
“Maintaining this measure for the future means prolonging a measure of fiscal injustice that is not justified, and is also a biased way to further inflate the housing market,” Costa told CNN.
According to him, the scheme will remain in force for visitors who enter the country before the deadline in 2024.
What will take its place, including new ways to establish tax residency in Portugal and new income tax brackets once they do? is unknown.
Fortune’s report on the impact of the new regulations on digital nomads has not yet received a response from the Prime Minister’s Office. Furthermore, uncertainty remains about the potential implications of this rule change for the digital nomad visa, which was introduced last year.
Foreigners from outside the EU or EEA can apply for a 12-month work visa under the D8 visa if they earn at least €2,800 (approximately $2,930) per month. The new rules for people without permanent residency may also affect temporary workers, as these people typically pay taxes in their home country.
This change makes it less attractive for emigrating well-paid workers to live abroad in Portugal. Since the start of the COVID-19 pandemic, thousands of digital nomads have arrived in the country to take advantage of the new remote working opportunities.
According to Nomads List data cited by Politico, As of December 2017, 15,800 digital nomads called Lisbon their home. According to the Portuguese Immigration and Borders Agency (SEF), there were 45% more foreign residents in Portugal between 2018 and 2021.
