Recent press reports have suggested that Portugal's highly favourable tax incentives for British expats have ended. This is not the case, says Jason Porter, director of specialist expat financial planning firm Blevins Franks. 

Portugal has a special tax regime for arrivals who have not been resident in Portugal in the previous five years. If they register as a ‘non-habitual resident' (NHR), then they will only pay 10% Portuguese income tax on any pension income for the first ten years they are resident.

But they must apply for this by 31 March of the year following when they became tax resident.

Certainly, the Prime Minister, Antonio Costa made the comments on ending the scheme in Parliament, and subsequently followed them up in discussions with journalists. The actual details are not yet available, though more may become known when the national budget is released next week. 

This would sit alongside other measures taken by the Portuguese authorities already to combat the unaffordability of property, including the cancellation of the real estate investment route to the Golden Visa, and increases in the MPT (Municipal Property Tax) on uninhabited houses located in areas of urban pressure. 

These are reflective of comparable moves by governments across most of Europe, including near neighbours, Spain and France, which are introducing similar national and local tax increases to encourage the sale, or the long-term rental of unoccupied or second properties in areas where local residents are struggling to afford the increase in property prices. The aim is to push down property prices and bring more homes into the rental market, which should in turn lower rental costs. 

In the case of NHR, this is not a retrospective step, in that those who have already successfully been accepted into the NHR programme will continue to benefit for the remainder of their ten years. 

Hopefully, any detail released next week will confirm any applications made prior to 1 January 2024 should also qualify.

By Jason Porter, director of specialist expat financial planning firm Blevins Franks. 
  
MPT (Municipal Property Tax) 

There is an increase in MPT on uninhabited houses, located in areas of urban pressure, including: 
1.         Up to 100% where the buildings are used for local accommodation. 
2.         Up to 25% on houses that are not rented or in use as the taxpayer's own permanent residence. 
3.         A further 50% increase may apply whenever a taxpayer is a legal person or other equivalent entity (e.g. trust or company structure) 

Municipalities may increase the MPT rate on vacant properties located in areas of urban pressure, where the building has been vacant for more than one year (used to be two years). It may be increased by: 
1.         25% whenever the building is not rented or the taxpayer's own permanent residence, 
2.         50% whenever a taxpayer is a legal person or other equivalent entity.