Tax savings for foreigners up 33%

by Perfect Portugal

Foreign residents who are under the NHR tax regime in Portugal have “saved” a total of €2.02 billion in taxes in 2021.

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The tax expense for the Portuguese government associated with the tax regime for foreigners residing in Portugal, under the non-habitual residents' regime (NHR), increased by 33.29 percent in 2021.

According to data from IRS statistics for the year 2021, which have now been publicly released the Tributária e Aduaneira (AT) indicates that the NHR tax regime corresponded to 59.7 percent of expenditure on tax benefits.

"With regard to tax benefits, in 2021, tax expenditure reaches the amount of €2.02 billion (13.84 percent of the IRS paid), 59.70 percent of which relate to the Non-Habitual Residents Regime".

According to IRS statistics, tax expenditure from the government on the NHR regime totalled €770 million in 2019, increasing to €908 million in 2020 and surpassing the barrier of one billion euros in 2021 for the first time, up at €1.21 billion.

Currently, there is no information provided on the number of people who were benefiting from the scheme in that year, which can be used for a maximum period of 10 years.

Tax expenditure generally corresponds to tax revenue that the State chooses not to collect or to return to taxpayers, through refunds, exemptions, deductions, tax reductions, or other tax benefits.

Created in 2009 (and reformulated in 2012) with the aim of attracting people with high incomes and professionals with high added value to Portugal, the NHR regime gives workers the possibility of benefiting from a special IRS rate of 20 percent.

In the case of pensioners who receive pensions paid by another country, the NHR provides for the subjection of this income to a tax rate of 10 percent. It should be remembered that these pensioners were exempt from tax for several years, a situation that was eliminated with the State Budget for 2020 (OE2020).

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