Non-habitual residents cause tax expenditure to skyrocket

According to idealista, the State lost €1.741 million in 2024 due to the tax benefit granted to Non-Habitual Residents (NHR).

In 2024, the State terminated the tax regime for NHR and created a new regime that remained in force until December of the same year. Despite its aim of relieving the public accounts in terms of personal income tax, tax expenditure on NHR grew by 34% in 2024. As a result, the State recorded losses of €1.741 million.

According to data from the 2024 General State Account, cited by idealista, tax expenditure on personal income tax stood at €2.622 million, up 26.9% compared to the same period last year. The same media outlet reports that the increase is explained by the rise in expenditure on NHR. Consequently, the Portuguese State has recorded its largest tax loss with NHR since 2009, when the regime was introduced.

The document concludes that if NHR paid the IRS rates applied to other taxpayers, with the appropriate progression, an additional €1.741,2 million could have been collected by the State in 2024.

The increase in tax expenditure in the year in which the reduced 20% income tax rate for NHRs was abolished may have several explanations, according to idealista. On the one hand, those who had already joined the scheme will not lose the benefit until the 10-year period to which they are subject has elapsed, even if their salaries have increased. On the other hand, in 2024, the transitional NHR regime was in force for those who could prove that they already had a connection with Portugal until the end of 2023.

Currently, the only tax benefit for those who want to live in Portugal, whether foreign or not, who have not lived in the country for five years and who exercise high value-added professions, is the tax incentive for scientific research and innovation.

Other than being a clickbait article, the author doesa not seem to understand how tax, finance or economics work. The reason many moved to Portugal was for the NHR. NHR beneficiaries pay 20% flat income tax rate. 20% of something = something. Without the NHR, these residents would not live in Portugal, so 48% of nothing = nothing. In addition to tax, NHR recipients also pay social security (which we will never get access to as it requires working 20+ years in Portugal). In my experience living in Portugal it seems the national pasttime is not paying tax, when I request official invoices the prices go up as well as unpleasant vendors. Most NHR recipients I have spoken to plan to leave Portugal after their NHR expires. It seems the purpose of this article is to blame NHR recipients for problems caused locally.

By James Snow from Algarve on 03 Jun 2025, 14:28

This is a really weak argument and a very polemic way of looking at things. The NHR was created to attract people with well paying remote jobs to Portugal ( because it only makes sense if one has overseas income ) and these people would clear cut not be here if these tax incentives weren't there. So therefore the state and the local economy are clearly gaining revenue.

By Hans from Lisbon on 03 Jun 2025, 14:54

What a stupid viewpoint. The majority of people who moved to Portugal to claim NHR were foreigners. They probably would not have moved to Portugal otherwise, yet over the years will have contributed greatly to the Portuguese 'coffers' via property taxes, car taxes, eating out etc, etc. There is a reason that the Portuguese economy has recovered to be one of the fastest growing in the EU, and foreigners have played a huge part in that.

By Mr. jeremy rumble from Algarve on 03 Jun 2025, 20:50

Well written Mr. Snow. This article was apparently written by one of those character types that kept this country poor. They manipulate data into stories pushing agendas to the oppressed poor, claiming a foreign entity is taking advantage of the masses. When in actuality, they are stealing these people's rights to their hard earned wages and opportunity for progression. 54% effective tax rate for anyone making €30k annually is oppression. No wonder the youth leaves creating a brain drain. Any programs attempting to help the country are hampered by ill-willed socialists pushing this kind of destructive propaganda. I love the Portuguese, but these fake socialist gremlins in the system gotta go.

By Dave G. from Beiras on 04 Jun 2025, 08:22

The OLD NHR (2009-2024) was attractive for people retiring in Portugal as the income tax in Portugal would be zero for a pension earned in another country.
I have heard a few portuguese people complaining about foreigners who don't pay any taxes at all in Portugal. I guess their real complaint is that they don't like foreigners.

That being said, it does not mean that foreign pensioners do not pay any taxes.
The answer is simple. If you don't have a portuguese income you don't pay tax when you have a NHR.

However, you do pay taxes when you buy different things;

• (IVA) Sales Tax when buying e.g. food and other goods.
• (IMI) Property Tax for your owned house or apartment.
• (IMT) Stamp Tax when buying a house or apartment.
• (IUC) Car Tax if you own a car in Portugal.

These taxes amount to a considerable contribution to the economy.
I don't see myself as a burden to the society who is taking advantage of the system.

When Portugal created the NHR it was with a purpose to attract foreigners.

By Robert from Lisbon on 04 Jun 2025, 11:38

Articles like this are so skewed. They always fail to point out the additive nature of the program and only look at the theoretical loss. Additionally, however, some of the comments seem a tad off target as well. Example, socialists do not run the government (and I have no allegiance to that party or any other); there isn’t a 50+% effective tax rate; many NHR holders do pay tax, the 0% scheme most be getting close to phasing out. I suppose it’s just a case of foreigners get blamed when they come and they’ll get blamed when they leave.

By Steve from Porto on 06 Jun 2025, 14:44

What a bizarre way to describe the impact of the NHR. It is not “expenditure” by the state at all. It is quite obviously reduced tax revenue compared to not having NHR status. However, there would be zero tax revenue if NHR did not exist because I and all the others in the scheme would have chosen to live somewhere else or taken a Golden Visa. My annual expenditure on items that attract IVA means that I pay IVA of tens of thousands. Far more than the average Portuguese. If the Portuguese state wants to alienate immigrants then I really do fear for the economy.

By Paul K from Algarve on 07 Jun 2025, 10:55

This is a very misleading article and analysis. It’s been shown over and over that immigrants to Portugal contribute more to the economy that they take out. Regardless of income tax and social security contribution (both of which NHR holders contribute), these residents of Portugal also contribute IVA plus all the other taxes on homes, cars etc, plus they employ people. This article is highly misleading and fuels xenophobia and the Portugal News should report more honestly on the matter

By Tim from Lisbon on 07 Jun 2025, 11:45

What's deeply confusing to me about this article is that nowhere does it explain what is the source of this tax expenditure. In other words, what is the state SPENDING money for in relation to participants in NHR? It is impossible to understand or evalutae the issues raised in this article without having that question answered first.

By Phillip from Other on 07 Jun 2025, 12:48

The article is skewed.
If the tax regime wasn’t so bad the country would be better off. As a foreigner, I have spent a considerable amount of money renovating my home, buying a car, and generally living.
I soon learned that because of the crazy 23% tax on everything, much goes unaccounted for. Almost everyone I had do work for me wanted cash - no paperwork. Black economy is flourishing here because the tax situation is flawed.
Forget blaming foreigners for everything.

By L from Lisbon on 07 Jun 2025, 15:30

What the article fails to mention is that not all retirement savings a from pensions.
During my working years I accumulated significant savings in my 401k.
I have to draw down on that so when NHR expires I am not in a 48% tax bracket.
That is income of which a percentage of tax is paid to Portugal.
While there is an offset on taxes, Portugal is getting tax on money that was not earned here.
With all the other taxes IVA etc, I think this is a pretty good deal for Portugal
The more I look at this, I am not so sure it is a good deal for me.
After the 10 years, maybe only staying here 180 days and paying no Portuguese tax might make sense.
I am not sure what tax they think they are losing, but if you add in the taxes paid on pensions, and other savings vehicles they may find out that NHR is really a good deal for the Portuguese.

By j from Algarve on 08 Jun 2025, 11:27