British expats in Portugal are set to lose their tax breaks as the government revamps the golden visa scheme.
The ruling Socialist party (PS) wants to change the 2020 state budget to increase the tax rate on overseas pensions of ‘non-habitual residents’ (NHRs) from zero to 10% while capping residence on the number of homes available to expats in the main cities of Lisbon and Porto.
Around two thirds of properties bought under the scheme are in these cities.
The measure is also likely to attract criticism from other European Union countries who already hold a dim view of visas for sale to expats to attract investment. Counties have already complained about the tax breaks on pensions breaking EU law.
The budget is also likely to hit celebrities and spots stars who enjoy a zero tax NHR status by raising their tax liability to 20%.
Who has a golden visa?
Portugal is home to 49,000 British expats, of whom many receive tax-free pension income under NHR status.
In total about 28,000 people of all nationalities, including some 9,000 pensioners, have moved to Portugal under the golden visa program.
The golden visas, which offer residence permits to investors, come with a property purchase of €500,000.
British expats already living in Portugal under the scheme will remain unaffected, but new arrivals after Brexit will come under the new rules.
The most golden visas have gone to Chinese expats – 323 between January and September last year.
Next comes Brazilians – 176 in the same period, then expats from Turkey (71), the US (49) and Russia (40).
Portugal golden visa tax breaks and benefits
Besides zero tax breaks, a big attraction for non-EU expats is the Portugal golden visa comes with the right to freely travel between the bloc’s member states.
Expats must live in Portugal for at least seven days a year to retain their golden visa status.
After taking residency, expats can progress to becoming Portuguese citizens by passing an exam.
In granting the visas, expats have staked €4.3 billion in investments since 2012. The amount raised last year was 29% up on the year before.
Portugal is one of several European countries offering visa for investment. Other countries with schemes include Greece, Cyprus and Malta.
Find out more about Financial Advice in Portugal here