No extra NHR tax exemptions in 2015, say Portuguese officials

Proposals to extend capital gains and investment income tax exemptions under Portugal’s Non-Habitual Residents Tax Regime have not been passed, say government officials

It seems that the Portuguese government has shelved plans, at least for 2015, to extend capital gains and investment income taxation exemptions.

However, officials say they are closely monitoring the situation for capital gains and investment income tax exemptions for the Non-Habitual Residents Tax Regime, in case changes need to be made. Meanwhile, the country’s ‘Golden Visa’ property-for-residency scheme is exceeding investment expectations.

The Non-Habitual Residents Tax Regime (NHR) is a 10-year tax regime for foreigners who live in Portugal either permanently or temporarily. It does not require an investment and has been created to attract highly qualified talent, pensioners and High Net Worth Individuals to Portugal.

Key benefits include a 20% flat tax rate, tax exemption on foreign income, no wealth tax in Portugal; and 100% gift and inheritance tax exemption for spouses, descendants and parents, explains residence and citizenship planning specialist, Henley & Partners.

The news that the Portuguese Government was considering extending tax exemption to capital gains and investment income taxation was announced at a joint seminar run by the Portuguese Government and UK tax experts, Henley & Partners in Lisbon in October, covering the Golden Residence Permit Programme and Non-Habitual Residents Tax Regime for non-EU citizens.

But now the relevant Government department says the changes will not be introduced in 2015, OPP Connect has been told.

“As a follow up on the seminar we had last month on the Non Habitual Residents Regime, the draft of the law that will amend the Personal Income Tax Code has not incorporated the Proposal of the Commission regarding capital gains and other types of income, therefore, in principle the regime will not be updated for 2015,” officials say.

The regime for capital gains exemption was due to be similar to the one for taxes on pensions, which has attracted many retired people to the country to take advantage of 0% taxation on their pensions for 10 years.

Since 2012, more than 2,000 citizens, mainly from France, the United Kingdom and other EU countries, have bought property in Portugal, mostly for holiday or second home purposes, says Henley & Partners.

Meanwhile, Portugal’s Golden Residence Permit Programme has issued more than 1,500 ‘Golden Visas’ up until the end of September 2014, with a total investment of €950million.

Four out of five (80%) went to Chinese citizens, with the Russians being the next largest group with 50 visas.

Portugal’s ‘Golden Visa’ Programme is a five year investment-based residence scheme for non-EU nationals, which requires a minimum real estate investment of €500,000.

The residence permit allows free circulation in the Schengen Zone of 26 states and only requires an average of seven days per year stay in Portugal over this period, which can also count towards citizenship eligibility after six years.

Portuguese Vice-Prime Minister, Paulo Portas, says the programme has already exceeded the objectives set down by the Government in its first two years, “In 2013 it achieved around €300million, which was 50% over the objectives that I had outlined in Parliament, and in 2014, with still a quarter to go, it has exceeded the €500million target by far.”