The Portuguese prime minister spoke in an extended interview about the inflation problem that is hindering Portuguese citizens. He spoke about fiscal measures being added to assist Portuguese families but also announced the end of the special income tax rate for non-habitual residents.
The Portuguese Prime Minister António Costa announced in an interview with CNN Portugal and TVI that the special income tax rate for non-habitual residents in Portugal would be removed, concluding that the measure “no longer made sense.” The measure will only apply to future non-residents starting in 2024.
The taxation scheme for non-habitual residents was created in 2009 “to attract Portugal nonresident professionals that are qualified in high added value or intellectual, industrial property or know-how activities.”
Non-habitual residents must spend more than half of the year residing in Portugal to qualify, but are not Portuguese citizens.
The decision to remove this measure comes amidst a reality of high inflation and housing shortage in Portugal.
A “fiscal injustice inflating the housing market”
According to Portugal’s National Institute of Statistics, bank valuation on houses in Portugal reached 1,518 euros per square meter in June 2023 and house prices increased by 8.7% in the 2nd quarter of 2023.
This changing economic reality has left Portuguese people with less space to live. In 2021, 10.6% of people in Portugal lived in conditions with a lack of space, as opposed to around 9.0% throughout 2018–2020.
While at-risk poverty rates have stabilized after a setback in 2021, the threshold now only sits at 556 euros (583 dollars) per month. Annual inflation rate in September stood at 3.6%
Costa explained that the measure benefiting non-residents promoted “fiscal injustice” and that it constituted a “biased way of inflating the housing market.” Despite this, he said that the ones currently benefiting from the special income tax rate will continue to benefit, and it will not be available for future non-residents starting in 2024.
In response to the country’s inflation and housing problems, Costa seemingly took responsibility and said he is “frustrated that the [housing] reality was more dynamic than the political response.” Costa also spoke about fiscal measures to assist Portuguese citizens.
He said that the social security initiatives introduced to assist families, including the removal of VAT on certain food items, will remain in the future and will become a staple.
Throughout the talk, Costa was keen to speak about initiatives to lessen the burden on Portuguese families. The prime minister also mentioned negotiations with the General Union of Workers in Portugal to increase the minimum wage from 760 euros (800 dollars) to above 810 euros (850 dollars), and continued reductions in income tax for Portuguese families.
