The Impact of Portugal’s Tax Change on the Tech Boom

Portugal’s tech boom has been fueled in part by generous tax policies that have attracted foreign tech workers and entrepreneurs to the country. Under the non-habitual resident (NHR) statute, foreign individuals pay a fixed 20% tax rate on their income for a 10-year period, compared to income tax rates ranging from 15% to 48% for locals. Additionally, golden visas have allowed foreigners to trade investments for Portuguese passports, further incentivizing professionals and retirees to choose Portugal as their home. However, the Portuguese government recently announced its intention to scrap the favorable tax regime for new entrants starting in 2024, although current beneficiaries will be able to keep the 20% rate until the end of their 10-year period. This change has raised concerns among those who have benefited from the tax scheme, as it could potentially reverse the country’s tech boom and impact talent attraction. The government plans to replace the NHR regime with a more targeted program focused on attracting overseas scientists and researchers, but the final details are still unknown. The decision to end the tax benefits has been influenced by rising housing prices and protests over high rents and property prices. Portugal’s tax expert, Rita de La Feria, agrees with the government’s decision, as these tax incentives come at a cost of depleted tax revenue, strained public services, and hindered efforts to promote European cohesion. However, some tech workers believe that the tax break should continue to attract professionals to Portugal, while others argue that the country’s other competitive advantages will be sufficient to attract talent. The impact of this tax change on the tech boom remains uncertain, but it may potentially lead to fewer individuals moving to Portugal and could result in a higher tax burden for both locals and foreign workers. Individuals who have been considering relocating to Portugal may reassess their options due to the potential increase in taxes. Only time will tell the true consequences of this tax policy change on Portugal’s tech industry and overall economy.