Portugal has made significant changes to its legislation in 2023, particularly in relation to its residential Golden Visa program. Originally, the program allowed foreigners to obtain long-term residency in Portugal by investing at least €250,000 in residential property. However, in February, the Portuguese Prime Minister announced his intention to abolish this program. After much debate, a bill to end the residential option has been approved.
Despite the end of the residential Golden Visa program, it is still possible for foreigners to obtain a Portuguese Golden Visa, but at a higher cost. One option is to donate €250,000 to artistic or cultural institutions, but this does not include the acquisition of property or the associated rental yields. The remaining options require a minimum investment of €500,000, either for scientific research, business, or approved investment funds.
The decision to end the residential Golden Visa program is a response to the concerns of native Portuguese regarding the state of the domestic housing market. Between 2015 and 2021, average rents increased by 112%, while house prices rose by 157%. The capital city, Lisbon, experienced the highest increase, with housing costs rising by over 300%.
The residential Golden Visa program was initially implemented to revive the Portuguese housing market after the global financial crisis in 2008. However, many locals believe that it has led to an overinflated housing market. Despite these changes, Portugal still requires foreign investment, which is why the country is encouraging potential migrants to explore alternative visa options, such as digital nomad and independent means visas. These visas grant long-term residency rights but require the holders to have active or passive income from abroad, as employment within Portugal is not permitted.
One attractive aspect of these income-based visas is Portugal’s Non-Habitual Resident (NHR) tax regime. Under this regime, foreign income is exempt from Portuguese tax for 10 years, and passive income, such as pension payments, is taxed at a concessionary rate of 10%. In comparison, Portuguese citizens are subject to tax rates of up to 48%. However, Prime Minister Antonio Costa recently announced that the NHR regime will be discontinued for new residents in 2024, although it will remain in place for those who have already qualified. Costa believes that maintaining this measure would perpetuate fiscal injustice and further inflate the housing market.
Portuguese real estate interests have argued that the residential Golden Visa program is not responsible for the rising housing costs. While 12,500 applicants received property-based Golden Visas between 2012 and now, over 500,000 foreigners have moved to Portugal in the same period, most of whom come from other European Union countries. The government attributes the housing affordability crisis to the influx of Europeans taking advantage of the NHR regime. In fact, a major property developer in Portugal states that 65% of their clients are foreign residents seeking to benefit from the NHR regime.
The future of the NHR regime remains uncertain, and it is likely that the government will replace it with another concessionary program, albeit less attractive. However, U.S. individuals who take advantage of the remaining visa categories in Portugal will not end up paying more in tax than they did under the NHR regime. This is due to a tax treaty between Portugal and the U.S. that prevents double taxation and provides a U.S. income tax credit for foreign taxes paid.
The situation in Portugal is constantly evolving, and regular updates can be found on the Global Citizen service, which provides information on various aspects of international living.
