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Tax-exempt residency deal scrapped for Finns in Portugal - with other countries expected to follow

holdinghandsThe Secretary of State for Tourism, Ana Mendes Godinho, has confirmed a sharply increased demand from Italians for property in Portugal.

Confirming that overall tourist revenue for September this year has increased by 10.8% over September 2015, Godinho added that Italians are buying up property in increasing numbers, a trend that already has been noted in the Algarve.

Year to date, tourism income has risen by 9.5%, according to the Bank of Portugal which confirmed that Italians have spent 17.2% more this year so far, than last.

In terms of countries of origin, Godinho said Brazil is the clear leader “which grew 43.8%, making a fantastic recovery, after a difficult start to the year.”

The Secretary of State reported "significant growth" from American visitors, up 18.2%, the French, up 17%, the Spanish, up 11.5% and the Dutch, where 11.1% more arrived for their holidays than over the same period last year.

The Secretary of State said Portugal continues to win German visitors, especially in the nature tourism sector

Godinho’s delight in the number of Italians buying properties in Portugal, primarily for tax avoidance reasons, may be short-lived as the generosity of Portugal’s pension and income treatment of many EC expatriates compared to residents has been spotted by other EU members, some of which already have referred to Portugal as a ‘tax haven within the Union.'

Finns residing in Portugal and legally avoiding taxes on their private pension and investment income now have three years’ grace before the bi-lateral agreement between Lisbon and Helsinki ends.

Following pressure from the Finland’s government and many Finns' outrage at the low-tax status of Finns moving to Portugal, Helsinki has announced the beginning of the end of the agreement.

The Dutch and French treasuries also have started to put Portugal under diplomatic and EU pressure as they watch helplessly as thousands of nationals move to Portugal to avoid paying national tax rates.

The current legislation triggers tax exemptions for many expatriate retirees on much of their income under the ‘non-habitually resident’ scheme.

Finland’s Finance Minister, Petteri Orpo, already has signed an agreement with his Portuguese counterpart that ends the generous tax treatment for Finns in Portugal. This will come into effect in three years time.

The recent flood of French and Italian property buyers to Portugal, availing themselves of the tax breaks under the bi-lateral agreements, may be short-lived if the Finnish model is expanded to include other or all EU member states, which now seems likely.

The counter-claim by this group of low-taxed immigrants is that they have more of their income left after tax to spend in Portugal's restaurants and on goods and services, also they pay one-off taxes when buying property and new vehicles and claim they are ‘good for the economy.’

The other side of the equation is that many already well-pensioned individuals end up living in Portugal while paying significantly lower rates of tax than those in the Portuguese tax system who are afforded no such beneficial treatment.

Incoming Europeans pay proportionally less tax than Portuguese nationals struggling by - and with VAT at 23% and the top rate of income tax at 48%, the Ministry of Finance may well decide to bow to international pressure and scrap the various beneficial schemes currently in play.

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Comments  

-5 #3 Ed 2016-11-20 08:26
Quoting dolphie:
it is not just Portuguese who are disadvantaged, but foreigners who have lived here for many years and who do not qualify for the tax breaks. Both sections have seen their disposable income slashed over the years at the expense of others paying no tax! Agree with liveaboard's comments 100%.

Good point, Dolphie.
-3 #2 dolphie 2016-11-20 08:23
it is not just Portuguese who are disadvantaged, but foreigners who have lived here for many years and who do not qualify for the tax breaks. Both sections have seen their disposable income slashed over the years at the expense of others paying no tax! Agree with liveaboard's comments 100%.
-1 #1 liveaboard 2016-11-19 07:53
Perhaps lowering everyone's taxes would stimulate the economy, create sustainable wealth, and encourage inward investment.
haha, only kidding! We all know that can't happen.

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