Warning bells have been ringing in estate agencies across Portugal due to the Left Bloc’s insistence that the 2019 State Budget should include the scrapping of the Non-Habitual Resident scheme that has attracted thousands of foreign buyers of property.
Finland already has torn up its tax treaty with Portugal, with Sweden making firm steps to do the same.
One of the biggest suppliers of tax free pensioners is France where the word in the corridors of power is that the Macron government is preparing a legal change that would treat French citizens resident in Portugal, and elsewhere, as resident in France when it comes to their tax returns.
Estate agents know that the influx of foreigners has been one of the big creator of profits in the sector and, keen to protect their commission earnings, warn that the government risks much should it change the NHR and Golden Visa schemes.
"These foreign investment programmes were an excellent example of how to help and grow our economy," says Hugo Santos Ferreira, vice president of the Portuguese Association of Real Estate Investors, who claims that political moves to stop these programmes, would be "castrating or limiting foreign investment and tourism as well, so can be very dangerous and can, or already is, throwing away everything in terms of wealth and investment in our country."
Noting that "there are more and more foreigners buying real estate in Portugal without recourse to any (tax incentive) programme," the president of the estate agents’ professional body, APEMIP, commented that, "there is no doubt that the NHR scheme continues to be important in attracting investment."
Luís Lima understands that "this Left Bloc proposal shows that decisions are still being made that look at the country solely and exclusively from Lisbon, without thinking about the benefits that this type of investment is having in other regions, where little by little, the benefits are beginning to arrive.”
According to Lima, based in Lisbon and forgetting the Algarve completely, "if in the first wave, foreigners looked only at the opportunities available in the big cities, they are now beginning to decentralise their investment more and more to regions of low population density.”
If the tax friendly schemes are scrapped, despite their headline-grabbing unfairness, Luís Lima is worried that buyers will go to other countries where taxes are low or non-existent for incoming foreigners.
In the case of Sweden’s 2002 joint taxation agreement with Portugal, that Finance Minister Magdalena Andersson now wants to scrap, Hugo Santos Ferreira said that, "we should all be very attentive to potential contagion,” concerned that if, one by one, European governments scrap these taxation agreements and, hence, the instrument that allows tax free or low tax living in certain European destinations, nobody is going to trust their home government to keep these agreements in place with those countries offering similar tax schemes to Portugal’s.
