Portugal: tax exemptions for foreign retirees are over

2023-10-03 18:40:33

It is a country that thousands of French retirees have chosen in recent years for its tax advantages. There may be fewer of them in the future. Indeed, Portugal will stop granting a tax exemption to foreign retirees from 2024, because this would contribute to driving up real estate prices in the midst of a housing crisis, announced Prime Minister Antonio Costa.

“Maintaining such a measure in the future would amount to prolonging a measure of fiscal injustice that is not justified, and then it would be a roundabout way of continuing to raise prices in the housing market,” said the head of the socialist government in an interview given Monday evening to CNN Portugal television, specifying that the exemptions already granted will remain in force.

Created in 2009 for foreigners living at least half the year in Portugal, this exemption granted for ten years was total until 2020. Since then, new arrivals have been able to benefit from a reduced tax rate of 10%. . The measure, which became truly effective after a simplification of the procedure in 2012, aimed to attract foreign capital to this country, then hit hard by the debt crisis.

It benefited some 10,000 people, mostly French, British or Italian retirees, who settled mainly in the Lisbon region or in the seaside resorts of the Algarve (south) and who in fact largely contributed to the revival of the real estate market.

Housing costs jump

Like the “golden visas” granted to wealthy investors from countries outside the European Union or the tax regime aimed at attracting “digital nomads”, the system was regularly cited among the factors explaining the surge in property prices .

Between 2012 and 2021, the cost of housing increased by 78% in Portugal, compared to 35% in the European Union as a whole, according to a study by the Portuguese Francisco Manuel dos Santos Foundation. In the second quarter of 2023, the median rent jumped another 11% year-on-year, according to official data released last week.

In this context, thousands of Portuguese took to the streets of Lisbon and around twenty other cities in the country on Saturday, to demand firmer action from the government. “I do not hide a certain frustration, not to say a great frustration, to note that the reality was much more dynamic than the capacity for political response,” admitted the Prime Minister in the interview on Monday evening.

Its executive recently adopted a series of measures aimed at curbing real estate prices which notably provides for the end of “golden visas” or the compulsory rental of apartments vacant for more than two years in the most populated regions. And, to help nearly a million families, the government decided last week to allow borrowers to benefit from a reduced rate for two years.