For the last few years and especially during the pandemic, Portugal has been the “it” country to go to for expats. With the combination of a lower cost of living, a beautiful climate and geography, and easy access to Europe, Portugal was an extremely attractive option for expats.

And, more than just being a nice place to go, Portugal had the most popular Golden Visa program in the world, along with the favorable NHR (Non-Habitual Resident) tax regime that made it a tax-friendly option for expats who wanted to live there long term.

Recently, though, that has all changed, as Portugal has made big changes to their Golden Visa program and will be ending the NHR tax regime. While they aren’t exactly slamming the door in expat’s faces, they certainly aren’t rolling out the red carpet like they used to, either.

So, is Portugal becoming anti-expat? Let’s discuss below.

Tough times produced great opportunities for Portugal

Both Portugal’s Golden Visa and their NHR tax regime were the result of the Great Recession of 2007-2008, although Portugal had been having economic issues since about 2001, lagging behind other European nations in economic growth. The Great Recession just further exacerbated these issues.

Like many countries, Portugal found itself in a dire financial situation during this time, unable to pay or refinance government debt without assistance. They received a bailout of €78 billion, austerity measures were brought in, and real estate in the country hit rock bottom.

Portugal needed to attract foreign investment to help revive their economy, so they came up with some very attractive programs to do just that.

NHR Tax Regime

Created in 2009, the NHR Tax Regime was a special tax scheme used to attract foreign residents to live and work in Portugal. It offered a tax exemption on certain types of foreign source income and lower taxes on income from other high-value activities. (Source: https://www.ifcreview.com/)

These people could live in Portugal full-time, become tax residents and enjoy a reduced tax rate for 10 years, during which time they would presumably contribute to and stimulate the Portuguese economy. It was an amazing tax incentive, especially for those who were coming from high-tax countries.

Portugal Golden Visa

The now famous Portugal Golden Visa program was created in 2012. With the Golden Visa, you did not even have to live in Portugal. Rather, it allowed foreigners to obtain residency by investing in real estate, creating at least 10 jobs, or making other investments (as low as €250,000!) to support the development of various sectors of the Portuguese economy.

Portugal Golden Visa holders would only have to spend 7-days per year in Portugal, while receiving visa-free access to Europe’s Schengen area. They could also apply for citizenship in five years.

The program was a smash hit and has brought in over €7 billion in revenue for Portugal since its inception. People flocked to Portugal to invest in its real estate market in exchange for their Golden Visa. It was a great fit for foreigners who wanted to live, work, and travel in Europe, as well as for those setting up their Plan B.

The End of an Era

Portugal’s Golden Visa and NHR tax regime made Portugal an extremely popular destination for expats. They brought in billions of Euros in investment, not to mention the overall economic stimulus and revitalization of the Portuguese real estate market.

But, unfortunately, these programs are (rightly or wrongly) being blamed for the massive housing shortage in Portugal, along with inflated real estate prices, which has made housing much less affordable and more difficult to find for everyone. Lower-income residents have been hit especially hard by this issue, much like we are seeing in Canada.

Is it fair to blame the Golden Visa and NHR tax regimes for all the issues with the Portuguese housing market? Or are Portuguese politicians biting the hand that feeds them, and going after the easy target and perennial boogeyman of “the rich”?

Changes to the Portugal Golden Visa

Regardless of whether it is to blame or not, the Portuguese government is making big changes to the Golden Visa program to “help” with the housing crisis.

On October 6, 2023, after waffling back and forth about the future of the program for a year, the Mais Habitação Law was enacted by the Portuguese government, which decreed that you could no longer invest in a real estate property or a real estate-related fund to qualify for a Golden Visa in Portugal.

So, the Golden Visa absolutely still does exist and most of the other requirements have remained the same, they’ve simply removed real estate investment as one of the means of qualification.

Changes to the NHR Tax Regime

Left-leaning politicians also felt the NHR tax regime was unfair, accusing it of being a “fiscal injustice” that no longer made sense. And you can forget any changes to this one, because they have outright cancelled the program, with it set to end by the end of 2024.

Is Portugal anti-expat? My take.

I think Portugal is not so much anti-expat as it is anti-wealth, like most western countries these days. The so-called “rich” are an easy target for politicians, who need someone to blame for their wasting of taxpayer dollars and mismanaging of the economy.

Everywhere is seeing massive inflation and high interest rates right now, and Portugal is not even close to being alone when it comes to its housing crisis. Canada, the United States, and Turkey are just a few of the other countries facing housing crises of their own. Each country is trying different tactics to get a handle on the situation.

Could foreign investment play a role in Portugal’s housing crisis? Absolutely. But to what degree is the question.

Removing the Golden Visa’s real estate investment option while also cancelling the NHR tax regime are tools the Portuguese government can implement to at least to look like they are doing something. Will it help ease their housing crisis? Only time will tell.

What it will definitely do is have a cooling effect on the number of expats coming to Portugal. This was already seen earlier this year when the Golden Visa was temporarily paused and there was an immediate drop of 37% in applications from the United States alone.

That being said, Portugal remains open to expats looking to move to the country with its revised Golden Visa program, along with a few other visa options, namely:

• The D7 Visa – Dubbed the Retirement or Passive Income Visa, this visa is great for anyone with passive income.
• The D2 Visa – Geared towards entrepreneurs and small business owners, this visa is for those who wish to start a business or relocate an existing business to Portugal.
• The D8 Visa – The newest edition to the group, this is the digital nomad visa geared specifically towards remote workers.

So, while the Golden Visa program is losing its real estate investment route and the NHR tax regime is being cancelled altogether, Portugal still absolutely wants to attract expats. They just won’t be giving you as sweet of a deal as they used to, so it’s a good time to weigh all your options.

Start planting your flags now

When it comes to setting up your Plan B, nothing is for certain. Residency programs change constantly so there is no time like the present to start planting your flags. If Portugal was one of the countries on your list, it may not look as attractive to you now with the new changes they have made in their bid to fix their housing crisis. But, if you love the country and the people and don’t mind potentially paying more tax, Portugal is definitely still open for you.

If these changes DO cause you to pull Portugal off your list of Plan B destinations, rest assured there are many other countries out there that would welcome you with open arms.

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