“We have been looking at this issue for some months already, taking into consideration realities in other European countries”, the Finance Minister said in Estonia during an EU meeting.
“We believe that some adjustments are necessary, but above transparency, we believe in good European fiscal relations,” added Mário Centeno.
While he said it was important Portugal maintained its “fiscal independence”, he added the country needs to respect its European partners.
The Minister failed to provide a deadline for a tax on expat pensioners to be introduced, or whether it would be a flat rate of either five or ten percent, but said several studies still needed to be completed before a rate and a date were announced.
It is also believed that the tax rate will only apply to future residents looking to benefit from the so-called non-habitual resident programme.
Following the announcement by Mário Centeno, Portugal’s national real estate association APEMIP has termed the move a “crass error” as the programme has brought extensive benefits to the real estate market and the national economy since its introduction.
In a statement, APEMIP president Luís Lima said: “We seem to destroy whatever works well in Portugal. We created golden visas which brought in thousands of euros in foreign investment but quickly became the target of bureaucratic problems and blockages, which have damaged its credibility.”
APEMIP argued the success of the local lodging programme is also being undone by legislation.
“Now, we are targeting the non habitual resident programme, which has been one of the primary reasons for the recovery of the property market just because other countries are dissatisfied. It’s absurd”, lamented the association.
Foreign property buyers made up 20 percent of the market last year, with latest figures pointing to this number being on the increase in 2017.
The building industry has also attacked the move to introduce a tax on expat pensions, saying the government was giving the wrong image of the country to potential foreign investors.
The legislation entitles pensioners to be exempt from taxes both in their home nation and in Portugal.
The special regime for pensioners allows an exemption of a foreign occupational pension so long as its beneficiary qualifies for a special tax regime for non-habitual residents.
One of the requirements is that the pensioner be a non-habitual resident for Portuguese income tax purposes, while the second is that the pension is an occupational pension, paid from a foreign source.
Should these requirements be met, the pension will not be taxed in Portugal and depending on the provisions of the applicable tax treaty, it is also usually non-taxable in the source country for the duration of residence in Portugal.
Figures from the Finance Ministry recently showed that while people taking up the beneficial tax treatment in Portugal failed to exceed a hundred a year in the first four years following its introduction, this number exceeded ten a day in 2015 and continues
to rise.
The first signs of problems with the system came after pressure from the Finnish government reached a deal with Lisbon allowing it to come after expat pensioners who are residing in Portugal.
Public opinion in Finland became incensed about the Portuguese fiscal loophole, when a top shareholder in a top Finnish company revealed in an interview that she was moving to Portugal with her family to avoid paying tax.
This particular incident is said to have been behind Helsinki’s insistence to reach a tax deal with Lisbon.
The Swedish Finance Minister also said earlier this year that she had a serious discussion with her Portuguese counterpart over the matter.
Magdalena Andersson further revealed that Mário Centeno had shown a certain level of understanding.
She had also earlier told Swedish television that citizens who move to Portugal should do so for reasons such as the “climate, green wine or Fado, and not to avoid paying taxes.”
Other EU states have also expressed their aversion to the current legislation, with the Netherlands and France reportedly also starting to exert pressure on Portugal to revise rules governing tax benefits for expat pensioners residing here.
The Netherlands has been particularly vociferous in its
criticism of the regime, reportedly arguing that the rule has effectively transformed Portugal into
a tax haven within the EU’s borders.