“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.
Taxman targets expat pensions
in News · 21 Sep 2017, 14:49 · 8 Comments
There are so many benifits to moving to Portugal after retiring. The wonderful people being foremost. The weather. As you get older the sunshine and temperature plays a very important role for people like myself who suffer in the damp climate of Ireland. The cost of living and eating out and public transport. Being on mainland Europe makes travel easier between countries and more cost effective and easier. The wonderful and varied food that is to be had throughout the whole country. The low crime rate and the attitude of Portuguese people and the Police forces both against vandalism, general thugism and lack of respect for each other that is becoming rampant in most of Europe, including my own country, Ireland. I would have no problem paying my fair share of tax in Portugal as a householder and resident as long as it was fair to both me and the Portuguese people and allowed me to live a semblance of a good life in my later years. I have chosen to move permantly to Portugal alongside my sister and her family for the above mentioned reasons and look forward enjoying jlit for whatever time I have left in this earth.
By Tommy Cunningham from Other on 22 Sep 2017, 10:28
This for peole who although have EC passorts get their pension from outside the EC and are already taxed. These peole would face double taxation
By Iris Lawton from Açores on 22 Sep 2017, 15:06
You are living in a place I dont know , I had a local borrow money ,then not want to repay,took 5 years going to court ,,, another kick and Punch me in the face , another tried to hit me with a car ,as he wanted to overtake me , a taxi driver told me to f/0ff ,because he was in a hurry, another told me to go back to my country ,because I objected to him not paying his Condominium fee,, Where do you live???????????
By Fred from Lisbon on 23 Sep 2017, 10:07
Yes. Zero tax is not acceptable. EU passports do not exist. Passports are national. Tax agreements are between nations. Not EU.
The new Finland-Portugal agreement, which is not yet ratified says e.g. that if Portugal does not tax anything then Finland will tax 100%. If P. applies whatever tax then there is a grace period of three years. After this Finland will collect the balance. So - the end result will be that soon there will be no tax incentives left for the pensioner. Please apply asap a 5% tax and Finns will stay three more years in .Portugal.
By Jan from USA on 25 Sep 2017, 05:48
I keep hearing wonderful people.I find the Portuguese to be extremely selfish.They care not one iota about their dogs barking non stop,they don't give a damn about things that might affect their neighbours.
Hotels bars and restaurants respect nobody in the surrounding area.
The beaches are filled to overcapacity.
Litter is thrown like confetti.
The government has lured expats in now they want to screw them.
Let's have a reality check.
I am out of here.
By James from Algarve on 26 Sep 2017, 11:05
I think NHR policy has been a great success for Portugal. I am sure that the country is going to pay a big price, if they cheat the people, who have already been given NHR status for the next 10 years.
Do people here think that Portugal is going to really start taxing people, who received an NHR status with the belief that they will not pay any taxes to the country in the next 10 years?
The way I see it is this: after 10 years Portugal is naturally free to change the rules, but it would be an awful signal, if they changed the rules for the people they promised a 10 year tax free stay..
By Jenny from the block from Algarve on 28 Sep 2017, 19:19
Portugal is mostly nice, but strangely enough, in addition to the superficial and sometimes deep ingrained niceness of some Portuguese people, when dealing with them on a commercial level, with their shops, their businesses and even on the road etc. I notice that a lot of people are crooked, cheating and are selfish. Also about half people are polite and nice, very nice, but the other half (or less) are rude. Which many may not notice, but there is this selfishness. Must admit. And I still like Portugal, but have to keep in mind and be careful not to lose your money to numerous crooks, rip-offs, overcharges and outright scams that are quite very numerous indeed. And a lot of discrimination towards different population groups and toward foreigners as well. Sometimes the overly "respect" to Americans turns out to be real respect and sometimes false. In general a nice country to live, if one is patient and has a lot of time, patience and being extreely careful in financial transactions.
By Vassilis Cassidis from Other on 11 Feb 2018, 15:55
I read with interest the comments. The Portuguese people are very nice in the region of Alentejo and once accepted in the community they will help anyway they can. However, the government and governmental departments are the Bain of the country. For example I have lived in Portugal for a long time but I am not good with the language. Most people speak English which is okay. But believe it or not if you go into some of the government departments that deal with foreigners none can speak English. Plus they have an all mightier then Gods attitude. You will also visit departments that every desk has a computer but none are being used and its all handwritten and ledgers. Red tape has to be the most in the world and you can fill in forms only to find out that they change their minds and you have to fill in another form and this can go on for months until your paperwork is out of date and you have to start all over again. Too add to this lawyers are twice as expensive than in the UK. You will realise that Portugal is very nice what you can see but go into places you cannot see its a dump everything is top show as most Portuguese will agree. Then we have to NHR scam. Its great for the first 10 years and after that unlike the UK you are taxed on the very first euro unlike the UK were you can earn around 13000 pounds before you pay tax. So if you are living on your UK pension it's going to be hard. So buy your house let that increase in price and after 10 years sell up and leave you will be better off financially. On a final word the people are great and the wine and food is great and the weather is great but you have to pay through the nose for it.
By Mike Stringer from Alentejo on 27 Dec 2020, 12:46