Portugal’s Revives Tax Breaks To Attract Skilled Foreign Workers

Portugal is once again flip-flopping on its foreign tax policies, this time reintroducing tax breaks specifically designed to attract foreign skilled professionals to the country.  

The recent back-and-forth decisions come after the previous government scrapped the country’s golden visa program last year due to concerns over rising costs of living for locals in international hotspots like Lisbon and Porto. It’s a major policy decision that The Financial Times reports will not be reinstated alongside the tax policies. 

The tax break, originally launched in 2009 as part of the non-Habitual Resident (NHR) Tax Scheme, is designed to attract skilled foreign professionals such as tech workers and doctors to Portugal. The revised scheme offers a reported 20% flat tax rate on salaries and professional income — excluding pensions, dividends, and capital gains. 

Reuters reports that the tax breaks, which were initially designed to help Portugal recover from the financial crisis, had drawn over 74,000 beneficiaries in 2022 alone. This cost the state budget more than 1.5 billion euros. However, it proved effective in attracting digital nomads to the country. 

The government’s revised approach also includes reducing the normal corporate income tax rate from 21% to 15% by 2027 and establishing a mandatory minimum tax rate of 15% for all multinationals and large Portuguese companies operating within the country. These measures are designed to improve private investment and make Portuguese companies more competitive in the European market. 

The update in tax policy shows a more balanced approach to Portugal’s migration and economic policy. It prioritizes the entry of individuals who can contribute to the nation’s growth while cutting down on previously observed negative impacts — such as increased housing costs for locals. 

Policy makers in Portugal hope to not only revitalize the economy but also to position itself as a prime destination for global talent and investment. While there are still uncertainties regarding how the new policy will play out, the initiative shows the government’s recognition of the importance of such a mechanism to attract highly qualified individuals and investors.