In 2017, non-usual residents in Portugal paid 80 million euros in IRS but the tax advantage enjoyed by these taxpayers costs the State 509 million euros. This is one of the conclusions of the working group on tax benefits and could give a little more support to those parties in favour of abolishing or modifying this Portuguese NHR status.
Non-usual residents paid 80 million euros in IRS in Portugal in 2017, six times less than the cost of the tax advantage they enjoyed that year, according to data published Monday by the Working Group on the Study of Tax Advantages.
The regime for non-habitual residents in Portugal (NHR) allows :
- A tax rate of 20% for 10 years for workers in high value-added professions regardless of the value of the income earned.
- An exemption for pensioners with pensions paid in other countries if there is a double taxation agreement that allows it.
As a result, and in view of the associated tax burden, this system has served to attract many expatriates to Portugal but has always been heavily criticised. Advocates of this advantageous scheme use as their main argument the fact that these non habitual residents pay and declare the IRS in Portugal and that when they consume and invest in the country, they end up paying tax revenue to the Portuguese State.
The Working Group on the Study of Tax Advantages counteracts this argument and indicates that in 2017, non-resident non-habitual residents in Portugal paid 80 million euros in IRS (on non-exempt income). In the previous year, they paid 54 million euros. This compares with a tax burden of EUR 508 million related to the tax saving in 2017. In 2018, the value is higher: 593 million euros. However, the specialists do not present data on the personal income tax paid by NHI in 2018.
However, the working group indicates that in order to be more rigorous in these calculations, the additional revenues generated by indirect and direct taxes should also be taken into account. This has not been done since they did not take into account the impact of HNI on other taxes such as VAT on consumption or taxes on purchases and sales of real estate, which should still mitigate the difference in revenue generated for Portugal.
The working group also points to a strong increase in the number of beneficiaries of HNI status in Portugal: 7899 new Portuguese HNI in 2018 and an increase of 270% compared to 2014. Portugal now has around 29,900 non habitual residents, with French, English (UK) and Italian nationalities in the ranking.
The working group after studying the population of NHR in Portugal concludes that among the 29,900 beneficiaries, only a small part has an NHR activity with high added value. In March of this year, when the data were collected by specialists, only 2,205 taxpayers with non-resident status were engaged in a high value-added occupation. Of these, about half were senior managers.
Although the conclusion is not new, these data reinforce the idea that only a small proportion of the beneficiaries of this scheme bring a high level of skills to Portugal, as the vast majority of them do not have a “high value added activity”.
Original article on jornaldenegocios.pt
