Wealthy SA expats in Portugal urged to act fast as NHR tax regime faces being phased out

Thousands of wealthy expats in Portugal – including many South Africans – are being urged to act now to ensure they don’t get caught by a sting in the tail of the soon-to-be phased out Non-Habitual Residency (NHR) tax regime.

Last week, (October 10, 2023) the Portuguese government released its first draft review on how it will phase out the NHR tax regime in 2024. It suggested new applicants need to apply before December 31, 2023, and then complete their application/approval by March 31, 2024.

The draft review also gave more insight into the Portuguese government’s new Incentivised Tax Status (ITS) program, which will most likely replace the NHR.

It will potentially offer a more limited range of tax benefits to qualifying people and professionals. This includes a flat 20% tax rate for a decade and a 50% tax exemption on professional income, up to a cap of €250,000, for five years.

Current affluent expats already with NHR tax status will keep their benefits for the duration of their 10-year term but need to plan for the end of that period as early as possible to avoid progressive tax rates.

However, a survey has found that less than 30% (27% to be precise) of NHR wealthy expats have structured their financial future beyond the ten-year qualifying period.

The ‘Wealthy expats in Portugal survey report’, which is due out next week, interviewed more than 1,000 current and potential expats – from South Africa, Brazil, Canada, Asia, the UK and the USA – to gauge the benefits and challenges of making the move to Portugal.

Sunny Portugal with its laid-back lifestyle has proved hugely attractive to affluent expats who can enjoy the benefits of life in Portugal as well as a range of enticing tax incentives under the NHR – a tax program which was designed to bring wealth and investment to the country’s shores.

More than 53,700 expats in Portugal, many from SA, have taken advantage of the tax regime – first launched in 2009 – but were left unsettled by the recent announcement by Portugal’s Prime Minster, Antonio Costa, that it was to come to an end.

The Wealthy Expats in Portugal survey report 2023 will be launched at a webinar on October 24, 2023, and will include an update on the NHR tax regime and the new ITS scheme. It is being hosted by Portugal Pathways who are advising that it’s better to act sooner rather than later. Find out more here.

The report comes from the independent research company, World Digital Foundation (WDF).

Paul Stannard, chairman at WDF says: ‘’Our survey of current and prospective wealthy expats highlighted the majority had found Portugal to be a culturally rich, safe and secure haven compared with almost anywhere else in the world to relocate but fail to structure their life and finances in Portugal for the long term.’’