In an effort to solve the housing crisis in Portugal, last year the previous Socialist government headed by Prime Minister António Costa proposed scrapping the Non-Habitual Resident (NHR) tax incentive for new international residents.

Now, the new administration is revising the country's tax incentives to attract skilled professionals from overseas while simultaneously mitigating negative impacts such as increased house prices for locals. Its decision is to reinstate the NHR but limit the benefits to salaried and self-employed workers.

If approved, the revised NHR would still offer a 20% flat tax rate on salaries and professional income for 10 years for foreigners or Portuguese citizens who have not been tax residents in Portugal for the past five years.

However, unlike the original regime that was first launched in 2009, it would now exclude pensions, dividends and capital gains. Additionally, the corporate income tax rate will be gradually reduced from 21% to 15% by 2027, as part of a broader strategy to attract global talent and investment, particularly in the tech and medical fields.

Finance Minister Joaquim Miranda Sarmento explained in a press conference last week that "the move is crucial for maintaining Portugal's competitiveness in attracting skilled professionals.”

It's good news for international homebuyers who, after the Golden Visa was also revised to exclude real estate from its tax incentive programme, will once again see tax benefits if they are salaried or self-employed.

If you are someone who will benefit from the reinstated NHR tax break, why not talk to the Algarve Home Sales team to get a head-start on your property search? Your perfect home in the sun could be closer than you think.