American influx: Portugal's allure amid tax changes
A growing number of Americans are making the move to Europe, crossing the Atlantic due to factors such as the escalating cost of living, soaring housing prices, a strengthening dollar, and domestic political discord. According to a report from Bloomberg, the Southwestern Europe nation located on the Iberian Peninsula has become a popular destination for expatriates amid the pandemic, thanks to its affordable real estate, pleasant climate, and advantageous tax and visa programs. However, recent political pressure linked to rising housing costs has prompted a crackdown on incentives for foreigners.
The imminent end of the Non-Habitual Residency (NHR) tax regime is part of measures outlined in the State Budget for 2024 (OE2024), approved in the Portuguese Parliament at the end of November. The ruling Socialist Party has proposed amending the document to establish a transitional regime for NHRs in the coming year. This aims to accommodate individuals, including workers, retirees, or investors, who can demonstrate their preparations for relocating to Portugal in 2023.
The Socialist Government's objective is to enhance the transitional regime, recognising the legitimate expectations of citizens who have already taken concrete steps to change their tax residence to Portugal based on the regime scheduled to conclude with the OE2024 law proposal.
Capitalising on Portugal's Non-Habitual Residency, Americans pursue Benefits and navigate tax reforms.
Bloomberg features reports from North Americans expressing their desire to move to Portugal, citing examples such as Matt Booth from Boise, Idaho. Originally planning to relocate to the Algarve in January, where he and his wife purchased a house for €380,000 in 2021, Booth postponed his move to ensure qualification. Despite spending around $1,800 on flights, approximately $3,000 on fees, and missing four days of work to submit his request in person in early October, Booth describes the process as "very stressful and chaotic" but deems the investment worthwhile in the long run.
Bloomberg emphasises that Americans residing abroad are still subject to U.S. taxes. However, Portugal's non-habitual resident tax system enables expatriates to pay a fixed 20% tax on income and a 10% levy on pensions for a decade. This is notably less than the progressive tax regime for local residents, requiring those with annual incomes exceeding about €79,000 to pay a 48% tax.
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