In Portugal, while seeking to stimulate the economy, the Government has been amending the Tax Benefits Regime. But the generalised increase of taxation does not seem to be compatible with an attractive scheme of tax benefits, explains David Nunes Fernandes, Associate at Cardigos. “in fact, several tax benefits have been reduced and/or revoked due to the necessity of increasing the State’s revenue deriving from taxation.”
Recent incentives have improved performance mostly in the export trade sector for domestic companies. The Super Tax Credit, for example, and amending the scope of pre-existing tax benefits to make them accessible to a larger number of Portuguese companies, in particular SMEs. The market is expectant as to the result of these measures since preliminary analysis suggested that, for instance, the Super Tax Credit would not have a relevant impact in the Portuguese economy, says Teresa Pala Schwalbach, Head of Tax at MC&A. “However, conclusions on whether the Government’s goal to help SMEs was achieved will only be possible after the presentation of 2013’s CIT returns.”
Steps to reduce bureaucracy and encourage foreign nationals to become resident in portugal have been taken with the Special Tax Regime for Non-habitual residents (NHTR) and the Golden Visa Regime, which allows non-EU or Schengen members to obtain a Portuguese residence permit if they perform an investment activity in portugal for a minimum of five years. These have proven to be a sucess in 2013, with a direct impact on the real estate market, especially on luxury properties as well as on tourism, says Vasco Carvalho Marques, International Taxation Partner at TFRA – Teixeira De Freitas, Rodrigues e Associados. There are strong indicators that the investment in real estate has grown significantly within the two last quarters of 2013, largely credited to investments made under these regimes, say lawyers.
“The NHTR is currently bringing a lot of business and investors to portugal”, says António Rocha Mendes, Tax Partner at Campos Ferreira, Sá Carneiro & Associados. It applies to corporate expatriates, retirees and high net-worth individuals wishing to take residency in Portugal and grants several interesting benefits, such as a preferential treatment to income from “high value added activities” – namely artists, engineers, architects, researchers, tax consultants, among others.
Employment income obtained in portugal will be subject to a special tax rate of 20 percent, while foreign income will be tax exempt, says Rogério M. Fernandes Ferreira. Founding Partner of RFF & Associados. Moreover, pension income can also be fully exempt from tax depending on the application of the relevant double tax treaties.
The NHTR also combines a favourable income tax regime with an inheritance and gift tax exemption towards spouses, descendants (children) and ascendants (parents), says Marreiros Moreira at Vieira de Almeida, making it a very appealing tax planning opportunity.
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