Tax relief to foreign skilled workers
Portugal has been giving tax incentives to foreigners since 2009 under a policy to attract skilled workers and overcome Portugal’s debt crisis and boost productivity.
High-income individuals and freelance workers — who can work from anywhere in the world basically — are enjoying, for example, a flat tax rate of 20% on their income for ten years. Portuguese citizens, by contrast, are subject to a progressive tax rate of between 14.5% and 48%. To qualify for the 20% rate, workers must work and life in Portugal for more than 6 months per year. Pensions, and income from capital investments such as dividends are excluded from the 20% rule.
According to data compiled by news agency Reuters, some 74,000 foreigners benefited from Portugal’s flat-tax incentive in 2022.
In October 2023, the previous government in Lisbon promised to close the scheme for tax breaks for new applicants in 2024 after it was blamed for higher property prices in the country. The new Portuguese government said earlier this month that it plans to reintroduce the scheme.
In Portugal’s neighbor, Spain, the special foreigner-tax rate is higher with 24% but also comes as a flat tax on all income they earn.
