Ricardo Marvão, director of the Portuguese innovation consultancy firm Beta-i, remarked that the technology sector in Portugal has experienced something extraordinary since the year 2010.
Portugal's international competitiveness grew substantially, attracting numerous foreign founders to view the country as a potential home. These entrepreneurs imparted knowledge, set up innovation hubs, injected capital into regional businesses, and erected co-working offices, the speaker explained.
In addition to its long sunny coastline, Portugal has enticed overseas tech workers and entrepreneurs with its generous tax policies.
Under the NHR scheme, foreign individuals pay a rate of 20% on their earnings during a 10-year period. On the other hand, locals have their income taxed at rates ranging from 15% to 48%.
Simultaneously, the golden visas enabled a foreign individual to gain a Portuguese passport in exchange for a financial investment. These two programmes combined have brought in thousands of businesspeople and retirees into Portugal.
According to data from the court of auditors of the country, in 2022 there were 74,258 individuals living in Portugal under this regime, a jump of 28% compared to the previous year.
After experiencing a decade of tremendous growth, the success of the venture could be at a turning point.
In October, the Portuguese government declared their intention to end the beneficial tax rate for all new citizens come 2024. Notwithstanding, those already enjoying its advantages will still be able to take advantage of the 20% rate until the culmination of their 10-year period.
The Portuguese authorities plan to put in place a more specific program which will aim to draw in foreign scientists and researchers. The specifics of the program are still to be decided.
Ricardo Marvão's phone was ringing off the hook after the government's proclamation, with friends and others who had taken advantage of the tax program expressing apprehension as to what comes next.
He told the BBC that there was a great deal of scepticism directed at the government, with them vouching that nothing would change for those already subject to the law but many still anxious about a total turnabout.
Mr. Marvão stated that the programme has been a decisive factor in attracting particularly skilled people who, without it, would not have been motivated to relocate to Portugal and settle down in the country.
The NHR and the tech surge in Portugal enabled talent recruitment. Rapidly developing start-ups required seasoned specialists since expertise in Portugal was largely absent when the system first began, according to Mr Marvão.
The government has attributed the drastic increase in housing prices to certain schemes. In Lisbon and other cities, the public has been very vocal in its condemnation of high rents and property prices, leading to major demonstrations.
Rita de La Feria, a Portuguese tax expert and professor at the University of Leeds, affirmed to the BBC that she is in approval of the Portuguese government's decision.
She indicates that these tax advantages tend to increase, as countries vie to draw in widely sought employees. In addition, they cause a decline in tax income and weakened public services, and interfere with attempts to foster European unity.
Ms de La Feria is also dubious about how much credit the attractive tax laws should get for drawing workers to Portugal.
She wonders if the government calculated if Portugal still requires the NHR regime to draw in professionals, or if the other appealing things Portugal has to offer would be enough to bring them in.
An unnamed individual in the tech industry, whom I recently conversed with, expressed the opinion that the tax break for NHR should be terminated due to the escalating debate around it.
Looking at the entirety of Portugal, it seems unnecessary to keep the tax incentive in place. I believe it was effective and has accomplished its purpose. Nowadays, numerous people desire to reside in the country regardless of any tax incentive needed to encourage them to move.
The tech worker who moved to Portugal in 2016 expressed his opinion that it's unfair that Portuguese people earn less and pay more taxes, while speculating that possibly fewer people will attend due to this situation. means more power to the business world.
The introduction of greater technological advancements provides more clout to the business sector.
He is looking at the whole situation, yet still weighing up the option of relocating from Lisbon to London to avoid a substantial hike in taxation.
A tax rate amounting to nearly 50% is nonsensical. If the rate were that high, one would expect the nation to operate in an extremely effective manner, yet this is not an accurate description of Portugal.
Felix Lange, a Swedish software designer who is now the head of product at a Portuguese housing start-up, relocated to Lisbon in 2016 in search of a fresh start.
Despite being unsure of his future after a decade of time, he noted, "I don't think I'll relocate due to the expiration of my NHR status. That won't be the primary reason."
"In addition," he states, "if I didn't have the NHR statute, I calculated the tax rate I would have which would make me pay more taxes in Portugal than I was accustomed to paying in Sweden, which I find strange."
Comments