Portugal will stop granting tax breaks to foreign retirees from 2024 as this would contribute to driving up property prices amid a real estate crisis, Prime Minister Antonio Costa has announced.
“Maintaining such a measure in the future would be equivalent to prolonging a measure of fiscal injustice that is not justified, and then it would be an indirect way of continuing to increase prices in the real estate market,” said the head of the socialist government in a statement. interview given on Monday night to CNN Portugal television, specifying that the exemptions already granted will remain in force.
Created in 2009 for foreigners who live at least half of the year in Portugal, this exemption granted for ten years was total until 2020. Since then, newcomers can benefit from a reduced tax rate of 10%.
The measure, which became truly effective after a simplification of the procedure in 2012, was aimed at attracting foreign capital to this country, then hard hit by the debt crisis.
10,000 people benefited
It benefited about 10,000 people, mostly French, British or Italian retirees, who settled mainly in the Lisbon region or in the coastal towns of the Algarve (south) and who, in fact, contributed greatly to the recovery of the market real estate.
Like the “golden visas” granted to wealthy investors from countries outside the European Union or the tax regime aimed at attracting “digital nomads”, the system is regularly cited among the factors explaining the rise in real estate prices.
Between 2012 and 2021, the cost of housing increased by 78% in Portugal, compared to 35% in the European Union as a whole, according to a study by the Portuguese Francisco Manuel dos Santos Foundation.
In the second quarter of 2023, the average rent increased by another 11% year-on-year, according to official data published last week.
In this context, thousands of Portuguese took to the streets of Lisbon and twenty other cities in the country on Saturday to demand stronger action from the government.
“I do not hide a certain frustration, not to say a great frustration, when realizing that reality was much more dynamic than the capacity for political response,” the prime minister admitted in the interview on Monday afternoon.
Its executive recently adopted a series of measures aimed at curbing real estate prices, which provide, in particular, for the end of “golden visas” or the mandatory rental of apartments unoccupied for more than two years in the most populated regions.
And, to help almost a million families, the government decided last week to allow borrowers to benefit from a reduced rate for two years.
Source: BFM TV
