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Portugal’s technology sector has experienced remarkable growth since 2010, making the country highly competitive in the international market. This has attracted foreign founders who have brought valuable know-how, established innovation centers, and invested in the local industry. Additionally, Portugal’s attractive tax policies, such as the non-habitual resident (NHR) statute and golden visas, have enticed overseas tech workers and entrepreneurs to relocate to the country.

The NHR statute allows foreign individuals to pay a fixed 20% rate on their income for a 10-year period, while locals face income tax rates ranging from 15% to 48%. These tax benefits, coupled with the allure of Portugal’s sunny coastline, have resulted in a significant influx of professionals and retirees to the country. In fact, in 2022, 74,258 individuals were living in Portugal under this regime, a 28% increase from the previous year.

However, the Portuguese government recently announced that it will eliminate the favorable tax regime for new entrants starting in 2024. Those who already benefit from the NHR statute will not be affected and can maintain the 20% rate until the end of their 10-year period. The government plans to replace the regime with a more targeted program focused on attracting overseas scientists and researchers.

While the existing beneficiaries of the tax scheme will be relieved, many individuals who had plans to move to Portugal or were considering it are concerned about the future. Ricardo Marvão, director of a Portuguese innovation consultancy firm, highlights the importance of the NHR regime in attracting highly skilled individuals who would not have otherwise had an incentive to move to Portugal. The tax benefits played a crucial role in helping fast-growing startups find experienced professionals, especially when local know-how was limited.

However, the government has been criticized for the impact of these schemes on soaring housing prices, which in turn has led to protests over high rents and property prices. Some experts, like Portuguese tax expert Rita de La Feria, support the government’s decision to end the tax break. De La Feria argues that such benefits escalate and deplete tax revenue, strain public services, and hinder efforts to promote European cohesion. She also questions how much credit the tax regime should receive for attracting workers to Portugal, suggesting that the country’s other competitive advantages may be sufficient.

Despite the debate, some tech workers understand the reasoning behind ending the tax break. They believe that Portugal no longer needs the NHR regime to attract professionals, as the country’s assets and appeal are enough to draw people in. However, concerns about higher tax burdens and overall efficiency persist. Some tech workers are even considering leaving Portugal for other destinations with lower tax rates.

In this situation, an AI legalese decoder could be beneficial. By analyzing the complex legal language and regulations surrounding tax policies, the AI system can provide individuals with a clearer understanding of the changes and their potential impact. It can help demystify the intricacies of the new targeted program and how it may affect specific individuals or industries. With its ability to process and interpret legal jargon, the AI legalese decoder can provide valuable insights into the evolving taxation landscape, empowering individuals to make informed decisions about their future plans and tax obligations.

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