146
146

RNH is One of Europe’s Most Competitive Tax Regimes

13 September 2018

The Left Bloc (BE) will propose the elimination of the Non-Habitual Resident Tax Regime (RNH) as of 2019, calling the program a “tax haven.” Paulo Núncio, the former Secretary of State for Tax Affairs, guaranteed that the BE proposal, were it accepted, would not only affect the economy and the budgetary consolidation but would also seriously undermine the credibility of the Portuguese State.

Created in 2009 by the PS (Socialist Party), the Non-Habitual Resident Tax Regime (RNH) is ten-year tax status that is granted to all taxpayers who move to Portugal but have not lived there within the last five years. The tax regime allows all income to be taxed at a flat rate of 20%, except for some retirees, who are entirely exempt. The MP Mariana Mortágua announced to media sources that the BE will propose an end to the tax regime during negotiations on next year’s State Budget.

The MP believes that “the effectiveness of an instrument that gives someone the right to few taxes than the rest of the population needs to be determined.” She added that “we have to measure, as a society, whether it makes sense for some people to pay an income tax rate of 20% when the rest pay their income taxes according to the national norm. We harbour serious doubts regarding the effectiveness of this regime and so far, the government has been unable to clarify them,” Ms Mortágua stated.

In recent weeks, the mayor of Lisbon, Fernando Medina, has expressed his belief that the programs covering non-resident foreigners and the golden visas must be rethought in light of the city’s new reality.

Paulo Nuncio, former Secretary of State for Tax Affairs, argued in statements to Público Imobiliário that the non-habitual tax regime has attracted thousands of Portuguese emigrants and foreigners to the country, principally after its reformulation in 2012.  The program has promoted investment and contributed to economic growth in such important sectors as services, real estate and tourism. “Even from a purely fiscal perspective, the tax regime has contributed to an increase in tax revenues in Portugal, not only increased income tax revenues but has also increased the state’s revenues with IMT and IMI (real estate taxes), ISV, ISP and IUC (automobiles) and VAT.”

Therefore, Mr Nuncio firmly believes that the proposal, should it be accepted, “would not only affect Portugal’s economy and budgetary consolidation but would also seriously undermine the credibility of the Portuguese State in relation to the tens of thousands of people who have already adhered to the regime by moving to Portugal in the last years.” The former Secretary for Tax Affairs stated, however, that given that the government recently stated that it would maintain the RNH regime, that “this proposal should not be accepted.”

RHN is one of the most competitive European tax regimes

“RNH is one of the most competitive tax regimes at a European level, compared to similar regimes in countries such as Spain, United Kingdom and Italy,” Mr Nuncio emphasized, adding that the tax regime had placed Portugal in a strong position in its quest to attract qualified professionals, both in the technical and service sectors, reinforcing the Portuguese economy’s general competitiveness. “According to recently published rankings, it has also contributed to positioning our country as an international destination for emigrating, working and living.”

Despite the fact that no official figures exist, “according to recently published estimates, the number of registered non-habitual residents increased to 27,000 by the end of 2017 (returning emigrants and foreigners), an increase of about 10,000 people since the end of 2016.” Mr Nuncio says that if the trend continues, in the coming years “the number of non-habitual residents may exceed 40,000 or even nearly 50,000, reinforcing the importance of this tax regime.”

French are the biggest buyers in Lisbon

According to data released by Confidencial Imobiliário, in 2017, foreign buyers accounted for 27% of the purchases of residential real estate by individuals in the Urban Rehabilitation Area of Lisbon. That is, they were responsible for about 415 million euros of transactions, €75 million more than in 2016 when growth had already reached 22%.

Foreign buyers accounted for 19% of the total number of transactions, while the French alone accounted for 22% of those.

Ricardo Guimarães, the director of Confidencial Imobiliário (Ci), explained that if the increase in demand from French buyers is related to the RHN, then “obviously, if there are changes to the regime, there may be losses in the real estate market.” Mr Guimarães also believes that “the tax regime boosted international demand, in particular by the French, in the Portuguese market.” The effects are most easily seen in the city of Lisbon, though the Confidencial Imobiliário’s director admitted that they extend throughout the country.

At the same time, Mr Guimarães noted that Ci identifies 80 different nationalities among the buyers of homes in the capital, leading to the conclusion that “Lisbon is attracting buyers from all over the world… irrespective of any particular tax regime.”

In other words, the perception of Portugal as a good place to live or invest in, added to tax regimes like the RHN, is, “of course, of great benefit to the country because it brings spending by a demographic which has a higher level of purchasing power to Portugal, instead of remaining in their home countries.”

Original Story: Público Imobiliário

Translation: Richard Turner