Americans rush to Portugal ahead of tax changes for expatriates.

More Americans are rushing to Portugal to get ahead of tax policy changes that will wipe out financial benefits for expatriates looking to move to the country. The end of tax breaks for Portugal's so-called "non-permanent residents," announced by Prime Minister António Costa in October as part of a broader effort to address the country's real estate crisis, has led to an increase in the number of Americans applying for fiscal residency.

Portugal attracted a huge number of expatriates during the pandemic thanks to lower housing prices, a warm climate and special tax and visa programs. However, political pressures related to rising housing prices have led to recent restrictions on benefits for foreigners. The impending end of these tax credits has many people scrambling to complete the necessary paperwork to make sure they qualify for a program that could save them hundreds of thousands of euros over 10 years. - "People are panicking, rushing, trying to get into all of this before it's too late," said Daniela Lopez Costa, a Lisbon tax attorney.

Matt Booth of Boise, Idaho

Matt Booth of Boise, Idaho, rushed to protect his tax benefits. Having originally planned to move in January to the Algarve, where he and his wife bought a €380,000 semi-detached house in 2021, the 51-year-old physiotherapist has postponed the move date for a few weeks to make sure he qualifies. He spent about $1,800 (1,668 euros) on flights, about $3,000 on tax experts and lost four days of work to travel to Portugal in early October to apply to register his company in person. He estimates that the existing program will help him save about half a million euros over the next 10 years. "It was very stressful and chaotic, but obviously worth it in the long run," he told me.

Americans living abroad

Americans living abroad still pay taxes in the United States. However, the tax system for non-permanent residents allows expats who move to Portugal to pay a flat tax of 20% on income and a 10% tax on pensions for 10 years. This is less than the progressive tax system for local residents, which requires residents with an annual income above about 79,000 euros to be taxed at 48%.

A friendly system for non-residents

The Welfare System for Non-Residents was created in 2009 in an attempt to attract foreign capital. And it has been successful: in July, the government announced that the total number of people who have used the system is 89,000. Last year alone, expats participating in the program paid 1.4 billion euros in taxes.

Criticism and restrictions

The program has been the target of criticism in recent years. Some politicians and locals have blamed the tax system as well as the so-called "golden visas" for speculation in the country's housing market, arguing that wealthy foreigners have driven up housing prices. As a result, the number of "golden visas" issued was capped in July and special tax breaks are being phased out.

Changes in tax policy

Portuguese Prime Minister António Costa resigned last month amid a corruption scandal, but his government is still in power and tax changes were included in the budget approved Nov.

William Jones

William Jones, 40, a resident of Asheville, North Carolina, acted quickly when the changes were announced. The CIO traveled to Portugal in November with his wife to submit documents proving his intention to live in the country. To set up residency, the couple rent an apartment for 1,000 euros a month in Cascais, though they plan to move there in June. The whole process cost them about $15,000, including $2,500 for flights, €315 for a tax consultant, money for a nanny for their one- and three-year-old children and €8,000 for eight months' rent. "It's a big expense, but if we hadn't taken advantage of the tax program, we would have spent about 300,000 euros more on taxes over 10 years. So this investment is worth it," William said.

Norris Merritt

Some expats who had only vague plans to move to Portugal have abandoned the idea due to imminent changes in tax policy. Others are trying to avoid paying taxes. Norris Merritt, a resident of White Salmon, Washington, will not become a fiscal resident if the non-permanent resident program is terminated by the time he receives his visa. A former software developer, the 71-year-old pensioner bought his house in the Algarve two years ago for 500,000 euros but is still waiting for his visa to be issued. Without it, Merritt won't be able to claim tax credits. For now, Merritt plans to be in the country less than 183 days a year to avoid paying Portuguese taxes on his pension, "I just need to keep a day count. But in the end, Portugal will lose a lot of money because of these new restrictions. "