Portugal removes tax incentives for foreign residents due to the housing crisis.

PHOTOFIELD: Residential buildings are seen through a fence in Lisbon, Portugal, March 15, 2023. REUTERS / Pedro Nunes / File Photo LISSSABON: Prime Minister Antonio Costa said tax breaks for foreign residents in Portugal were no longer justified and promised to close the program for new applicants in 2024 after it fueled house prices in one of Western Europe's poorest countries.

Launched in 2009, the program allows people who become residents by spending more than 183 days a year in the country to enjoy a special tax rate of 20 percent on income derived from sources in Portugal related to "high-impact activities" such as doctors and university professors. It was created to attract investors and professionals during Portugal's financial crisis.

Other benefits of the scheme, known as Non-Habitual Resident, include tax exemption on virtually all foreign income if taxed in the country of origin, and a 10 percent tax rate on foreign-source pensions.

Portuguese who had lived abroad for five years or more could also apply.

Costa told CNN Portugal late Monday night that the program has "deflated the real estate market," calling it a "fiscal injustice that is no longer justified." "It doesn't make sense now," Costa added, explaining that those who already use the program will continue to do so.

The announcement came two days after mass protests by thousands of people on the streets of Lisbon and other Portuguese cities against rising rental and real estate prices driven by luxury renovations and record tourism.

Government data shows that more than 50 percent of workers earned less than 1,000 euros ($1,046) a month last year, and a 65 percent rise in Lisbon rents since the boom began in 2015 has made apartments unaffordable for many. The value of sales rose 137 percent during that period, according to real estate data specialists Confidencial Imobiliario.

Critics say measures announced by the government earlier this year, including restrictions on short-term Airbnb rentals and changes to the country's golden visa program, were insufficient to address the crisis, which has also been exacerbated by a chronic shortage of affordable housing.

(US$1 = €0.9558) - Reuters.