Socialists reject NHR and IUC road toll tax hike. (for now)

from its most controversial proposals included in the 2024 state budget to win favor with the Portuguese people ahead of early elections in March. However, the government, despite the ongoing political crisis, still has a majority in parliament and is single-handedly deciding on these amendments to its state budget proposals.

Changes to the tax regime NHR

With regard to the NHR tax regime, the new temporary scheme will allow individuals of any nationality to continue to benefit from the NHR tax regime (which was due to be abolished from 2024) until December 31, 2024, if they can prove that they were already planning to move to Portugal in 2023 (i.e. provide documents proving''purchasing real estate, applying for a residence permit or enrolling children in a Portuguese school). This 'transitional regime' was created as a result of a change to the 2024 state budget proposal presented in Parliament on Tuesday by the Socialist Party.

Justification and criticism of the decision

Justifying the abolition of the regime earlier this year, Prime Minister Antonio Costa said the NHR tax regime was "a measure of fiscal injustice that is no longer justified and is a biased form of pumping up the real estate market, whose prices have reached unsustainable levels." However, the SP government now believes it is necessary to create a "transitional period". "It is important to create a transitional regime that preserves''legitimate expectations of people who have already made the decision to immigrate or return to Portugal,' the party said in a statement. It adds that not creating this transitional scheme could "jeopardize the trust" of those who have chosen Portugal to live in. In fact, the NHR's new transitional tax regime extends it for another year, leaving the option for the next government to either move to repeal it, maintain it or change it.

Reaction of the real estate sector

Representatives of the real estate sector welcome the creation of a "transitional" NHR tax regime, but criticize the government for deciding to start abolishing it first. "When Prime Minister Antonio Costa announced the abolition (of the NHR regime), he said two things:''Uncertainty - even if the measure is eventually repealed - is a critical deterrent to any investment decision,' he told JE.

Change in vehicle circulation tax IUC

The government's sudden change in policy proved even more surprising when it came to the increase in the IUC vehicle circulation tax, which was canceled after Finance Minister Fernando Medina emphatically defended it on several occasions. In a statement justifying its decision, the PS said, "Passenger cars remain in many cases the main means of transportation to work or the nearest public transport stop, especially outside the country's major cities and''prompted by this measure, the PS clearly realized that it could be harmful and affect support for the middle class,' he told SIC Notícias. The Portuguese Automobile Club (ACP) also emphasized the "fear" that it believes prompted the government to reject the tax increase.