Created in 2009, the non-habitual resident regime is expected to end in 2024, according to the proposal of State Budget Law for next year (SBP2024).

This regime was frequently linked to inflation in the real estate market and therefore one of the advanced reasons for revocation has been the need to control rent and housing prices in Portugal. Still, one should bear in mind that the impact of the revocation on housing will be limited. At start, the announcement of the end of the regime might in fact trigger an increase in the demand for tax residency until the end of 2023. In addition, the revocation will not affect acquired rights of existing non-habitual residents, meaning that benefits will remain until 2032 at the latest, and those that benefit from the regime may buy or rent property during this period.

Given the interest in attracting talent and capitalize national companies, SBP2024 foresees the creation of a new benefit entitled "Tax Incentive for Scientific Research and Innovation" (IFICI).

This new tax benefit is very similar to the current tax regime for non-habitual residents. In general, it lasts for 10 years and taxpayers who have not been resident in Portugal in the previous 5 years can apply. The benefit consists in the application of a rate of 20% to income obtained in Portugal in categories A (income from employed work) and B (business and professional income), provided the income is originated in university teaching careers, scientific research, work positions under the contractual benefits for productive investment, and work positions of research and development of PhD workers, within the scope of Tax Incentives for Research and Industrial Development programs (SIFIDE). As regards to income from employment, business and professional income, capital income, rental income and asset increases obtained abroad, the exemption method will apply, unless the income is paid or made available by entities domiciled in a country, territory or region subject to a more favorable tax regime, in which cases a tax rate of 35 % shall apply.

SBP2024 also foresees changes in the "tax regime applicable to former residents", which has been in force since 2019.

This regime will be extended until 2026. The requirement that taxpayers have been tax residents in Portugal in the past will be eliminated and the regime will only require that the taxpayer has not been a resident in any of the precedent 5 years (instead of the current requirement of just 3 years).

The regime remains allusive to "former residents", despite the elimination of the requirement of prior tax residency, which leaves room for controversy. It will be necessary to wait for the final version of the State Budget Law to confirm whether this regime may indeed apply to foreigners registering for the first time as tax residents in Portugal.

This being the case, taxpayers not meeting the requirements of the tax incentive for scientific research and innovation (IFICI) referred to above, would benefit from the regime applicable to former residents, i.e. a 50% exemption of taxation of income derived from categories A and B obtained in Portugal for 5 years (with a limit of €250.000,00).