Luis Horta e Costa’s Postmortem of the NHR Tax Program

Picture yourself sunning on the shores of Portugal‘s stunning Algarve coast, dining on delicious traditional dishes like cod or custard tarts accompanied by wine from the Douro valley, or listening to the melancholy strains of fado music. Now imagine all this is possible because of the country’s nonhabitual resident tax program — if you’re not too late.

Real estate experts like Luis Horta e Costa fear that if the government gets rid of the nonhabitual resident tax program, “a mass exodus of foreign capital will hurt Portuguese real estate, tourism, and countless other industries.” 

A Boom of Wealthy Expats

Portugal’s nonhabitual resident tax program is designed to attract people to live in Portugal by offering them favorable tax treatment for a period of 10 years. Qualified foreigners can enjoy lower tax rates on foreign income, and in some cases, it might even be tax-free. This program is especially appealing to retirees, professionals, and entrepreneurs from abroad looking for a tax-efficient way to live in Portugal.

The NHR tax program has been hailed as a significant driver of foreign investment and economic growth since its inception in 2009. However, with the current administration considering terminating it as early as 2024, speculation abounds regarding the potential fallout for the Portuguese economy.

According to real estate expert Luis Horta e Costa, the loss of the NHR program could spur an economic mess. “Foreign investors didn’t just bring capital to Portugal,” said Luis Horta e Costa, the co-founder of Square View, a real estate property developer and asset manager in Lisbon. “They brought innovation and a new perspective that transformed our economy. It’s not just about the businesses they established — it’s the fact that their investments made Portugal a powerful economic force.”

The NHR program was created in 2009 as Portugal dealt with the global financial crisis. It offered substantial tax breaks to wealthy foreigners and investors in an attempt to reboot the Portuguese economy, create jobs, and attract foreign capital. On all accounts, the program has been a resounding success.

Luis Horta e Costa: ‘Renewed Vigor’

However, Horta e Costa and other experts now worry that terminating NHR could jeopardize Portugal’s economic momentum. Horta e Costa predicts a “mass exodus” of foreign investment, hurting critical industries and growth prospects. Fellow entrepreneur Ricardo Marvão agrees, crediting NHR with enabling an unprecedented tech boom in Portugal. Even the loss of foreign real estate demand could have ripple effects. As Horta e Costa says, “Portugal’s real estate market has found renewed vigor, thanks largely to the NHR tax program. Its termination will halt this progress in its tracks.”

Compounding concerns is the emergence of similar programs in neighboring countries like Spain, which experts say will become more attractive destinations for investors. According to Luis Horta e Costa, the loss of NHR could have impacts beyond economics. He argues that the program was critical for cementing Portugal’s reputation as an appealing location known for being “open, welcoming, and forward-thinking.” Without incentives to attract foreign capital and talent, Horta e Costa worries about Portugal falling behind regional competitors.

While the future remains uncertain, the demise of NHR incentives would leave Portugal at a crossroads. With the economic benefits clearly demonstrated over the past decade, replacing the program presents a substantial challenge. Luis Horta e Costa for one believes preserving foreign investment should be a priority for government leaders. Otherwise, the post-mortem of NHR may tell the story of a policy that gave Portugal‘s economy new life, only to have that prosperity cut short prematurely.

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