Take Advantage of This Incredible Tax Program Before It’s Too Late
A couple months back, I was standing in line at Denver International Airport waiting to board a flight to Newark. A bunch of us were huddled near the check-in desk at the gate as the flight’s boarding time approached. The gate agent grabbed the mic and announced, “Sorry, folks. You guys waiting for an upgrade—first-class has now checked in full.”
The collective groan was audible.
I was lucky in that I’d been given an upgrade earlier in the day. Still, I could sympathize with those who missed out. I’ve been among that list of losers more often than not.
All of which probably seems like a fairly odd path into a dispatch on a key reason I chose to move to Portugal earlier this year. But stick with me—the analogy is spot on.
See, I chose Portugal for a very specific reason: the country’s tax regime for immigrants.
Known as the non-habitual resident program, or NHR, the regime provides immigrant workers like me a very sweet set of benefits that radically reduce my tax obligation. At worst, a digital nomad will pay a flat 20% tax rate for 10 years, while a retiree will pay a flat 10% rate for the same 10-year period.
Structured smartly, however, nomads can reduce their Portuguese tax obligation to 0%, which is what I’ve done.
How I’ve done that is irrelevant.
Which is precisely the point of this dispatch.
Not long ago, the Portuguese government picked up a metaphorical mic and announced, “Sorry, folks. You guys waiting to move to Portugal for tax advantages—the NHR program is now dead.”
I was lucky in that I had my Portugues long-term residence papers before the announcement was made, and I’ve already started the NHR application process. So, I’m grandfathered in, and will benefit from reduced taxes for the next decade.
But all over the world… a collective groan emerged as dreams of moving to Portugal for a reduced tax obligation died with that announcement. (See? Spot on analogy!)
All of this has raised a very big question in my mind: If the NHR program had not existed when I first started the process of moving to Portugal earlier this year, would I have still moved?
This has been quite a challenging question to answer.
First, this is a gorgeous country.
My wife Yulia and I love living near the sea again. We’re a seven-minute car ride from a beautiful stretch of beach—that is improbably wild for being so close to city life. And we’ve been driving around the country on long weekends and have found some places that are truly lovely. Places where we’d be happy to buy a house and settle in.
The cost of living is definitely cheaper, even though we picked one of the most expensive cities in the country to call home—Cascais.
All in all, a great place to call home.
But I also know in the back of my mind that a big part of the reason it’s a great place for us to call home is because I’m not paying any taxes for the next decade (I still owe Uncle Sam taxes on my self-employment income).
Without the NHR, I’d be on the hook for Portuguese tax rates. And frankly, Portuguese tax rates are a wee bit usurious. If you make any amount of money at all—and I mean more than $50,000, or about €46,600—you’re looking at tax rates of between 43.5% and 48%. That’s actually a bit worse than Spain, long dogged as a high-tax country. Portugal’s Iberian neighbor imposes rates of between 37% and 45% for that same income bracket.
That doesn’t mean I would have chosen to move to Spain instead. I would not have. The rates are still usurious, plus Spain requires 10 years of residency before you’re eligible for a local passport, which is a European Union passport. Portugal requires just five years—and an EU passport is very important to me.
I might have chosen Greece. The Aegean nation has a digital nomad visa, the benefits of which include a 50% reduction on local tax rates for seven years. So between €50,000 and €100,000 of income means you’re paying 19% or 20%. Above €100,000, you’re paying 22.5%.
That’s not terrible.
But, frankly, I would have more likely just remained in Prague. The tax program there for independent workers meant an effective tax rate of just 7.2%.
So, for anyone looking to move to Europe because they want to sharply reduce their taxes to save more for retirement or to simply live a richer life, I would recommend the Czech Republic these days.
That said, there’s talk that Portugal might not go through with scuttling the NHR program just yet. Its most recent Prime Minister, Antonio Costa, whose administration was hellbent on killing the program, recently resigned amid a corruption scandal, and that administration’s agenda has been scrapped—at least for now.
For those who can move quickly, Portugal remains a fantastic option for a beautiful life at a sharply reduced cost, thanks in part to a fantastic tax-reduction/elimination program. But you gotta move quick on this because the new government that comes in could decide to revive plans to kill off the NHR program.
Better to land your upgrade now, before the gate agent announces that first-class is now full.
