Welcome to Portugal’s new ‘golden passport’ law – Abreu Advogados

The Portuguese economy is facing difficulties derived from its consecutive and excessive budgetary deficits and the constraints imposed by the bailout from the IMF, EU Commission and European Central Bank (ECB).

The Portuguese economy is facing difficulties derived from its consecutive and excessive budgetary deficits and the constraints imposed by the bailout from the IMF, EU Commission and European Central Bank (ECB).
The Portuguese Government has a limited range of measures that can be taken in order to overturn the recessive economic environment, attract foreign investment into the country and reduce unemployment.

A new legislation that amends the entrance, residency, departure and expulsion of foreign citizens is about to be introduced. This law amends more than 50 articles of Law No. 23/2007, July 4th, 2007, and among its major innovations introduces the so called ‘golden passport’.

The ‘golden passport’
This measure is aimed at foreigners that develop (directly or through a company) an investment activity in Portugal during a minimum period of five years.

For that purpose, the amended law defines the relevant activities as follows: the transfer of funds in the minimum amount of €1m or the creation of at least 30 new jobs; or the acquisition of properties in the minimum amount of €500,000.

According to this new regime, a light procedure for obtaining a residency card in Portugal is applicable to foreigners who will come and invest in Portugal. This new legislation aims to attract highnetworth individuals and investment into Portugal.

A new beginning for the non-habitual tax resident status
We believe that the ‘golden passport’ is a very positive measure that should be applauded, but we also encourage the Portuguese Government to take this opportunity and instruct the Tax Administration to coherently apply its tax regime of the Portuguese non-habitual resident. This regime was introduced in the Tax Investment Code approved by Decree-Law No. 249/2009, September 23rd, 2009. It allows investors, who have not been taxed in Portugal over the past five years, to register before the Portuguese Tax Administration and obtain the status of non-habitual resident for a renewable 10year period.

At that time, the idea was to attract individuals who would develop high value-added activities in Portugal in accordance with a list approved by Implementing Order No. 12/2010, January 7th, 2010. These individuals would be taxed at a flat rate of 20 percent on income of categories A and B (employment related and self-employment related income) instead of the 49 percent individual income tax in force in 2012 for Portuguese residents with an income higher than €153,300.00. In addition, any foreign sourced income earned by non-habitual tax residents will, subject to certain conditions, be exempted from taxation in Portugal.

In practice, over the past two years, the Portuguese Tax Administration has been making a very strict and limited interpretation of the law currently in force and denying most of the applications that are being made for the concession of the non-habitual resident tax status, even in cases where such applications are legally compliant. This position undermines the confidence of foreign investors in the country and jeopardises the efforts of the Portuguese Government to attract investment into the country. It is therefore time for the Portuguese Tax Administration to effectively apply the law and grant this favourable tax regime every time the respective applicant meets the legal conditions.

Pedro Pais de Almeida is a Partner with Abreu Advogados and co-responsible for the firm’s Tax Law Practice Area. He can be contacted at ppa@abreuadvogados.com

Welcome to Portugal’s new ‘golden passport’ law – Abreu Advogados

Garcia-Sicilia

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