Portuguese tax authorities control 264 “fake” non-habitual residents with huge tax adjustments
Some beneficiaries of the NHR status might be anxious ! Indeed, the Portuguese tax administration carried out 264 inspections of beneficiaries of the regime of non-habitual residents (NHR), which led to tax adjustments and, consequently, an increase in the tax payable. Some beneficiaries played with fire by not fulfilling their part of the contract. In order to be able to continue to benefit from NHR status, you must reside in Portugal for at least 183 days (6 months) per year. Persons who have been unable to prove their residence in Portugal for at least 6 months have been notified of tax adjustments. Lisbob, the expatriate assistant in Portugal, tells you all about this wave of checks for beneficiaries of NHR status.
Portuguese tax authorities control 264 “fake” non-habitual residents with huge tax adjustments
Fake NHR hunt
The information is included in the opinion of the Portuguese Court of Auditors on the general state account for 2018, which was published recently. However, according to the courts, it was not possible to know the value of these tax adjustments. These inspections of beneficiaries of NHR status took place between 2016 and the end of April 2019 and took place after the General Inspectorate of Finance (IGF) warned against the “need to tighten controls” of the system.
In this 2015 audit (for the period 2012-2014), but which was only made public in January 2019, the IGF wanted to ensure that the taxpayers who benefit from the NHR system "maintain conditions during the period where they benefit. " In other words, the tax administration should take steps to avoid "false" unusual residents. By false NHR the tax authorities mean people who would not stay 6 months a year in Portugal, a condition sine qua none in order to be able to continue to benefit from it.
During the audit, the IGF proposed to simplify access to the system via the financial portal and to "improve access requirements".
This year, the tax authorities have abolished the prior recognition procedure so that non-residents can benefit from the generous IRS regime by simply registering with the Finanças and only providing supporting documents if the tax authorities require it. Thus, it simplified the access to the mode.
The cost of NHR status increased by 26% in 2018
This scheme offers a generous tax rebate to foreigners or emigrants who have professions with high added value or in sectors that have difficulty hiring, regardless of the amount of income earned. For ten years, income earned in Portugal is taxed at a single rate of 20%, regardless of salary. In addition, income earned abroad, such as pensions, is exempt in Portugal. For these reasons, and the high tax expenditures associated with it, this regime is widely criticized.
In 2018, tax exemption for non-usual residents cost state coffers € 548 million, up 115 million (or 26.6%) from the previous year, according to the Court of Auditors. This tax benefit is the one that has the highest cost among all the tax incentives granted last year in Portugal.
To assess this tax expenditure, the court sees the difference between the tax collection of beneficiaries of NHR status and the collection that would result from taking into account all income and applying the required rates to residents. The shortfall was therefore € 548 million in 2018.Since its launch in 2009, the regime for non-habitual residents has exceeded 29,000 beneficiaries.
This status having a duration of 10 years, some people have already lost their right to NHR status. The statistics do not say whether these people remained in Portugal or whether they decided to leave it once the NHR status has ended.