Portugal’s non-habitual resident tax break cost state €1.7bn in 2024

Portugal’s non-habitual resident tax regime generated a tax expenditure of €1.741 billion in 2024, almost triple the €619.7 million recorded in 2019, according to an audit by the Inspectorate-General of Finance (IGF). The findings highlight the fiscal cost of one of Portugal’s best-known tax incentive schemes and raise questions about how it has been monitored.

The audit, approved by Secretary of State for Tax Affairs Cláudia Reis Duarte on April 29, 2026, said the increase tracked a sharp rise in beneficiaries. The number of registered non-habitual residents rose from 41,229 in 2019 to 128,958 in 2024. The IGF said the regime’s tax cost kept rising even after the government ended it for new applicants under the 2024 state budget, because it remains in force for existing beneficiaries and for taxpayers covered by a transitional arrangement.

Created in 2009, the regime offered a more favourable tax framework for 10 years to attract qualified professionals, foreign investors and pensioners, including a 20% personal income tax rate for certain high value-added activities and exemptions on some foreign-source income.

The IGF said the scheme also led to “a relevant increase in tax revenue”, with revenue linked to these taxpayers rising from €275.27 million in 2019 to €788.62 million in 2023, but added there was no consolidated assessment comparing the tax cost of the regime with the revenue it generated.

The audit also identified weaknesses in tax authority controls. According to the IGF, existing checks do not adequately reduce the risk of the status being granted improperly, particularly in verifying whether applicants had been tax resident in Portugal during the previous five years. It flagged 254 cases involving 71 taxpayers with signs of possible non-compliance, and also pointed to broad definitions for eligible high value-added activities and gaps in coordination with other public bodies under the transitional regime.

The IGF recommended that the Tax and Customs Authority adopt a specific control and risk-management strategy for these tax regimes, strengthen validation procedures and carry out a deeper assessment of their economic and fiscal effects. The tax authority accepted the recommendations and said work is already under way to implement some of the proposed measures, according to the report.

Originally published at Eco.pt