Between 2012 and 2021, the cost of housing increased by 78% in Portugal, compared to 35% in the European Union as a whole, according to a study by the Portuguese Francisco Manuel dos Santos Foundation. (Photo by Patricia DE MELO MOREIRA / AFP)
Portugal will stop providing income tax exemptions to foreigners living part-time in the country from 2024 to fight against a housing affordability crisis, the government has said.
The rules created in 2009 to attract foreign capital to Portugal, badly hit by the 2008 financial crisis, offered a total and later a partial exemption from taxes.
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About 10,000 people mainly from France, the UK and Italy, who settled in Lisbon and the southern Algarve region, benefited from the tax break.
The rules applied to foreigners living at least half the year in Portugal and until 2020 meant their income was exempt, though later it offered a reduced tax rate.
But the measure has contributed to soaring house prices over the last decade, leading Prime Minister Antonio Costa to label the exemption “fiscal injustice” and to end it from next year.
Between 2012 and 2021, housing prices increased by 78 percent in Portugal compared to 35 percent in the European Union as a whole, according to a study by the Francisco Manuel dos Santos foundation.
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Thousands of Portuguese took to the streets of Lisbon and 20 other cities across the country on Saturday to ask for stronger government intervention against unaffordable housing prices.
“Keeping a (tax) measure like this in place would prolong a level of fiscal injustice that is not justified,” Costa said in an interview broadcast Monday on CNN.
“It would be a roundabout way to continue to push up the price of housing,” he added.
On top of ending the exemption, Costa’s government announced a series of other measures including the compulsory rental of apartments that have been vacant for over two years.
Portugal said in February that it was ending its practice of issuing “golden visas” to rich foreign investors.
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Costa’s also decided last week to reduce borrowing rates for two years, potentially helping about a million families.
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