Portugal’s Will-They-Won’t-They Relationship with Foreign Workers: A Twisty Tale

Introduction

Portugal’s relationship with foreign workers has been a topic of much debate and controversy in recent years. The country has been trying to balance its desire to attract skilled foreigners with the concerns of its own citizens. In a surprising turn of events, Portugal has announced plans to reintroduce tax breaks for foreign workers, a move that is expected to attract more skilled professionals to the country.

The Tax Breaks: A Brief History

In October, Portugal scrapped its 20% flat tax rate for high-skilled foreign workers, including doctors, tech workers, and journalists. Instead, these workers would be taxed at the same progressive rate as Portuguese citizens, ranging from 14.5% to 48%. The decision was expected to deter high-skilled foreigners from migrating to Portugal.

However, the government has now decided to reverse this decision and reintroduce the 20% flat tax rate for foreign workers. This means that foreign workers will be taxed at a lower rate than before, but only on their salaries and professional income. Dividends, capital gains, and pensions will not be eligible for the tax break.

The Reasons Behind the U-Turn

The government has cited economic stimulation and attracting skilled workers as the reasons behind the U-turn. Portugal’s Prime Minister, Joaquim Miranda Sarmento, stated that the decision is part of a broader package of legislation aimed at stimulating the economy and attracting more people to the country.

The Migrant Mixup

Portugal has a long history of attracting young, skilled foreigners, particularly since the global financial crisis in 2009. The country has also become a popular destination for "Digital Nomads" who work remotely and want to enjoy a better quality of life.

However, this influx of foreign workers has also raised concerns among Portuguese citizens. Opponents of immigration argue that it drives up the cost of living and makes housing more unaffordable. They also claim that the increased income of foreign workers fuels the housing market, making it even harder for locals to find affordable housing.

The Golden Visa: A Thing of the Past

In a separate move, Portugal has also changed its "Golden Visa" program. This program allowed foreigners to gain residency by buying property worth at least €500,000 ($540,000). However, the government has scrapped this option and now only offers higher investment options to prospective residents.

The Demographic Crisis

Portugal, like many other European countries, is facing a demographic crisis. The country is experiencing a decline in its working-age population, which is expected to have significant implications for its economy and social security system.

Conclusion

Portugal’s will-they-won’t-they relationship with foreign workers has been marked by twists and turns. The reintroduction of tax breaks for foreign workers is a significant move that is expected to attract more skilled professionals to the country. However, the decision has also raised concerns among Portuguese citizens who are worried about the impact on their cost of living and housing affordability.

FAQs

Q: Why has Portugal reintroduced tax breaks for foreign workers?
A: The government has reintroduced tax breaks to attract more skilled workers to the country and stimulate the economy.

Q: What is the 20% flat tax rate for foreign workers?
A: The 20% flat tax rate applies to foreign workers’ salaries and professional income, but not to dividends, capital gains, and pensions.

Q: What are the concerns among Portuguese citizens?
A: Portuguese citizens are concerned about the impact of foreign workers on their cost of living and housing affordability.

Q: What is the demographic crisis facing Portugal?
A: Portugal, like many other European countries, is facing a demographic crisis due to a decline in its working-age population.

Q: What has happened to the "Golden Visa" program?
A: Portugal has scrapped its "Golden Visa" program, which allowed foreigners to gain residency by buying property worth at least €500,000 ($540,000).

Author: fortune.com

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