B Law & Tax
30 November 2023

Tax Advisor: Possible Exodus of the Wealthy to Portugal Following the Approval of the Wealth Tax

The recent approval of the wealth tax by the Constitutional Court (TC) on November 7th has led to an increase in inquiries from wealthy investors at law firms seeking to change their tax residency to Portugal.

The neighboring country has extended its special tax regime for non-habitual residents, similar to the Spanish Beckham Law, with the aim of attracting large fortunes, despite the real estate crisis that led to announcing the elimination of this regime in October.

 

Considerations for Changing Residency: Perspectives of Wealthy Taxpayers in Spain and the Portuguese Tax Strategy

Clients are seriously considering the possibility of changing their effective residence, with many planning to make concrete decisions by the first quarter of 2024.

Their main concern revolves around the political situation and the perceived tax burden, which is considered disproportionate compared to other countries. While some inquiries involve Spanish citizens, the majority come from foreigners, especially from Latin America, who have already relocated their residence to Spain in the past.

Portugal’s strategy to extend its non-habitual resident regime is seen as a tactic to attract wealthy taxpayers currently in Spain, but there are potential drawbacks, such as the “exit tax.” This Portuguese regime, along with the Golden Visa, offers lower tax rates, tax exemptions, and benefits in inheritance and donations, with a duration of ten years for those who choose it.

 

Resurgence of Wealth Tax in Spain: Impact on Wealthy Taxpayers and Residence Change Trends

The approval of the wealth tax has led some autonomous communities in Spain to revive the Wealth Tax to offset the decrease in revenue. This change affects wealthy taxpayers who can no longer evade paying taxes on their wealth, either at the regional or national level.

With over 230,000 taxpayers in Spain owning more than two million euros, interest in tax and residency changes is on the rise, especially among those affected by the recent Constitutional Court decision. The average wealth of these individuals amounts to 3.66 million euros, with Madrid being the region with the highest average wealth, reaching 11.6 million euros.

 

 

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