NHR Termination Back on the Table As President Invokes Questionable Constitutional Maneuver

Madalena Monteiro

As readers of IMI have become accustomed to this year, when it comes to Portuguese political decisions on tax and immigration policy, nothing is final until it is final.

Yesterday, President Marcelo Rebelo de Sousa announced the dissolution of the Assembly of the Republic and called elections for March 10, 2024, following the dismissal of Antonio Costa from the position of Prime Minister following a corruption scandal associated with contracts concluded in the context of hydrogen and lithium exploration.

At that moment, it was clear to everyone (including myself) that the government’s resignation represented the expiry of the state budget law for 2024, which in turn would have forestalled the extinction of the NHR regime. This was because Article 167 of the constitution effectively states that any legislative proposals tabled by a sitting government are rendered null and void if that government resigns or falls.

However, since then, the UTAO (Technical Budget Support Unit) has issued a technical note clarifying that since the budget law was already approved in “the generality” (na generalidade), the act in question no longer has the nature of a proposed law for the purposes of applying article 167 of the Constitution.

Instead, the UTAO says, the bill has already taken on the nature of a Decree of the Assembly of the Republic, which implies continuity of the legislative process. Consequently, a final global vote on the state budget law for 2024 (which includes the NHR termination proposal) will now be subject to a vote after all, on November 29th.

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For Portugal, a great deal more than the NHR regime is at stake. If the law approving the State Budget were not to be approved, Portugal would immediately lose access to European funds from the Recovery and Resilience Plan (the so-called European “bazooka”).

Although several relevant constitutionalists have spoken out about the unconstitutionality of this understanding, it appears President Marcelo Rebelo de Sousa prefers to adopt this constitutional maneuver that allows the maintenance of the 2024 State Budget Law proposal, relying on the understanding of UTAO, forcing a vote on the bill on November 29th to avoid the loss of EU funds.

The outcome of that vote is highly unpredictable, given the deep divisions within the Socialist Party this week’s revelations. While the Socialist Party has a clear parliamentary majority, Pedro Nuno Santos (tipped by many as the most likely Socialist to replace Costa as Prime Minister) has departed from the party line in recent weeks. Considering the gravity of the corruption scandal in which Costa’s faction of the party is embroiled, it is possible that certain elements of the Socialist Party will try to distance themselves from that ignominy by calling for changes to the State Budget Law.

Moreover, considering the uncertainty around who exactly will govern Portugal next, the various parties may enter into a “pact regime” so that the new government, whoever ends up composing after the election in March, can get behind the budget law. A state budget law is typically the most important bill a government tables, and it would not be reasonable to make a new Social Democrat government implement a state budget introduced by a former Socialist government.

Several highly reputed constitutionalists have said the President’s move is constitutionally fraudulent. I personally think his actions represent a flagrant disregard for the Constitution by someone whose duty it is to defend it.

It places the country in a highly complex situation: We have a government involved in a corruption scandal and a prime minister who has resigned while under investigation by the Supreme Court. Nonetheless, the government will carry on with full functionality for several more months as though nothing had happened. At a time when we should be celebrating 50 years of democratic rule, our institutions have fallen into total discredit, not only in the eyes of the Portuguese but also in those of the international community.

The various parliamentary commissions are still discussing the wording of the bill. By the time we get to the final vote on November 29th, the bill will either still include provisions to end the NHR or not.

So don’t open the champagne yet.

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