NHR to Survive At Least Another Year as Portugal Prime Minister Resigns Over Corruption Scandal

Portuguese Prime Minister António Costa has just resigned following police raids on his official residence as part of a corruption probe. One welcome consequence of the government’s fall is that the legislative initiative to terminate the Non-Habitual Resident (NHR) preferential tax regime has now fallen flat and will not pass this year.

Police today raided the PM’s home and arrested his Chief of Staff. The Prime Minister himself is now under investigation, according to the country’s Attorney general. The corruption case, which reportedly involves several senior government figures, relates to lithium mining concessions and a hydrogen energy project in the country’s north. The Minister of Infrastructure is also a formal suspect.

President Marcelo Rebelo de Sousa is expected to accept the PM’s resignation. The PM will nonetheless remain in charge until a new government has been formed, explains Lisbon-based lawyer Madalena Monteiro of NSM Advogados.

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“The current annual state budget that is still in the approval stage [and which included provisions for terminating the NHR regime] will now not be submitted to parliament for a vote because it was an initiative of the elected government,” says Monteiro. “Under article 167 of the Portuguese constitution, the annual budget proposal is rendered null and void if the elected government that presented it resigns. A new government will have to submit a new state budget for 2024, which will not happen before the end of this year. Consequently, the end of the NHR is no longer on the table.”

While a new government could certainly make a similar proposal to end the NHR,

New elections, says Porto-based lawyer Pedro Catão Pinheiro of Next Lawyers Gali Macedo & Associados, are likely to take place in January.

“The country is unlikely to get back on track until April. So, at this point, I feel confident in saying that the NHR regime will survive until at least the end of 2024.”

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