Limiting foreign investment is a “gross mistake”

By Kim Schiffmann, in News · 24-01-2020 01:00:00 · 13 Comments

APEMIP has classed as a “gross mistake” the possibility of limiting demand in the real estate sector in the State Budget 2020 (OE2020) with the requirement of 10 percent IRS to foreign retirees who join the Non Habitual Residents tax regime.

According to the president of the Portuguese Association of Real Estate Professionals and Real Estate Companies (APEMIP), Luís Lima, under discussion at the OE2020 will be the Residence Permit for Investment Activities (ARI) and the Tax Regime for Non-Habitual Residents (NHR).
“Although the information conveyed in the media is not concrete, it is now known that the Government appears to be intent on demanding 10 percent IRS from foreign retirees wishing to join the NHR, with a minimum tax of €7,500 per year,” said Luís Lima in a statement.
This is “bad news” for the Portuguese real estate industry, as “giving in to the disgusting demonstrations revealed by other European countries about the programme seems to me to be absurd, especially when in the same field we have countries like Spain, Ireland or Italy, with very similar mechanisms, which will eventually absorb the investment that, with these measures, will no longer enter Portugal,” he says.
For Luis Lima, “it is scandalous” that the government is stopping investment under such programmes that helped rehabilitate city centres, create jobs in the construction and tourism sector and that have set the country on the path of international real estate investing.
“Acting to curb demand is a crime against Portugal and the consequences are not being properly assessed,” warned Lima.
He explains that the housing problem in Portugal today “is not the result of foreign investment, but of decades of ineffectiveness of successive governments that have never bothered with the implementation of a true housing policy.”
“Now that the problem has erupted and its impact is unquestionable, it is important that effective measures be taken to increase supply, not to curb existing demand.”

The signal from abroad “is that the country no longer needs investment, which, as we all know, is not true,” he says.
He continued: “We have a unique opportunity to focus on decentralising investment outside major cities and thus on boosting economic growth in other parts of the country, and we are throwing that opportunity away, which our European ‘competitors’ will certainly take advantage of”.
For Luis Lima, the only alternative to solve the lack of affordable houses is to take an effective position on the part of the Portuguese state, either through central or local power.
The president of the association also argues that “we must think of alternatives in partnership with the private ones, in which the State cedes the right to use land in exchange for the construction of assets that are subsequently sold or leased at controlled prices”, considering that “these actions are urgent”.
As proposed changes to taxation for foreign investors is discussed it has been revealed that foreign investment from private business inflows was up by 9.2 percent in 2019.
Portugal’s minister for economy said that foreign investment contracts secured by its agency for foreign trade and investment, AICEP, reached “a new high” in 2019.
Pedro Siza Vieira was addressing a joint session of the parliamentary committees on budget and finance and on economy, innovation, public works and housing that was considering the draft state budget for 2020, which had its first reading last week.
“We last year achieved the maximum level of foreign direct investment in our country that we have ever had,” the minister told deputies. “Once again foreign investment contracts secured by AICEP reached a new high, that is, private business investment in our country grew 9.2 percent.
“Despite the level of taxation, we are seeing very vigorous paces of investment growth,” he concluded.
Siza Vieira also said that “in the country’s current situation, lowering taxes now would only increase the debt and deficit” and this would flow through into a rise in market interest rates.
The minister was responding to calls from some quarters to reduce the burden of taxation to attract still more investment.
Although the draft budget is the first in Portuguese democracy to foresee a surplus, and the country’s public indebtedness as a share of gross domestic product has been falling for some time, the ratio is seen remaining above 100 percent for several years.



Comments:

Outstanding arguments - all. Just wanted to support the argument on how these proposals will have consequences on Portugal's continued negative population index. This proposal by the Socialists will dry up the foreign investment and halt the economic benefit from affluent pensioners migrating in and Portugal will take three substantial hits. 1. RE agents won't be able to move their properties. 2. The variables that led to the debt related crisis that were showing signs of turning back, begin to flood deeper into debt. 3. Brain-drain of the youth continue to emigrate out and foreign investment dries up leading to an empty country with only the socialists and the abject poor (because those are the only two who believe there are no other options left and they have to stay) as the residents. Try getting your manufacturing, R&D and innovation companies to settle on PT after that happens. Good Luck! Again, from above - the very European countries who are criticizing you to eliminate the NHR tax regime will then entice those same investors elsewhere. In summary - the health of the economy relies on major variables (real estate, investment, and innovation from indigenous youth are all critical support indicators) to help it get out of the hole it's in. Start introducing "take-away's" and watch not only your economy evaporate, but your dreams of recovery and your children's dreams disappear as well.

By Nyles Gregory from USA on 05-02-2020 05:21

I am in the process of buying a property in Portugal but I shall stop and begin to search elsewhere. There is a plethora of properties offered to purchases throughout the world like me.
Please keep me informed on this subject.

By Alex Cameron from UK on 31-01-2020 02:56

Raving and ranting against a perceived "ultra-liberal financial system" and other chimera is besides the point and merely showcases ideological bias in one's education. Look at this objectively. Offering a tax advantage in exchange for investment leads to less tax income for the government and more private investment replacing public expenditure, over time offsetting the tax income loss. It also leads to stronger economic growth. Retiree immigrants not only buy and rent property, they also spend their retirement income in Portugal, resulting in substantial economic advantages to the country, not the least of which is a boost to employment. The impact on housing costs - which is uneven across localities - must be tackled, but historic housing policy negligence or mistakes should not be buried under a solution born more out of envy than out of rational thought. In simple terms: is Portugal keen on slaughtering the goose that lays the golden eggs? Foreigners would like to know, so they can adjust their plans accordingly. When they do, Portugal will be the loser.

By JOHAN TEMMERMAN from Other on 27-01-2020 05:30

Is Portugal a place form Retirement ???.

Although ex U.K. and after 22 years in South Africa I came to Portugal in 2017 for my retirement. As an engineer, having held senior management positions in the U.K until 1995 and South Africa until 2017, which involved direct contact with Japan, Germany, China and Italy. With Portugal being a full member of the European Union, it seemed a compatible country in weather, cost of living and democratic admission for which to retire too. Wrong. What a frustrating and costly disaster it has turn out to be.
From the viewing visit to the payment of my property, to the delivery of the shipping container full of my possessions, I was cheated out of some €4 – 5000.00. These included the estate agent through to the lawyer, the forwarding company and EDP electricity supply, and the list goes on. Apparently, this is a very common practice as my neighbour who move here from Belgium suffered much the same losses and frustrations’.
Unlike practically every other developed county, none of the Portuguese utility and major commercial companies offer an e-mail “Customer Services” address apart from a message box on the Portuguese only web page and or pushing the clients more to a voice call, either are leaving the client without written proof or registration of the quire and complaint. This type of obstruction are a negation of consumer and civil rights in raising a quire or complaint and are especially detrimental to the retirees who do not speak or can communicate in Portuguese. As far as EDP, who are the worst culprits, have an added obstacle in an “All or Nothing” payment system, which in certain circumstance would be seen as Extortion and or Racketeering which blocks clients from a part payment for whatever the reason.
As a country with a declining population, a shrinking DGP, an industrial base that is almost a joke. Considering that retires main objective is a peaceful life style and exercising their spending power, any progressive government would see this as way to boost the economy and as a foundation to develop a better industrial base.
Should you wish and or feel there is a foundation of an article that will awaken those responsible for allowing the county to slide closer to communism and poverty I have plenty of documentary evidence in support of my comments.

By Ian Mackie from Other on 27-01-2020 02:36

As a retiree living in Portugal, I have the choice to choose taxation in the country I left, and compared to the 7500€ ax proposal, I would definitely benefit from doing so. We're not all millionares, you know. Most of us are common people, with some savings we have invested in Portugal. Do you really wish us to leave, or be taxed in another country?

By Jan Wiklund from Algarve on 26-01-2020 03:53

please keep me informed on this topic

By Ronald Albert from USA on 26-01-2020 01:17

For some it is not enough to have a ultraliberal financial system! What they want is full control of the country and its richs! That’s the reason why some countries have basically disappeared but in name! Portugal is close to join that club of non-entities! With a huge public debt, Portugal sovereignty is almost gone and its resources, infrastructure, and patrimony are being sold to the foreign capital and the wealthy for a bargain! Look at the housing market. No native can afford a house anymore in Lisbon, Porto, along the coast or the so called turistic areas. Soon, the Portuguese will have to move back to the mountains to survive like their ancestors, the Lusitanians! Even there they may not be safe as the financial assalt of the “New World Triumvirato” – the USA, EU and China – is relentless!

By Tony Fernandes from Other on 26-01-2020 12:54

Billy Bissett from Porto makes a great observation, he writes,
"Making it harder for landlords to recover their properties can only lead to fewer people wanting to be one, reducing the supply of available rented accommodation and driving up rents. The real victims of Socialist intervention are once again the poor and marginalized, the very people the govt would be seeking to help! Such irony!"
And I say, let the free market of real-estate alone, as it is always the best route to take.
The actions by the Socialist government of Portugal is so very typical of people who want to control all aspects of everybody's life. In the end, everybody loses except the Socialists.
And for those with "silly thought", Portugal will always need investment, whether it is domestic or from foreign sources.
Portugal can be the small shining-gem of Western Europe! Make it happen!

By Marc J. Moniz from USA on 26-01-2020 12:20

Please keep me informed on this topic

By Maxine Borcherding from USA on 25-01-2020 12:37

As a Portuguese citizen and tax payer I have been opposed to this policy from the beginning . It's nothing but tax evasion. It puts Portuguese taxpayers (national and foreigners) in disadvantage. There is no gain for the country, it only helped too create a housing crisis. Yes Portugal needs foreigner investment but not like this.

By Rui Adriano from Algarve on 24-01-2020 08:33

Mr. Lima is spot on, having a minimum tax of EUR 7,500 will drive away all but the wealthiest of foreigners and make it harder for vendors to find a buyer, especially in rural areas where typically it takes a long time to sell a property and where sales are highly dependent on foreigner buyers.
Typical Socialist mentality of punishing the better-off and attempting to blame them for the housing crisis which is actually made worse by govt. intervention itself.

Making it harder for landlords to recover their properties can only lead to fewer people wanting to be one, reducing the supply of available rented accommodation and driving up rents. The real victims of Socialist intervention are once again the poor and marginalised, the very people the govt would be seeking to help! Such irony!

By Billy Bissett from Porto on 24-01-2020 03:20

Please keep me informed on this topic

By Herman JC Paardekooper from Porto on 24-01-2020 01:51

Please keep my informed on this topic

By Herman JC Paardekooper-Dos Santos from Porto on 24-01-2020 01:48
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