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Budget 2018 - no change envisaged to Non Habitual Resident tax break

6252The Portuguese cabinet has approved the 2018 State Budget Proposal, at the end of a 14-hour meeting on October 12. The Minister of Finance, Mário Centeno, will present the proposal and accompanying report to MPs for discussion and approval.

The final vote on the 2018 State Budget will be on November 28th, giving enough parliamentary time to make additions and amendments if there are any difficult areas but with income tax cuts for low earners and only small increases in other areas, the budget looks to be the mildest for many years.

The 2018 Budget approved draft, based on public debt falling to 126% of GDP, proposes changes in taxes and pensions but does not mention any changes to the Non Habitual Residents scheme that affords significant tax breaks for foreigners moving to Portugal.

An easing of income tax bands and rates are designed to see lower and mid-range earners, benefit from more cash in the pay-packets at the end of the month,

High-earners will continue to pay the 2.5% income tax supplement next year (those who earn between €80,000 and €250,000 per year) and a 5% supplement for those who earn over that.

A single person on €1,000 a month will be €154.28 a year better of - not a large amount but when multiplied by the number of workers in this tax band, the effect on the economy will show through.

Student workers begin to pay income tax but at a low rate of 10%. This covers students under 25 working both during school and during vacations.

The nation’s ever-increasing cadre of pensioners who receive a monthly amount under €588 will get increases of between €6 and €10. The annual pensions update will be announced in mid-2018.

There will be VAT tax breaks on bike and car sharing, and on the purchase of musical instruments.

The tax on beer, spirits and liqueurs will rise again in 2018, up 1.5% on top of this year’s rise of 3%. The sugar tax on soft drinks will rise.

The tax on high-salt foods should come into effect in July, 2018. The agreed threshold is a salt content equal to or greater than one gramme per 100 grammes. This will hit crisps makers with a tax of €0.80 per kilo.

This means the price of cereals and crisps may rise to 65% next year due to the proposed salt tax.

The Government is budgeting for its new tax on foods with high salt content to raise €30 million next year, which is "assigned to the National Health Service for the pursuit of health promotion and disease prevention programmes."

There will be much debate on the budget over the following weeks but the gradual easing of the tax burden is seen as a good thing and part of the Socialist Party's direct taxation plan to hand money back to those who suffered most during the years of austerity.

As for the Non Habitual Residents scheme, it look currently like it may be continuing 'as is' despite some of the northern EU's finance ministers complaining about the inequality of a scheme that allows its retirees to leave a high-tax country for halcyon days of happy retirement in Portugal.