What to be afraid of when France's public debt is not the brightest and that the IMF recently expressed concern about the record level of global debt ... Portugal is expected to tax wealthy property owners in the coming months to finance pensions.
From there to the French government's attempt to apply such types of measures in France, there is perhaps only one step .... that perhaps only a presidential election could prevent our governors from crossing, at first.
According to the draft budget submitted Friday evening by the Portuguese socialist government to Parliament, Portugal will levy a tax on the real estate assets of wealthy taxpayers, with a tax value exceeding 600,000 euros.
Earlier in the day, Socialist Prime Minister Antonio Costa announced that the tax will be used to finance Portugal's pension system. "The tax on large real estate holdings will be used to strengthen the sustainability of our social security system and contribute to tax justice" he said in front of the MPs.
According to the draft budget, if the tax value of an owner's total real estate assets exceeds 600,000 euros, a rate of 0.3% will be levied on the portion above this threshold. The estimated revenue from this tax, estimated at 160 million euros per year, "will make it possible toincrease pensions " Catarina Martins, leader of the Left Bloc, one of the government's allies, said.
This draft budget aims above all to reassure Brussels and the markets about Portugal's determination to curb deficits, while at the same time sparing its anti-austerity left-wing allies. "It is a responsible budget, marked by a consolidation of accounts that is combined with social orientations," summarized Finance Minister Mario Centeno, adding that he expected a "positive evaluation" from thea European Commission. Let's not forget that last July, Portugal won the Euro 2016 .... but had been declared in budgetary slippage by the latter.
But as expected, this project, which has been under consideration since September, has provoked the anger of the real estate sector. Luis Lima, president of the Portuguese Association of Real Estate Agents, believes that "this tax will have devastating effects on the sector and will undermine the confidence of foreign investors.
However, they are currently pouring in in Portugal to buy houses and apartments. The most important foreign buyers are the French (27%), including many retirees attracted by tax exemptions, followed by the British (18%) and Chinese (13%). Since 2013, Portugal has in fact implemented a near-total income tax exemption for ten years for expatriates moving to the country. The tax advantage introduced in 2013 is based on the "non-habitual resident status", which implies not having resided in Portugal for tax purposes for the last five years, without any age or nationality requirements. This makes it possible to attract both retirees, with high purchasing power, and professionals from high value-added sectors.
In 2015, the top three countries in terms of new residents were Great Britain (23%), China (18%) and France (16%). In the first half of 2016, the French came out on top, accounting for 25.5% of new arrivals, according to l'Apemip.
"This is an unprecedented tax attack on the real estate sector" while "the market was growing, attracting more and more foreign investment," said the Association of Owners of Lisbon (ALP). It should be noted that at present, there are about a quarter of foreign buyers in the Portuguese real estate.
However, the 600,000 euro threshold will spare most of the beneficiaries of "gold" visas, residence permits granted to non-European investors entering the Schengen area through this method.
In order to attract investment, Portugal has been granting these visas since the end of 2012 to applicants willing to pay at least 500,000 euros for a property purchase, invest at least one million euros or create ten jobs. In the space of 4 years, 3888 such visas have been granted, corresponding to an investment of 2.37 billion euros. Among them, mostly Chinese, but also Brazilians and Russians.
Taking a double whammy on the real estate sector, the Portuguese government has also decided to increase the level of taxation on tourist rentals, which previously enjoyed lower rates than long-term rentals. The move comes as the number of tourists staying in Lisbon via Airbnb, a home-to-home rental platform, doubled in 2015, from 213,000 to 433,000 people in a single year.
Sources: AFP, La Tribune, Apemip