Curated by Daniel Xu
Portugal will sunset a tax policy that began in 2009 to draw professionals to the country and ended, arguably, by exacerbating a housing shortage and perpetrating fiscal injustice.
The Portuguese non-habitual resident (NHR) program offered a reduced income tax rate for 10 years for filers that had been taxpayers outside of Portugal the previous five years. It also provided tax advantages to foreign source income, making the program attractive to digital nomads and retirees.
The reduced NHR tax rate of 20% on income for the newly Portuguese taxpayers was higher than the lowest income tax bracket but lower than all subsequent rates for higher income individuals. The policy led to an influx of high-net-worth individuals—just as planned.
Portuguese residents and those who had lived in the country for longer than the five-year lookback period felt slighted. A housing shortage compounded the problem, as the policy only benefited high earners and enabled them to drive up home prices. The result was an 8.7% and 11.3% year-over-year increase in housing prices for the last quarter in 2022 and first quarter in 2023, respectively.
A tax policy may fail due to unintended consequences. In the NHR case, it failed because it achieved the intended goal too well. The effect of the NHR policy on the Portuguese economy and housing market wasn’t unexpected, but the experience of living through the results made the program politically untenable.
At Bloomberg Tax, we closely monitor such policy experiments and bring you insights from experts who can dissect the complexities and implications of these initiatives.
The Exchange—It’s where great ideas intersect.
—Andrew Leahey
Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social
Federal Insights
The IRS’s temporary pause on processing new employee retention credit claims will allow the agency to conduct audits and give businesses reason to reassess whether they qualify for ERC refunds, says Armanino’s Jenn McCabe.
Documenting good faith efforts at tax compliance can create a strong defense against overzealous criminal tax investigations by the IRS and Justice Department, say Jones Walker’s Mike Magner and Jeff Birdsong.
Certified public accountants Brenda Cannon and Katy Ayer offer a list of pitfalls to avoid for tax practitioners who have started, or who are considering starting, their own firm.
An accountant’s testimony in Donald Trump’s civil fraud trial is evidence that tax professionals have an ethical duty to cross-check and verify the information their clients provide, says Marcum’s Michael Greenwald.
Global Insights
Irwin Mitchell’s Chrissy Leach examines how UK soccer players who move to play in Saudi Arabia can prevent unexpected UK income taxation by ensuring they’re no longer residents of the country.
Both resident and nonresident property owners in France face dramatic increases in property tax, as Dimitar Hadjiveltchev and Guillaume Debiève of CMS France explain.
Jenny Tragner of ForrestBrown considers whether the proposed R&D tax relief single scheme will be a game-changer for the UK’s innovative businesses.
Columnist Corner
The US state sales tax gap is difficult to determine due to incomplete information on businesses’ transactions. In this week’s Technically Speaking, Andrew Leahey writes that adopting uniform digital invoicing could help reduce the gap by preventing businesses from removing data.
Save the Date
Since the US Supreme Court’s decision limiting affirmative action admissions in higher education, there’s been more pushback against diversity, equity, and inclusion programs—including lawsuits against firms over their policies.
Striking the right balance on DEI initiatives can be tricky. Learn how to steer clear of potential conflicts on Oct. 26 at noon ET by joining “How to Navigate the New Challenges of DEI Programs,” part of our free virtual Lunch & Learn series.
We have two experts on DEI efforts who will explain the current landscape and help you create stronger teams and better outcomes through diversity efforts.
Career Moves
Eleven tax attorneys are among 205 attorneys who have been elevated to partner at Kirkland & Ellis.
Emma Clewes has been appointed head of tax advisory at Prime Accountants Group.
Ángel Escalante Carpio has joined CMS Mexico as a partner with his team of five lawyers and a certified public accountant from Escalante y Asociados, a boutique consultancy and litigation firm.
Sue Williamson has joined Dentons as a partner in the tax practice.
Julia Qian Wang has joined Bennett Jones as a partner in Montreal.
Michael A. Goldberg has joined Aird & Berlis as a partner and member of the tax and estates and trusts groups.
Shawn O’Brien has joined McDermott Will & Emery as a partner in the tax practice group in Houston.
Babak Nikravesh has joined Greenberg Traurig from Morrison & Foerster as a shareholder.
Katherine Forster has been appointed to the private client advisory team at Birketts in London.
If you’re changing jobs or being promoted, let us know. You can email your submission to TaxMoves@bloombergindustry.com for consideration.
News Roundup
It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team.
*Note: Your Bloomberg Tax login is required to access Tax News.
- The Australian arm of PricewaterhouseCoopers has pledged to boost its corporate governance controls in response to firm-commissioned reviews faulting its culture for a leak of government tax plans.
- An unusual alliance of tax professionals across the political spectrum is sounding the alarm about how a foreign income tax case on the Supreme Court’s docket not only could upend large swaths of the US tax code but also could reshape Congress’s ability to amend that code.
- Business groups are seeing some flexibility in Canada’s stance on imposing digital services taxes on large corporations, which they say could allow the country to avoid a conflict with global tax reform efforts.
- Bermuda is proposing to enact a 15% corporate income tax that would align with the global minimum tax rules and take effect in 2025.
Tax Journals
Tax Management International Journal
A recent Mexican Tax Court ruling could adversely impact groups with Mexican-sourced technical assistance payments, particularly to US taxpayers recipients, say Armando Lara Yaffar, Michel Sanchez O’Sullivan, and Kimberly Tan Majure of KPMG.
Monique van Herksen of Simmons & Simmons discusses her personal perspectives on the proposed EU Transfer Pricing Directive and what multinational enterprises should focus on to reduce disputes and double taxation resulting from transfer pricing challenges.
Tax Management Memorandum
Prompted by rampant dubious and misguided claims for employee retention credit refunds, the IRS has amped up audits of filings for the credit, warns Caitlin Tharp of Steptoe.
*Note: Your Bloomberg Tax login is required to access Tax Journal articles.
Attention Law Students
Do you have an original take on the law—but you’re not a lawyer yet? Our student writing competition is the perfect opportunity to show off your work.
We invite students to choose an area of law and technology and describe how it might be tested in courts, update past practices, or force a rethinking of the legal landscape.
We’ll publish the winning entry in December, and the student with the winning entry will get a swag bag of Bloomberg Industry Group products.
Our Wish List
It’s the middle of the NFL season, and the NBA’s opening game isn’t far off. For October, we’re calling for article submissions on tax aspects of sports, gaming, and betting. We’d especially welcome analysis on gambling rules and athlete salaries.
If you have an interesting, never-published article for publication, you can contact our Insights team by email at TaxInsights@bloombergindustry.com.
Our Team
We talk about tax a lot. But there’s much more that you might hear us talking about if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.
Watching
Maria Menezes (Practice Lead): “Coco Chanel Unbuttoned,” a documentary charting her rags to riches story, with all the highs and dubious lows!
Reading
Andrew Leahey (Columnist): “The Design of Everyday Things,” a book by cognitive scientist Dan Norman on how the design of an object is the “communication” between that object and the person using it.
Listening
Daniel Xu (Content Editor): Finnish composer Jean Sibelius’ second symphony—I recently joined a community orchestra that will perform the piece in concert.
Stay Connected
Get our newsletter delivered to your inbox each week by heading over to The Exchange and clicking the green “Free Newsletter Signup” box at the top. Follow Bloomberg Tax on X, Facebook, Instagram, LinkedIn, and Threads—and check out Bloomberg Law on TikTok and Reddit. We also have a growing LinkedIn group where our authors, contributors, and readers can share tax-related stories and exchange ideas.
To contact the editors responsible for this story:
Learn more about Bloomberg Tax or Log In to keep reading:
See Breaking News in Context
From research to software to news, find what you need to stay ahead.
Already a subscriber?
Log in to keep reading or access research tools and resources.