By Moustafa Daly
Portugal’s prime minister, António Costa, announced his resignation on Nov. 7. In position since 2015, Costa’s departure comes after prosecutors issued arrest warrants for five individuals including his chief of staff for suspected corruption in awarding government concessions for lithium mines and hydrogen production.
Although Costa is not named as a suspect in the inquiry, according to a televised speech, he sees it as grounds for resignation.
“The dignity of the prime minister’s office is not compatible with any suspicion on his integrity, good conduct, and even less so with the suspicion that any criminal acts were committed,” said Costa while firmly reiterating his innocence.
During his last year in office, Costa led his Socialist Party to vote for restricting the country’s golden visa program by scrapping the popular real estate option to stabilize property prices. More recently, he announced his government’s plans to end the Non-habitual Residence (NHR) tax regime, which gives foreign residents reduced tax rates for their first 10 years in Portugal.
Portugal’s NHR tax regime might survive 2024
With the PM’s sudden resignation, the NHR tax regime could survive another year.
“There is a good chance the NHR will continue in 2024; however, it is not yet certain,” says Raquel de Matos Esteves, partner at RME Legal.
Whether it makes it or otherwise now depends on what President Marcelo Rebelo de Sousa decides to do after accepting the resignation.
“The President of the Republic will have the option to call for elections but could also choose to invite the Socialist Party to form a new government, in which case it's likely that the state budget proposal will still be voted on and approved by the absolute majority of the Socialist Party,” explains Esteves. “He could decide on the resignation of the government after the final voting of the state budget law.”
Portugal’s state budget law, which includes the provisions related to ending NHR, can only be dropped after the government’s resignation, adds Esteves.
Though he belongs to the opposition Social Democratic Party, the president’s next move remains unpredictable.
“The president has focused on preserving stability and has been widely criticized for aligning too closely with the [ruling] Socialist Party,” she says. “In my opinion, it is possible that the president may decide to get the state budget approved [hence keeping NHR proposal], depending largely on what he hears from the political parties, if they can provide assurances of presenting quick alternatives and a new state budget proposal promptly.”
A final decision, the attorney adds, will be announced by the president on Thursday after meeting with parties on Wednesday.
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