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Portugal to introduce tax on real estate fortunes

Portugal will introduce a tax on real estate fortunes in 2017 to help pay for pensions, Socialist Prime Minister Antonio Costa said Friday.

“The taxation of large real estate fortunes will enhance the sustainability of our social security system and contribute to fiscal justice,” he told parliament ahead of the presentation of his government’s draft budget for 2017.

Costa did not give details but Portuguese media said the government will apply a tax of 0.3 percent to owners holding real estate assets worth 600,000 euros ($661,000) or more.

The measure will raise 170 million euros for state coffers, according to the reports.

“The taxation of real estate fortunes will make it possible to raise pensions,” said Catarina Martins, a lawmaker with the far-left Left Block party which backs the minority Socialist government in parliament.

The threshold of 600,000 euros will spare most beneficiaries of the country’s so-called “golden visa” scheme, which has helped fuel real estate to wealthy foreigners from outside the European Union.

Cash-strapped Portugal in October 2012 started offering “golden” visas to non-EU citizens willing to invest 500,000 euros ($550,000) in property, make a capital transfer of one million euros or create 10 jobs.

The Portuguese visas allow foreigners to travel within Europe’s 26-country Schengen free trade zone without restriction.

Portugal has issued nearly 4,000 “golden” visas that have generated investments of 2.37 billion euros since the schemed was launched at the end of 2012, most of them to Chinese, Brazilians and Russians.

Socialist and Left Block lawmakers who prepared the new tax had estimated that a levy on real estate assets worth over 500,000 euros would apply to around 43,000 taxpayers.

The measure will also affect foreign buyers who have flocked to Portugal to take advantage of tax exemptions granted to European retirees who move for the first time to the country.

French nationals account for 27 percent of all foreign real estate buyers, followed by Britons who account for 18 percent.

Costa came to power in November 2015 after his party teamed up with the Communists and Left Block to oust a centre-right administration.

The tiny leftist parties did not formally join the new government, but Costa relies on them for a majority in parliament to pass legislation.