The non-habitual tax resident (NHR) is a tax regime created to improve Portuguese international competitiveness. This regime targets non-resident individuals who are likely to establish a permanent or a temporary residence in Portugal.

The NHR regime establishes, under certain conditions, IRS exemptions on foreign source income, as well as a limited 20% taxation of income from employment and independent personal services, in both cases if deriving from listed high value-added activities. Entrants in the regime since 1 April 2020 are liable to a 10% tax rate on pension income, instead of the previous exemption.

• Foreign-sourced passive income (interest, dividends, certain royalties, other income from capital, capital gains and income from immovable property) derived by NHR is exempt (without progression except in the case of capital gains on real estate) in Portugal, provided that it is potentially liable to taxation in the source State (i) under the rules of an existing Double Tax Treaty (DTT) or (ii) in the absence thereof, under the rules of the OECD Model Tax Convention if such income is not deemed to arise from a State, region or territory included in the Portuguese tax havens’ blacklist nor from a Portuguese source under the IRS Code territoriality rules.
• Foreign-sourced income from pensions is liable to a 10% rate for Portuguese tax residents as from 1 April 2020. Before that, pensions were IRS exempt (with progression) if not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
• Foreign-sourced employment income is IRS exempt (with progression), provided that it is effectively taxed in the source State (i) under the rules of a DTT or in, the absence thereof, (ii) of the OECD Model Tax Convention, as long as such income is not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
• Foreign-sourced employment income is IRS exempt (without progression) in Portugal, provided that it is income derived from high value-added activities of a scientific, artistic or technical nature and it is effectively taxed in the source State (i) under the rules of a DTT or in, the absence thereof, (ii) of the OECD Model Tax Convention, as long as such income is not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
• Foreign-sourced income from independent personal services is IRS exempt (without progression) in Portugal, provided that it derives from high value-added activities of a scientific, artistic or technical nature, as defined by Ministerial Order, and is potentially liable to taxation in the source State (i) under the rules of an existing DTT or (ii) in the absence thereof, under the rules of the OECD Model Tax Convention, if such income is not deemed to arise from a State, region or territory included in the Portuguese tax havens’ blacklist nor from a Portuguese source under the IRS Code territoriality rules.

Income deriving from employment or independent personal services of a domestic or foreign source but not qualifying for the mentioned exemptions will be liable to autonomous taxation at a special 20% flat rate and not to the general and progressive IRS rates (currently of up to 53% for yearly taxable income above € 250.000), provided that it derives from high value-added activities of a scientific, artistic or technical nature. Entrants in the regime that became Portuguese tax resident as from 1 April 2020 are liable to a 10% tax rate on pension income.

An amendment to the list of High Value-Added Activities, applicable from 1 January 2020 onwards, was published on 23 July 2019 (Ministerial Order nr. 230/2019). This was an in-depth revision of the list of activities that has been in effect since 2010, in order to align them with the needs of the labour market. Nevertheless, the most recent Ministerial Order encompasses a wide range of professions and activities according to the Portuguese Classification of Professions (PCP), which allows for more immediate clarification of interpretive doubts regarding the scope and range of each of the activities listed in the table.
This new list entered into force on 1 January 2020 and applies to individuals registered under the NHR regime from 2020 onwards. For NHR registered as such with effect up to 31 December 2019, even if their registration took place in 2020, the old list still applies. However, these “old entrants” can also opt to benefit from the new one.

I — Professional activities (PCP codes):

112 — General manager and executive manager

12 — Manager of administrative and commercial services (v.g., financial, human resources, and strategy)

13 — Production and specialized services’ managers (v.g., farming, livestock, forestry, fishery, mining industry, transports and others

14 — Managers of hotel business, restaurants/catering, trade and other services

21 — Experts in physics, mathematics, engineering and similar technics (v.g., chemistry, statistics, urban planning, and others)

221 — Doctors (v.g., generalists and experts)

2261 — Dentists and stomatologists

231 — University and higher education professors

25 — IT and communication experts (v.g., software apps, web, etc.)

264 — Authors, journalists and linguists

265 — Creative artists and performing artists (v.g., musicians, cinema producers, actors, dancers, etc.)

31 — Technicians as well as science and engineering professions of intermediate level (v.g., mining industry, life sciences and others)

35 — Technicians of information and communication technologies (v.g., telecommunications and radio)

61 — Farmers and market-oriented skilled agriculture and livestock production workers

62 — Market-oriented skilled forestry, fishery and hunting workers

7 — Skilled industry, construction and crafts workers, including skilled workers of metalwork, food processing, woodwork, clothing, handicraft, printing, manufacture of precision instruments, jewelers, artisans, electricians and electronics professionals

8 — Facility and machinery operators and assembly workers, namely operators of fixed installations and machinery

Professionals' workers included in the above-mentioned professional activities shall possess at least, a level 4 of the European Qualifications Framework or Level 35 of International Standard Classification of Education, or five years of duly proven professional experience.

II — Other professional activities:

Directors and managers of companies carrying out productive investment activities may also benefit to the extent that they are engaged in the projects for which contractual tax benefits have been granted under the Investment Taxation Code (Código Fiscal do Investimento) enacted by Decree-Law nr. 162/2014, of 31 October 2014.

Please read here our November 2019 update on this matter.

Old list of Value-Added Activities of a Scientific, Artistic or Technical Nature (Ministerial Order nr. 12/2010, of 7 January)

1 - Architects, engineers and similar technicians:

101 – Architects

102 – Engineers

103 – Geologists

2 - Visual artists, actors and musicians:

201 – Theater, ballet, film, radio and television Artists

202 – Singers

203 – Sculptors

204 – Musicians

205 – Painters

3 – Auditors:

301 – Auditors

302 –Tax Consultants

4 - Doctors and dentists:

401 – Dentists

402 – Analyst Doctors

403 – Surgeons

404 – Board doctors in ships

405 – General Practitioners

406 – Dentists

407 – Dentist Doctors

408 – Physiatrists

409 – Gastroenterologists

410 – Ophthalmologists

411 – Orthopedists

412 – Otorhinolaryngologists

413 – Paediatricians

404 – Radiologists

405 – Doctors in other specialties

5 - Teachers:

501 – University professors

6 - Psychologists:

601 – Psychologists

7 - Professional services, technicians and similar:

701 – Archaeologists

702 – Biologists and experts in life sciences

703 – Computer Programmers

704 – Software consultancy and activities related to information technology and information technology

705 – Computer programming activities

706 – Computer consultancy activities

707 – Management and operation of computer equipment

708 – Activities of information services

709 – Activities of data processing, hosting information and related activities/Web portals

710 – Activities of data processing, hosting information and related activities

711 – Other information service activities

712 – Activities of news agencies

713 – Other information service activities

714 – Scientific research and development

715 – Research and development of science physical and natural

716 – Research and development in biotechnology

717 – Designers

8 - Investors, administrators and managers:

801 – Investors, administrators and managers of companies promoting productive investment, if allocated to eligible projects under tax benefits contracts awarded under the Tax Code for Investment, approved by Decree-Law nr. 249/2009, of 23 September

802 – Senior employees of companies

Individuals who become resident for tax purposes in Portugal without having been so in the previous five years.

• Staying for more than 183 days in the Portuguese territory, whether these days are consecutive or not, in any 12-month period beginning or ending in a given tax year;
• If staying for a shorter period, having in the Portuguese territory, on any day of the period referred above, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode;
• Being, on December 31st, a crew member of a ship or aircraft at the service of an entity with residence, head office or effective management in Portugal.

Registering as a tax resident in Portugal is a requirement to obtain the non-habitual resident status, which means that those wishing to apply for the regime generally must:

i. register as non-resident taxpayers;

ii. obtain residence permits (for non-EU nationals) and residence certificates (for EU nationals);

iii. register as tax residents; and

iv. only then apply for the non-habitual resident status.

An application must be submitted until March 31st of the tax year following that in which Portuguese tax residence is acquired. From 2 August 2016 onwards, the applications must be submitted on the tax authorities’ website. Moreover, individuals must submit a statement whereby they solemnly declare that they have not fulfilled the criteria necessary for being considered a Portuguese tax resident during the preceding five years.

Non-habitual resident individuals may enjoy such status for a ten-year period, after which they will be taxed under the standard IRS regime.

After obtaining the non-habitual resident status it will be necessary to file annual tax returns in Portugal, stating the worldwide income and expenses, for which adequate documentation keeping is required.

The NHR status is granted for a ten-year period. The particular features of the NHR regime may always be amended by law, for better or for worse, even for those who have been granted NHR status prior to the enactment of any change (although in such cases the degree of change to the regime which is admissible under Portuguese constitutional law is very debatable).
The State Budget Law for 2020 introduced a 10% tax rate on pension income for new entrants in the regime that became Portuguese tax resident as from 1 April 2020. Old entrants into the NHR regime (those that became Portuguese tax residents before 1 April 2020) were grandfathered from the changes promoted by the State Budget Law for 2020 and remain in the old regime (although, in practice, they have an annual opting out towards the new regime). This is a very important precedent that shows the political willingness to safeguard the legitimate expectations of taxpayers. Indeed, those that entered the regime prior to the State Budget Law for 2020 changes kept and will keep the previous regime until the end of their 10-year tax benefit period.
This regime was implemented in 2009 by a Socialist (center-left wing) government and has remained stable since then. The current Socialist Government (with parliamentary majority until October 2026), the previous Socialist Government of 2015-2019 and the previous 2011-2015 government coalition of Social Democrats party and Christian Democrat / People’s party (center-right wing) have not materially changed the regime. The general perception is of its acceptance by the community in general and by the main political parties. The only relevant adverse change to the regime, prior to 2020, was the enforcement in 2011 and from 2013 to 2017 of a 3,5% surcharge to employment or independent personal services income deriving from high value added activities of a scientific, artistic or technical nature obtained by NHR residents liable to autonomous taxation at a special 20% flat rate.

A new change to the NHR regime could happen, but it is not likely, as the regime was introduced in 2009 by a government of the same center-left wing party (“Partido Socialista”) as the present government, which has parliamentary majority until October 2026. Additionally, there is currently no significant public debate or controversy surrounding the NHR regime.

In any case, if such change happens:

i. Even if NHR status is abolished, it cannot be taken away from those that already have it at the time the change is approved;

ii. Although the NHR status cannot be taken away, the regime could be made less attractive (reducing the scope of the exemptions, for instance) even for those that have obtained it in the past. To what extent such change could be made is very debatable under Portuguese administrative and constitutional law. Some changes would always be admissible, but in principle a change that would make the NHR regime purely nominal (making NHR and normal residents taxed in the same way or with only very minor differences) should not be allowed. Assessing the degree of change that is allowed is very difficult.

Firstly, the likelihood of a unilateral termination of an existing DTT is very reduced. A renegotiation of DTTs between Portugal and other States is currently an issue with two Nordic countries, and is driven by the double non-taxation of private pensions allowed by the combination of the NHR regime with DTTs following the OECD Model Tax Convention.
However, recently, Finland and Sweden terminated the DTT with Portugal. Its application ceased since the start of 2019 and 2022, respectively. There is no longer a restriction on these countries’ right to tax private pensions received in those countries by NHR. These developments motivated Portugal to unilaterally change its domestic NHR regime in 2020, starting to impose tax on foreign-sourced pension income for entrants into it that became Portuguese tax resident as from 1 April 2020. Currently, no other States have publicly signaled a will to revise their DTTs with Portugal due to the NHR regime but we are aware that some negotiations in this regard are taking place with France and Germany.

As explained in FAQ #7 above there is more than one way to acquire Portuguese tax residence. The 184-day rule is not mandatory as long as one has, in the Portuguese territory, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode. The Portuguese tax residence, in principle, will not be challenged by the Portuguese Tax Authorities. However, it could be challenged by an income source State, especially if one spends time in that State. In this regard, a number of precautions are advisable: a) keeping a calendar that tracks one’s days of stay in Portugal and in other countries; b) avoiding short-term rentals and frequent address changes within the Portuguese territory from the moment one becomes a tax resident herein; c) ask for invoices with the Portuguese tax number (NIF) on a recurring basis when one acquires products/services in Portugal. The latter will allow the individual (i) to better prove his/her effective presence in Portugal, if challenged, (ii) to benefit from certain deductions on the Portuguese tax assessment, if he/she has taxable income at standard tax rates, and (iii) also make him/her eligible for a State lottery!

In November 2015, the Socialist party, with the parliamentary support of three far-left parties (the Left Block, the Communist and the Green parties) formed a new government. The Socialist party proposed in its electoral program the reintroduction of inheritance taxation between spouses and direct line descendants for “high value” estates (in principle those with a taxable value above 1 million Euros, with a rate of 28% applying to the surplus), but “taking into account the need to avoid phenomena of multiple inheritance taxation”. It was therefore possible that a mild form of inheritance taxation might be re-introduced in Portugal, but it is not clear how it would target NHR with non-Portuguese assets, due to the caveat in commas.

Currently, inheritance between direct family is tax exempt, assets outside Portugal are not taxable and when tax is due on Portuguese assets it is so at a low rate - 10%. The Government Program of 2015 intended to tax those exempt cases (most notably those of inheritances between direct family). However, the relevant aspects remained fully uncertain (for instance, if foreign assets would be taxed or not, if donations would be taxed in the same way as inheritances or not, how should the € 1.000.000 be valued, etc.).

The 2015-2019 legislature went by and the Government apparently gave up on the idea of amending inheritance taxation. The Socialist party electoral program of 2019 and 2022 and the Socialist government programs for the legislatures of 2019-2023 and 2022-2026 have no mention whatsoever to changes in inheritance taxation. Nevertheless, developments on this issue should be monitored.