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NHR - Termination and Replacement regimes

The Non-habitual tax resident (NHR) regime has been revoked with effect from January 1, 2024, onwards, as per the Portuguese Budget Law for 2024. 

A grandfathering regime will be applicable as previously described. No further adjustments were introduced to this. 

Concerning the new proposed material incentive regime there were a few adjustments. The ex-residents regime was also clarified. 

  1. KEY TAKEAWAYS 
  1. Individuals becoming tax residents of Portugal until December 31, 2023, can apply for the NHR regime until March 31, 2024.
  1. Individuals who become tax resident of Portugal until December 31, 2024 can apply for the NHR regime until March 31, 2025, provided they meet the grandfathering regime requirements.

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Due to the approved amendments to the grandfathering regime those who are interested to move to Portugal under the NHR regime with effect to 2023 must take immediate action NOW:

 

  1. For Non-EU nationals, initiate of your immigration process still in 2023.

 

  1. For EU nationals (and Iceland, Liechtenstein, Norway, Principality of Andorra and Switzerland nationals):

 

  1. Check the criteria of the grandfathering regime and see what you can still meet (e.g. promise or employment contract, promise or secondment agreement signed by December 31, 2023, whose duties must take place within national territory). Failing those criteria,

 

  1. Obtain (i) now, asap, in December 2023, a Portuguese tax number and an access to the Portuguese tax web portal (even as non-Portuguese tax resident; several online service providers do this for a small fee), (ii) secure permanent housing in Portugal via a documented agreement (namely a standard lease – not a short-term rental – lasting for at least one year) with a starting date in December 2023, (iii) register in person in Portugal in December 2023 at the municipality of chosen residence (some require booking and slots for this are disappearing fast), (iv) request online the tax number status change to that of a Portuguese tax resident still in December 2023 (otherwise more complex procedures to retroact the requested change to 2023 will occur) and (v) apply online for the NHR regime until 30 March 2024.

 

  1. Retired / pensioners and high net worth individuals living from their savings and deriving passive income only do not qualify for the new regime.

 

  1. Due to the significant number of uncertainties surrounding the new material incentive regime (dubious legal wording, need for Tax Authorities’ IT updates and a clarifying Administrative Ruling, need for Ministerial Orders, Government dismissal with limited powers, political climate in Portugal with parliamentary elections in March 2024), we recommend that, if the NHR is beneficial to you, please opt for it and do not “gamble” with this new regime.

 

 

  1. GRANDFATHERING REGIME

 

The existing regime continues to be applicable, until the end of the initial 10-year period set out in the Portuguese Personal Income Tax (IRS) Code, counting from the date on which the taxpayer became resident in Portuguese territory:

a)    To the taxpayer who, on December 31, 2023, is already registered as a non-habitual resident in the taxpayer register;

 

b)    To the taxpayer who, on December 31, 2023, meets the conditions to qualify as a resident for tax purposes in the Portuguese territory;

 

c)    To the taxpayer who becomes a resident for tax purposes by December 31, 2024 and who declares, for the purposes of registering as a non-habitual resident, to have one of the following elements:

 

  1. Promise or employment contract, promise or secondment agreement signed by December 31, 2023, whose duties must take place within national territory; or,
  2. Lease contract or other contract granting the use or possession of property in Portuguese territory concluded until October 10, 2023; or,
  3. Reservation contract or promissory contract for the acquisition of real rights over property in Portuguese territory concluded by October 10, 2023; or,
  4. Enrollment or registration for dependents, at an educational establishment domiciled in Portuguese territory, completed by October 10, 2023; or,
  5. Residence visa or residence permit valid until December 31, 2023; or,
  6. Procedure, initiated by December 31, 2023, of granting a residence visa or residence permit, with the competent entities, in accordance with the current legislation applicable to immigration matters, namely through the request for an appointment or actual appointment for submission of the request for the granting of a residence visa or residence permit or, also, by submitting the request for the granting of a residence visa or residence permit.

 

d)    To the taxpayer who is a member of the household of the taxpayers referred to in the previous paragraphs.

 

For the purposes of the provisions of paragraphs c) and d) of the previous paragraph, the taxpayer must request registration as a non-habitual resident, electronically, on the Portuguese Tax Web Portal, after the act of registration as a resident in Portuguese territory, until March 31of the following year, by reference to the year in which he became resident in that territory.

 

  1. NEW REGIME

 

In what concerns the new proposed material regime we highlight, as of now, the following features:

 

  1. Taxpayers who, by becoming tax residents in 2024 under the terms of paragraphs 1 and 2 of article 16 of the IRS Code, and who have not been resident in Portuguese territory in any of the five previous years, can benefit from a tax incentive regime which allows them to be taxed, at a special rate of 20% on net income of categories A and B (in general; specific distinctions exist which may not allow self-employed income in certain cases) earned within the scope of the specific activities detailed in the regime, for a period of 10 consecutive years from the year of registration as a resident in Portuguese territory, without prejudice to the option for the aggregation of income to the progressive brackets.

 

  1. The right to be taxed under the terms of this regime, in each year of the period referred to, depends on the taxpayer being considered tax resident in Portuguese territory, at any time during that year and continuing to earn, each year, income included in the exercise of one of the specific activities listed.

 

  1. For the purposes of the provisions of the previous paragraph, it is considered that the taxpayer continues to earn income included in one of the activities listed, whenever the beginning of the exercise of the new activity occurs within a maximum period of six months after the end of the activity previously carried out.

 

  1. The taxpayer who has not enjoyed the right to be taxed in one or more years of the 10-year period may resume enjoyment of the regime in any of the remaining years of that period, from the year, including, in which he is once again considered a resident for tax purposes in Portuguese territory and once again receives income from the exercise of one of the activities listed.

 

  1. Cannot benefit from the provisions of this regime the taxpayers which:

 

a)    Benefit or have benefited from the non-habitual resident regime;

 

b)    Have opted for taxation under article 12-A (Program Return / Regressar) of the IRS Code.

 

  1. In cases where registration is carried out outside the period defined in a Ministerial Order, the special taxation takes effect from the year in which registration is carried out and is in force for the remaining legal period provided for.

 

  1. This regime is not applicable to income received in relation to jobs covered by subparagraph c) of paragraph 2 of article 22 of the Investment Tax Code.

 

  1. This new regime provided can only be used once.

 

  1. These listed activities qualify for the regime:

 

  1. Teaching in higher education and scientific research, including scientific employment in entities, structures and networks dedicated to the production, dissemination and transmission of knowledge, integrated into the national science and technology system, as well as jobs and members of governing bodies in entities recognized as technology and innovation centers, within the scope of Decree-Law no. 126-B/2021, of December 31; or

 

  1. Research and development of personnel whose costs are eligible for the purposes of the tax incentive system in research and business development, in accordance with subparagraph b) of paragraph 1 of article 37 of the Investment Tax Code; or

 

  1. Qualified jobs posts and members of Statutory Bodies, in entities that carry out economic activities recognized by the Agency for Investment and Foreign Trade of Portugal, E. P. E. or by IAPMEI - Agency for Competitiveness and Innovation, I.P. as relevant to the national economy, particularly in the context of attracting productive investment, as well as reducing regional asymmetries.

 

  1. These other listed activities, that we view as particularly relevant, also qualify:

 

  1. Highly qualified professions, to be defined by Ministerial Order issued by the members of the Government responsible for the areas of finances and economy. As per a transitional Ministerial Order the current activity list of the NHR applies. Please check FAQ5 on https://www.nonhabitualtaxresident.com/

 

a)I) developed in industrial and service companies, whose main activity corresponds to one of the CAE codes defined in a Ministerial Order and which export at least 50% of their turnover, in the year in which the corresponding duties started or in any of the two previous years.

 

The following activities (as an example) are encompassed as per a transitional Ministerial Order; i) IT consultancy and programming and related activities, ii) Information services activities (ex. data processing and web sites), iii) administrative and support service activities provided to companies.

 

a)II) developed in companies with relevant applications, in the year in which the corresponding duties started or in the five previous ones, which benefit or have benefitted from the ”Regime Fiscal de Apoio ao Investimento” (RFAI), in accordance with chapter III of the Investment Tax Code.

               

The RFAI is a tax benefit that allows companies to deduct from the tax collected a percentage of the investment made in fixed assets (tangible and intangible). However, the percentage allowed to be deducted differs according to the region in which the investment is made (Lisbon and Algarve are less attractive in this regard).

 

  1. Jobs posts and members of statutory bodies in entities certified as start-ups, under the terms of Law no. 21/2023, of May 25.

 

The mentioned legal regime defines the concept of startup as any company that; i) has been in operation for less than 10 years, ii) employs under 250 employees, iii) has an annual turnover of less than €50 million, iv) is not the result of a transformation or split from a large company, and no large company holds a direct or indirect majority stake in its capital, v) has its headquarters or permanent representation office in Portugal, or it employs at least 25 employees in Portugal, and vi) meets one of the following conditions: 1) It is an innovative company with high growth potential, innovative business models, products or services, and falls within the scope of Ordinance 195/2018 of July 5, or has been recognized as suitable for research and development (“R&D”) activities by the Portuguese National Innovation Agency or certified through the recognition process for technology sector companies, except for promotional, intermediation, investment, or real estate development companies; or 2) It has successfully completed at least one round of venture capital financing from a legally qualified venture capital investment entity supervised by the Portuguese Securities Market Commission (CMVM) or a similar international authority, or through equity or mezzanine instruments provided by investors who are not founding shareholders of the company; or 3) It has received investment from Banco Português de Fomento, S. A., or from funds managed by it, or from its subsidiaries, or from one of its equity or mezzanine instruments.

 

  1. Jobs posts or other activities carried out by tax residents in the autonomous regions of the Azores and Madeira, under terms to be defined by regional legislative decree. It is expected that the Madeira regime, which is ruled by the center-right wing party, may be significantly more favorable than the national one, something which was already publicly announced by the head of the Madeira Government. Please be reminded that Madeira also benefits from a Free Zone with a 5% Corporate Income Tax rate regime, among other tax benefits.

 

  1. Additionally, taxpayers who can benefit from this tax incentive regime regarding their Portuguese employment or self-employment activities (income categories A and B), also benefit from a tax exemption (with progression) on several sources of non-Portuguese income: employment/self-employment income, capital income, capital gains, and rental income.

 

Ironically, the new regime set in the Proposal can potentially be more advantageous than the previous one for the qualified and employed groups of people that can benefit from it as foreign income is always exempt for all categories of income (i.e., employment income performed abroad, self-employment income performed abroad, foreign rental income, capital gains in foreign assets), with the exception of pension income, which is never exempt and will be taxed progressively up to a 53% tax rate.

 

As an exception, the law states that qualifying taxpayers that derive foreign income from a non-resident entity without a permanent establishment in Portugal, located in a country, territory, or region subject to a “favorable more advantageous tax regime” (i.e., a blacklisted tax haven) are subject to certain tax rules (for capital income and capital gains) that envisage an autonomous 35% rate.

 

This provision is not fully clear: i) does it disqualify all the non-blacklisted income from taxpayers that have blacklisted income from the benefit regime and taxes all the income of the taxpayers at 35%? ii) does it tax all the blacklisted income from taxpayers at 35%? iii) does it tax only the blacklisted capital income and gains from taxpayers at 35%? This point needs clarification.

 

In any case, the 35% autonomous tax rate conflicts with the Double Taxation Conventions entered into by Portugal with blacklisted tax havens, which force Portugal, at least, to grant a credit for the foreign tax paid. And, in our view, also conflicts with the European Union free movement of capital provisions, which should not enable a tax rate higher than 28%.

 

Since non-blacklisted foreign income is automatically exempt:

 

                                i.            there should no longer be the need to interpret the Double Tax Treaties concluded between Portugal and the source country or the OECD Model Tax Convention and intertwine it with Portuguese source and NHR rules – which could potentially jeopardize the exemption. Portuguese domestic rules on income sourcing will determine what is foreign source income, which is a paradigm shift. This is currently a relevant issue when it comes to capital gains on securities as Portugal usually taxes such income – but with the approved amendments it will no longer do so;

 

                              ii.            the scope of the exempted self-employment income is no longer limited as it does not need to derive from a High Value-Added activity. Of course, the scope of the beneficiaries was also narrowed, but this does not change the fact that any self-employment income earned performed abroad is exempt, while it currently has to derive from a High Value-Added activity to be so;

 

                             iii.            employment income no longer needs to be subject to taxation in the source country in order for the exemption to apply.

 

 

  1. The access to this regime implies previous registration with the Tax Authorities regarding 10. a) above; with Start-up Portugal regarding 10. b) above; with the Agency for Investment and Foreign Trade of Portugal, E. P. E. or IAPMEI - Agency for Competitiveness and Innovation regarding 10. c) above; and with the autonomous regions of the Azores or Madeira regarding 10. d) above.

 

This mandatory registration procedure will be regulated by a Ministerial Order that does not yet exist. Notwithstanding, regarding a) above, the new legal regime expressly states that, until the relevant Ministerial Order is approved, the mandatory registration should be made with the Tax Authorities via the Portuguese Tax Web Portal (“Portal das Finanças”); this will still imply small adjustments to it in order to be put it in practice, but the online registration procedure should be as streamlined as that of the current NHR regime. We are hopeful that this IT issue will be solved in January 2024.

 

  1. Several additional layers of uncertainty exist:

 

    1. The fulfillment of the necessary conditions for the individual to get a special rate of 20% on net income from categories A and B is, in some cases, out of his/her control (e.g. the company exporting at least 50% of the turnover or making certain investments).
    2. Employers will be reluctant to withhold tax at 20% on conditions that are uncertain and so employees may face excess withholdings before they can claim the tax back on their tax returns, after monitoring their employers’ performance / accounts.
    3. The concept of “export” needs to be clarified.
    4. The indirect link to “export” is concerning for companies given EU State Aid and WTO rules on export subsidies.
    5. In some of the listed activities it is doubtful if a self-employed service provider can be encompassed in the regime or if only an employee can.

 

  1. AMENDMENTS TO THE “EX-RESIDENTS” REGIME

 

Currently, there is a tax benefit in place for people who (i) became/become tax resident in Portugal from 2019-2023 (ii) have been previously tax resident in Portugal and left before a certain date; (iii) have not been tax resident in Portugal during the 3 years prior to the new residence; (iv) have their Portuguese tax obligations in good standing and (v) have not applied for the NHR regime.

 

Other current main features are:

 

  • The benefit corresponds to a cut in half of the tax base (not to be confused with tax rates) applicable to all employment and self-employment income earned (from foreign and Portuguese source);
  • No reduced rate as the general and progressive rates apply instead;
  • No need to register for it. One can apply for its benefits while filling the tax return;
  • No need to perform a specific activity to be eligible.

 

The benefit changed with the Budget Law approval: (a) it lasts during a period of 5 years and (b) the 50% reduction of the taxable base is limited to the first € 250,000 of income from employment and self-employment income. It is still necessary to have the Portuguese tax obligations in good standing and not apply for the NHR. A Parliamentary amendment clarified that it is still necessary to have been resident in Portugal before; on the other hand, the applicant must not have been resident in Portugal during the 5 years prior to entry into this regime.

 

The Proposal foresees that the regime will only apply for those who move until the end of 2026.

 

With this being said, the “ex-residents” regime may be a viable option for newcomers obtaining employment or self-employment income either abroad or in Portugal.

 



If you are still interested in the NHR regime please scroll down below.




RPBA

is pleased to present this microsite on Residence Planning Services, one of our niche practice areas.
RPBA is deeply involved in residence planning (in particular through the Portuguese non-habitual tax resident (NHR) and golden visa regimes or through similar foreign regimes). We frequently assist wealthy foreign individuals moving to Portugal and, likewise, Portuguese nationals moving abroad. We also help them optimize their private wealth or income. 
Due to the increasing demand for these services RPBA felt the need to create a microsite with specific materials on this subject.
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NHR Case-Studies

FAQ on NHR Regime

This section answers the most frequently asked questions on the Portuguese Non-Habitual Tax Resident regime.

Additionally, you can view and download here a presentation with these frequently asked questions together with reasons to move to Portugal.

1

What is the NHR Regime?

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.

2

What are the benefits of the NHR Regime?

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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.

3

What types of income are eligible for exemption under the NHR Regime?

  • 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.

4

What types of income are eligible for reduced rates under NHR regime?

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.

5

What are considered high value added activities of a scientific, artistic or technical nature?

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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

6

Who may apply for the NHR regime?

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

7

How do I acquire tax residence in Portugal?

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  • 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.

8

What is the procedure to register as tax resident in Portugal?

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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.

9

How do I apply for the NHR 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.

10

For how long may I enjoy the NHR status?

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

11

Once I have the NHR status, what are my tax obligations?

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.

12

For how long are the benefits of the regime granted and have they changed?

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.

13

Can the NHR regime change again?

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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.

14

How does the termination or renegotiation of a double tax treaty (DTT) between Portugal, as my residence State, and an income source State, affect the NHR regime?

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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.

15

Am I required to provide proof of Portuguese tax residence?

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!

16

What about Gift and Inheritance Taxation in Portugal?

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.

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There are many sound non-tax reasons to consider taking personal residence in Portugal.

The cherries on top of the cake are that
:

The Portuguese Non-Habitual Tax Resident regime grants an exemption on foreign source income as well as a limited taxation on income deriving from high value added activities [for more information on this please read our Newsletter (English) and Presentation (English, French and Portuguese versions available)];

The Portuguese Golden visa regime allows non-European Union investors to access the entire Schengen area [for more information on this please read our Newsletter (English) and Presentation (English)].

In particular, the Portuguese Non-Habitual Tax Resident regime provides generous exemptions for foreign-sourced income and a reduced 20% rate for income from high value added activities. Since 1 January 2004 close family (spouses, children, grandchildren, parents and grandparents) is exempt from Stamp Tax on gifts and inheritances.

Moreover, the disposal of foreign assets (even towards Portuguese residents) as well as, in certain cases, the disposal of Portuguese assets towards non-Portuguese residents, are not liable to this type of taxation.Finally, Portugal has no wealth tax.

When family residence is considered, Portugal also tends to rank well, being a great place to raise children, due to safety and to both good private or public pediatric healthcare. The fact that in the destinations most favored by expats, like Lisbon, Cascais-Estoril and Algarve, English is widely spoken by the Portuguese tends to facilitate foreigners’ integration, some being able to live decades without learning the native language.

Some of the drivers of personal residence may also prove to be key factors for HNWI that are moving to Portugal to consider locating part of their dedicated Family Offices here.

Portugal has relatively cheap real estate (although tax structuring is vital as this is an overtaxed sector), namely office space, an excellent telecommunication infrastructure and educated, qualified and affordable professionals. Its location at the south of Europe, in the tip of the Mediterranean Sea and bordering the Atlantic Ocean, as well the 300 daily flights from Portugal to foreign countries make it an ideal place for globetrotters.

Its several seaports and marinas and its Exclusive Economic Zone, a sea zone of 1,727,408 km2 (the 3rd largest of the European Union and the 11th largest in the world), as well as its 31 airports and aerodromes, make it a natural choice for recreational yachting and private jet travel.

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HOW CAN RPBA HELP

One of RPBA‘s expertise services is residence planning (in particular through the Portuguese non-habitual tax resident (NHR) and golden visa regimes or through similar foreign regimes). We frequently assist wealthy foreign individuals moving to Portugal and, likewise, Portuguese nationals moving abroad. 

We also help them optimize their Portuguese real estate tax structuring and private wealth or income management by the use of holding and operational companies (namely in Portugal – in particular through the Madeira Free Zone –, Belgium, Luxembourg and Malta), trusts, private interest and family foundations, life insurance and wills.

If you are interested in becoming a Client please e-mail us to communication@rpba.pt

Non-tax reasons and a favorable tax environment make RPBA believe that Portugal is currently the best all-round jurisdiction for HNWI relocation.

In connection with the Portuguese NHR regime these are the services that we provide:

Step 1

Advice on double residence and taxation of income and wealth.

Step 2

Obtain a Portuguese non-resident taxpayer number (appointing a tax representative if necessary)
- Optional in some cases.

Step 3

Legal assistance in the purchase or lease of real estate.

Step 4

Obtain a residence permit (for non-EU nationals) from the Foreigns and Borders Service or a long-term residence certificate (for EU nationals) from the local city council.

Step 5

Register as resident taxpayer.

Step 6

Request the password to access the tax authorities' website.

Step 7

Submit an application to the NHR regime.

Step 8

Obtain Portuguese tax resident certificates and file a non-resident tax application in the country of origin.

Step 9

Activate the Electronic Post Box.

Step 10

File annual tax returns.

CONTACT US

Left to the main entry of the "Loja do Cidadão das Laranjeiras" and right to the Ismaili Center / Aga Khan Foundation; close to the Laranjeiras' subway station; there are two public parking spaces in a range of 100 meters, one underground at Rua Virgílio Correia, perpendicular to Rua Abranches Ferrão, and another in front of the Loja do Cidadão's back entry, underneath the Avenida Lusíada's viaduct. We also have parking space available in our building. Please request it in advance of any meeting.

  • Rua Abranches Ferrão, n.º 10, 9.º G - 1600-001 Lisboa, Portugal

    GPS Coordinates: Latitude: N38.773625 Longitude: W9.171181   

  • +351 21 240 27 43
  • communication@rpba.pt