Complete guide to the Portuguese NHR tax regime

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Complete Guide to the Portuguese NHR Tax Regime

Introduction

Portugal's NHR (non-habitual resident) tax regime is an extremely successful initiative offering lucrative tax incentives for foreign residents. To date, over 10,000 citizens from around the world have successfully signed up, helping them to ease their tax burden. The NHR regime was started in 2009 and updated in 2020 and is a fantastic initiative for anyone looking to optimise their tax planning and reside in Portugal. In this comprehensive guide to Portugal's NHR tax regime, you will learn more about the main guidelines for application and the main benefits of the programme.

The tax on non-habitual residents in Portugal aims to attract investors and professionals of high cultural and economic value in order to increase the country's international competitiveness. The regime was first implemented in 2009 and allows substantial tax savings for those who qualify. Under certain conditions, NHR status allows a 20% income tax rate and, in some cases, even a tax exemption for pensions for private sector pensioners. With over 10,000 residents in a non-habitual tax regime in Portugal, the scheme has been highly successful.

It usually takes around two weeks for an application for the NHR scheme to be accepted or refused.

NHR status is granted for a period of 10 years, with retroactive effect from the date on which the applicant became resident.

Why become a non-habitual resident for tax purposes in Portugal?

Tax residence in whitelisted EU country
Special tax treatment for 10 years
No wealth tax
Free remittance of funds to Portugal
Exemption of all foreign income
20% flat rate on some Portuguese incomes
Tax exemption on gifts for family members
No minimum stay requirement

Main advantages of applying for Portuguese NHR status:

Benefit from special personal income tax treatment for a period of 10 years
Enjoy tax exemption on almost all foreign-sourced income
Flat rate of 20% for certain Portuguese-source income (from specific professions and self-employment) as opposed to standard Portuguese income tax rates of up to 48%
Become part of a white list tax environment in the EU
A tax exemption for gifts or inheritances to immediate family members
No wealth tax
Free remittance of funds to Portugal

Tax residence in whitelisted EU country

Special tax treatment for 10 years
No wealth tax
Free remittance of funds to Portugal
Exemption of all foreign income
20% flat rate on some Portuguese incomes
Tax exemption on gifts for family members
No minimum stay requirement

Main advantages of applying for Portuguese NHR status:

Benefit from special personal income tax treatment for a period of 10 years
Enjoy tax exemption on almost all foreign-sourced income
Flat rate of 20% for certain Portuguese-source income (from specific professions and self-employment) as opposed to standard Portuguese income tax rates of up to 48%
Become part of a white list tax environment in the EU
A tax exemption for gifts or inheritances to immediate family members
No wealth tax
Free remittance of funds to Portugal

Tax residence in whitelisted EU country

Special tax treatment for 10 years
No wealth tax
Free remittance of funds to Portugal
Exemption of all foreign income
20% flat rate on some Portuguese incomes
Tax exemption on gifts for family members
No minimum stay requirement

Main advantages of applying for Portuguese NHR status:

Benefit from special personal income tax treatment for a period of 10 years
Enjoy tax exemption on almost all foreign-sourced income
Flat rate of 20% for certain Portuguese-source income (from specific professions and self-employment) as opposed to standard Portuguese income tax rates of up to 48%
Become part of a white list tax environment in the EU
A tax exemption for gifts or inheritances to immediate family members
No wealth tax
Free remittance of funds to Portugal

Portugal NHR and Double Taxation Agreements

A key feature of the tax regime for non-habitual residents in Portugal lies in its relationship with Double Taxation Agreements (DTAs). DTAs allow most categories of income to be taxed in the country of source of income. Most countries, however, choose not to tax income earned by non-residents because they want to be seen as jurisdictions open to foreign investment.

In turn, under the NHR tax regime, Portugal will not tax most foreign-source income earned by NHR individuals because the income can be taxed abroad. This allows NHR residents to receive foreign income completely tax-free.

Portugal has currently signed Double Taxation Agreements with 79 countries and the OECD model tax treaty can be used in the absence of a DTA.

Requirements

To qualify for the NHR scheme, applicants must meet the following requirements:

Have the right to reside in Portugal, either by being an EU/EEA/Switzerland citizen or through schemes such as the Golden Visa Programme.

AND

Not to have been a Portuguese tax resident in the five years preceding the establishment of residence in Portugal

To maintain the residence status in Portugal, the individual must:

Have a place of residence in Portugal on 31 December of that year. This home must be available in a way that can lead to the assumption of an intention to maintain and occupy it as a habitual home.

To qualify for the NHR scheme, applicants must meet the following requirements:

Have the right to reside in Portugal, either by being an EU/EEA/Switzerland citizen or through schemes such as the Golden Visa Programme.

AND

Not to have been a Portuguese tax resident in the five years preceding the establishment of residence in Portugal

To maintain the residence status in Portugal, the individual must:

Have a place of residence in Portugal on 31 December of that year. This home must be available in a way that can lead to the assumption of an intention to maintain and occupy it as a habitual home.

To qualify for the NHR scheme, applicants must meet the following requirements:

Have the right to reside in Portugal, either by being an EU/EEA/Switzerland citizen or through schemes such as the Golden Visa Programme.

AND

Not to have been a Portuguese tax resident in the five years preceding the establishment of residence in Portugal

To maintain the residence status in Portugal, the individual must:

Have a place of residence in Portugal on 31 December of that year. This home must be available in a way that can lead to the assumption of an intention to maintain and occupy it as a habitual home.

NHR and Golden Visa

Non-EU/EEA/Switzerland citizens who wish to apply for the NHR regime in Portugal may want to take advantage of Portugal's Golden Visa programme.

Investors who first acquire residency through the Golden Visa programme may then become eligible for the NHR regime in Portugal.

JPFC can help you take the next step towards investing in Portugal. As experts in investment and residency programmes, we can provide you with personalised advice that will help you make the best possible decision.

Tax residency requirements for the Portuguese non-habitual resident regime

To establish tax residence in Portugal, applicants for the NHR regime must have a place of residence in Portugal on 31 December of that year with the intention of maintaining habitual residence.