Non-Habitual Tax Residency(NHR regime) In Portugal
The non-habitual resident Portugal program is basically a tax regime that offers the “high value” residents and investors reduced tax rates and some exemptions on other taxes. The Portuguese government introduced this tax regime in the year 2009. The aim of this tax regime program is to increase the international competitiveness of Portugal. It has proved to be a very successful program in Portugal with a number of more than 10.000 non-habitual residents who get benefıts on their taxes in Portugal.
What is Included in This Portugal Tax Regime Program
What are the Advantages for the Non-Habitual Residents in Portugal
There are several advantages in this program for the non-habitual residents in Portugal, namely:
- Income tax: Special individual tax treatment for incomes for a period of 10 years.
- Exemption on almost all foreign source income.
- Compared to other Portuguese income tax rates up to 48%, this program offers only a 20% flat rate for certain incomes (Portuguese source) (from determined professions and from self-employment).
- No requirement of a minimum stay.
- Opportunity to have tax residency within the EU, in a white-listed surrounding.
- Exemption of tax on gifts or inheritance to family members.
- There is no wealth tax.
- Free cash remittance to Portugal.
Who Can Be a Non-Habitual Resident of Portugal
- The individual must have the right to be a resident in Portugal by being an EU/EEA/Swiss citizen or via a Portugal Golden Visa Program, and
- They shouldn’t be a Portuguese tax resident in the preceding five years.
For establishing a tax resident status in Portugal, the individual (applying for NHR) must hold a place of abode by the 31st of December of that year to show their intention that Portugal will be their habitual home. It can be useful for the applicants to buy a Portuguese property, yet they don’t have to. A Portuguese rental contract of 12 months will be sufficient as a residency proof. If they decide to buy a property, then they can show their purchase deed as proof of being a resident. After holding a place of abode, the applicant should apply for the Non-Habitual Resident program in Portugal until the 31st of March of the next year.
A reminder: Individuals who have the right to be a resident in Portugal through the Golden Visa Program can apply for the Non-Habitual Resident program.
Professions Regarded as High Added Value
Some professions are considered as a high added value to Portugal. These professions mainly have economic and cultural worth. So, individuals who practice one of the professions listed below are given generous tax exemptions:
|Theater, ballet, cinema, radio, television artists||Singers||Sculptors|
|Tax consultants||Dentists||Medical Analysts|
|Clinical surgeons||Ship’s doctors||General Practitioners|
|Biologists and life science experts||Computer programmers||Software consultant|
|Computer consultants and related services||News agencies||Other information and service activities|
|Scientific research and development||Research and experimental development on natural sciences and engineering||Research and development in biotechnology|
Tax on Foreign Source Income
Under the NHR regime, beneficiaries’ most income from a foreign source is exempt from taxation in Portugal for ten consecutive years. It means that if the income is from an external source that has a DTA (Double Taxation Agreement) with Portugal, then the income will not be subject to taxation in Portugal.
- DTA (Double Taxation Treatment): It is a treaty between two or more countries mainly to avoid double taxation of income and property. It aims to divide the taxation between the contracting countries in the right way, to avoid tax evasions, to secure the taxpayers’ rights, and to avoid differences. You can find the list of countries which have DTA with Portugal:
|São Tomé and Principe||Saudi Arabia||Senegal|
|South Africa||South Korea||Spain|
|Tunisia||Turkey||United Arab Emirates|
|United States of America||United Kingdom||Ukraine|
Types of Foreign Source Income
Under the NHR regime, it is either exempt from tax, or it is taxed at a rate of 20% (flat-rate) if it is not from one of the eligible professions.
If it is from an eligible profession and it is from a country with a DTA (Double Taxation Agreement), it is tax-exempt. It can also be tax-exempt if in the absence of a treaty under the OECD model tax convention (if the country is not a tax haven) If it is not from one of the eligible professions, it is taxed at a standard progressive rate. It is also subject to social security contributions. This type of income can also be taxed at a flat rate of 20%; however, the individual can pay the usual progressive tax if it is less than the flat rate.
Royalties and income from financial assets
If the income comes from a country with a DTA, it is tax-exempt. It is also tax-exempt if it is from a country without a DTA but which isn’t a blacklisted tax haven. If the country is a blacklisted tax haven, then it is taxed at the rate of 28% or 35%.
Real estate income and capital gains
They are tax-exempt if:
- they come from a country with a DTA; or
- they come from a country without a DTA but which isn’t a blacklisted tax haven.
Capital gains from the disposal of securities (shares, bonds, etc.)
If they are from a blacklisted tax haven, they will be taxed at an optional rate of 28%, 35%.
If it comes from a country with a DTA, it is tax-exempt.
Tax on Portuguese Source Income
If it is not from the list of eligible professions, it is taxed at the standard progressive rate. However, if the employment is from the list of eligible professions, 20% rate can be applied, or if the usual progressive rate is less, then the progressive rate can be used.
If it is not from the list of eligible professions, it is taxed at the normal progressive rate. However, if the employment is from the list of eligible professions, 20% rate can be applied, or if the usual progressive rate is less, then the progressive rate can be applied.
Real estate income and capital gains
- Rental income is taxed at the rate of 28% (optional rate) or otherwise at normal progressive rates.
- Net capital gains are taxed at a rate of 50%, at the normal progressive rates.
It is taxed at the usual rates.
How to Apply for the NHR Regime in Portugal
We will guide you in the application for the program step by step:
Step 1: Residency Proof
The first step is to prove that you have the legal right to reside in Portugal.
Citizens of EU/EEA/Switzerland can register without a visa. They can register for residency in their region’s city hall. They must bring their passport and EHIC Card for the procedure. They will be asked for their current address too, but they don’t need to prove that.
Non-EU citizens must first receive a residence permit so that they’re allowed to settle in Portugal. They can obtain the permit in different ways, but the two most common methods are via the Golden Visa Program or Passive Income. They can do that either online (on the site “SEF”) or in their country’s Portuguese embassy.
Step 2: Getting a NIF Number (Portuguese Tax Identity Number)
NIF number is a nine-digit number necessary to obtain, especially if one intends to do business or other official or legal activities in Portugal. While non-residents can get it through their representative/lawyer in Portugal, residents in Portugal can directly do it in the finanças (local tax offices). To do it, the individual needs an ID card/passport and proof of residency.
Step 3: Registering as a Tax Resident in Portugal
After the individuals obtain their NIF, they must register as a tax resident in the finanças.
Step 4: Application for NHR Status
The individuals must first register to the government’s website (https://www.acesso.gov.pt/unauthed/novoUtilizadorForm?partID=PFAP&path=/geral/dashboard). To register to the site, NIF number, email address, phone number, and fiscal address are required. After the registration, the applicants will receive their password by post in two weeks at most. They can then complete their application from the website (https://www.portaldasfinancas.gov.pt/at/html/index.html). While doing it, they are required to submit the following documents:
- A document that states that the individual was not a tax resident in Portugal in the preceding five years.
- The past five years’ tax returns.
- A rental agreement or proof of buying a property in Portugal.
Please take into consideration that these steps are explained for the individuals applying on their own. However, while doing it, we also recommend you to consult a specialist accountant in order not to suffer from any possible inconveniences.
The Portuguese DTA and The UK
While it is still uncertain if the NHR regime will change for the UK, it is clear that Portugal has a DTA with the UK. So, taxation for the citizens of the UK will be the same under the NHR program. According to the Portuguese government, even after Brexit, if the UK citizens have registered their residency in Portugal, their rights will be protected.
Frequently Asked Questions About the NHR Regime
How can I follow the update of my application status?
If you have done your registration online, you can follow your application status on https://www.portaldasfinancas.gov.pt/at/html/index.html > Aceda aos Serviços Tributários > Consultar Pedido > Inscrição Residente Não Habitual.
For how long should I wait for my application result?
You will learn the result of your application within a few weeks.
When should I apply for the NHR regime?
You must apply for it until the 31st of March of the tax year when you became a tax resident in Portugal.
Is there an inheritance tax?
In Portugal; spouses, direct descendants, and ascendants are exempt from inheritance tax of any kind. For the others, there is a 10% stamp duty on Portuguese assets.
How can I calculate my tax according to my income?
You can check it from the update Portuguese tax list below:
|INCOME (€)||TAX RATES (%)||BAND (€)||TAX ON BAND (€)||CUMULATIVE TAX (€)|
|0 – 7,091||14.5||7,091||1,028||1,028|
|7,092 – 10,700||23||3,608||830||1,858|
|10,702 – 20,261||28.5||9,561||2,725||4,583|
|20,262 – 25,000||35||4,738||1,658||6,241|
|25,001 – 36,856||37||11,655||4,386||10,627|
|36,857 – 80,640||45||43,783||19,702||30,329|
Is there a wealth tax in Portugal?
There is, but it is quite low and only affects the individuals who have a property at a value of more than €600.000 (for married couples and civil partners, it is €1.2 million).
How long can I benefit from the NHR regime?
You can benefit from it for ten years; then you will be taxed in accordance with the standard IRS regime.
What will be my obligations as a non-habitual tax resident?
You have to file annual tax returns in Portugal, and the total worldwide income and expenses must be included in these returns.