About Us
FAQ
Global Law Experts Logo
Global Law Experts Logo

Find a Global Law Expert

Specialism
Country
Practice Area

Awards

Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.

Full Guide to Non-Habitual Resident Portugal

posted 2 months ago

Portugal’s NHR (non-habitual resident) tax regime is hugely successful. If you’re considering relocating to Portugal for the sunny weather, stunning landscapes, and seafood delights – you’ll be glad to know that it’s also a smart financial decision.

The NHR scheme offers numerous benefits such as tax-free transactions, low taxes on pension income or wealth, and self-employed or other income is taxed at significantly reduced amounts. This guide will take you through applying for NHR so that you can become a non-habitual resident.

The NHR tax regime offers tax exemptions, tax benefits, and low tax rates for ten years. This article reviews the benefits of the non-habitual resident tax regime, its requirements, tax rates, and important dates.

What is Portugal’s NHR tax regime?

Non-habitual residence (NHR) refers to the process of establishing tax residency in Portugal, which enables individuals to enjoy reduced tax rates on income for a duration of 10 years. Notably, NHR holders are not subject to any specific minimum or maximum residency requirements.

Portugal’s non-habitual resident tax regime aims to attract investors and professionals who could contribute to Portugal’s economy and culture. This special tax status for new residents can lead to tax exemptions on a global income, while active income that arises from high value-added activities earned in Portugal is taxed at a flat rate of 20 percent.

NHR status allows substantial tax savings. The scheme was introduced in 2009 to increase Portugal’s global competitiveness by attracting professionals of high cultural and economic worth.

Foreign investors with a Golden Visa can optimize their taxes by applying for NHR status. Digital nomads or individuals on the Tech Visa who aim to spend over 183 days a year in Portugal can also apply.

Latest Updates – March 2024

The NHR came to an end in January 2024. The Portuguese government’s State Budget Proposal for 2024 included modifications that determine the end of the non-habitual resident regime.

The ultimate vote on the budget legislation happened on 29 November 2023, introducing the transitional regime before the end of the NHR tax regime in 2025.

Anyone who registered as a tax resident in the country in 2023 and had not been taxed in Portugal in the previous five years can still apply by March 31, 2024.

It’s also possible for some individuals to apply up until March 31, 2025, but the eligibility requirements for this deadline are more stringent. To qualify, it’s necessary to meet at least one of the following criteria:

  • Having an employment contract signed/to be signed by December 31, 2023
  • Having a lease agreement or other contract for the use/possession of property signed by October 10, 2023
  • Having a contract to buy property in Portugal signed by October 10, 2023
  • Having children enrolled or registered in a school in Portugal by October 10, 2023
  • Having a residence visa or a residence permit valid from December 31, 2023
  • Having an application for a residence visa or residence permit initiated by December 31, 2023
  • Being a member of the household of anyone who meets the above criteria

Anyone who qualifies under these conditions will have NHR status from the date that they become a tax resident — whether that’s in 2024 or in the first quarter of 2025 — until December 31, 2033.

What will replace NHR?

The State Budget proposal has introduced a new program known as the Incentivised Tax Status Program (ITS) or the Tax Incentive for Scientific Research and Innovation, which is replacing the existing NHR tax regime.

Those who qualify will benefit from a flat tax rate of 20 percent on eligible professional income arising from Portugal and possibly an exemption on professional foreign-sourced income. They will also have an exemption on the majority of foreign-sourced income, such as dividends, interest, capital gains, and rents. However, unlike under the existing NHR program, this excludes pensions. These benefits will last for a 10-year period.

To qualify, individuals must fulfill the following conditions: 

  • They become tax residents in Portugal 
  • They have not been tax residents in the previous five years 
  • They earn income in certain professional categories 

Individuals in the following categories will be eligible for the Tax Incentive for Scientific Research and Innovation program: 

  • Teachers and scientists 
  • People with qualified jobs according to the tax code and members of corporate bodies within the scope of contractual benefits for productive investment, such as:
  1. Activities carried out within the scope of the extractive industry and manufacturing industries  
  2. Tourism, including activities of interest to tourism 
  3. IT and related activities and services 
  4. Agricultural, aquaculture, fish farming, farming and forestry activities 
  5. Research and development and high technological intensity activities 
  6. Information technologies and audiovisual and multimedia production 
  7. Defense, environment, energy and telecommunication 
  8. Activities of shared service centers 
  • Highly qualified professionals, which will be anyone performing one or more of the above activities and carrying them out in a qualifying entity 
  • People working for companies recognized by relevant government agencies — AICEP, EPE, IAPMEI, IP — or relevant to the national economy, working with investment etc.  
  • Research and development personnel who meet the definitions of the tax code 
  • People working for startups, certified by law as such 
  • People working in Madeira and Azores who meet the terms set by these regions 

Beneficiaries of the NHR program or the Regressar Program will not be able to apply. 

Why become a non-habitual tax resident in Portugal?

Full Guide to Non-Habitual Resident Portugal

Tax residency in white-listed EU country

Special tax treatment for ten years

No wealth tax

Free remittance of funds to Portugal

Exemption on all foreign income

20 percent flat rate on some Portuguese income

Tax exemption on gifts for family members

No minimum stay requirement

Some of the significant advantages to applying for NHR status:

  • You can benefit from special personal income tax treatment over ten years
  • You can enjoy the tax exemption on almost all foreign source income
  • 20 percent flat rate for certain Portuguese source incomes (from specific professions and self-employment), as opposed to national Portuguese income tax rates of up to 48 percent
  • Become part of a white-listed tax environment
  • A tax exemption for gifts or inheritance to direct family members
  • No wealth tax
  • Free remittance of funds to Portugal

Portugal NHR and double taxation agreements

A key benefit of Portugal’s non-habitual resident tax regime lies with Double-Taxation Agreements (DTAs).

A double taxation agreement allows for most categories of income to be taxed in the country of the source of income. Most countries, however, choose not to apply income tax to any income earned by non-residents as 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. This allows NHR residents to receive some foreign income completely free of tax.

Portugal currently has signed Double-Taxation Agreements with 81 countries, and the OECD model tax convention may be used in the absence of a DTA.

Who can apply for the non-habitual resident tax regime in Portugal?

portugal golden visa for UK citizensThe main requirement of the NHR is for the applicant to become a tax resident in Portugal.

To this end, it is essential, from the outset, that the applicant is qualified to live in the country.

Thus, in the year to which the income relates, the applicant must comply with at least one of the following:

  1. Stay in the country for more than 183 days, consecutive or interpolated, in any period of 12 months beginning or ending in the year in question
  2. Stay for a shorter period of time, on any day during the period referred to in the previous paragraph, and have had access to housing in conditions that suggest a current intention to maintain and occupy it as their habitual residence
  3. On 31 December, being a crew member of a ship or aircraft, as long as they are in the service of entities with residence, headquarters or effective management in that territory;
  4. Carrying out public functions or commissions abroad, at the service of the Portuguese State.

Furthermore, this residence must be possible to substantiate. It’s important to not only fill these requirements above but also not be a tax resident in another country. You should not spend more than 183 days in another country, as it can then presume tax residence.

The other, cumulative requirement is that the applicant has not been a tax resident in Portugal in the previous five years

NHR Portugal minimum stay

In order to avail of NHR status, you must stay for a minimum of 183 days in the country per year or maintain in Portugal a place of abode residence in Portugal as your habitual residence.

It’s also important to note that in order to be a tax resident in Portugal, you must meet the country’s tax residency requirements, and should not comply with the tax residency requirements of another country.

What will happen to my NHR status after ten years?

NHR status only lasts ten years. After ten years, you lose your NHR status and tax benefits, and will have to pay tax at standard Portuguese rates.

NHR and the Portuguese Golden Visa

It’s possible for non-EU/EEA/Swiss citizens to apply for the Portuguese NHR scheme through Portugal’s Golden Visa program. Investors who first acquire residency through the Golden Visa program can then become eligible for the NHR regime in Portugal.

Find out more about the Golden Visa program here.

Global Citizen Solutions can help you take the next step towards investing and securing residency rights in Portugal. As investment and residency program specialists, we can provide personalized advice to help you make the best possible decision.

Tax residency requirements for the NHR scheme

In order to establish tax residency in Portugal, applicants for the NHR scheme must have a place of residence in Portugal to hold habitual residence, and stay in Portugal for a minimum of 183 days.

Do I have to buy or rent property to prove residency in Portugal?

The NHR regime does not require its beneficiaries to purchase property in Portugal. To comply with the regime’s requirements, applicants must have a domicile in Portugal available to them. This must be a place that demonstrates the intention to hold and occupy the space as a habitual place of residence.

It can, therefore, be beneficial for NHR tax residents to buy property in Portugal; however, a rental contract for 12 months is also sufficient proof of domicile.

What documentation is required to prove domicile?

If you decide to rent a property, you must provide proof of a lease or loan agreement. You can provide a purchase deed instead if you have bought a property.

NHR ELIGIBILITY TEST

BOOK AN INITIAL CONSULTATION

Tax Under the Non-Habitual Resident Regime in Portugal

Which professions are considered to be of high value under the NHR tax regime?

Professions of high cultural and economic worth are given generous tax exemptions and tax benefits under the NHR regime.

The following professions are considered of high added value:

General director and executive manager of companies

Directors of administrative and commercial services

Directors of production and specialized services

Directors of hotels, restaurants, commerce and other services

Specialists in physical, mathematical sciences, engineering and related techniques

Professor of university and higher education

Specialists in information and communication technologies (ICT)

Authors, journalists and linguists

Creative and performing arts artists

Technicians and professions in science and engineering, at intermediate level

Information and communication technology technicians

Market-oriented farmers and skilled workers in agriculture and animal production

Skilled forestry, fishing and hunting workers, market-oriented

Skilled workers in industry, construction and craftsmen, including in particular skilled workers in metallurgy, metalworking, food processing, wood, clothing, handicrafts, printing, the manufacture of precision instruments, jewelers, craftsmen, workers in electricity and electronics.

Installation and machine operators and assembly workers, namely operators of fixed installations and machines

Workers involved in the professional activities referred to above must have at least qualification level 4 of the European Qualifications Framework or level 35 of the International Standard Classification of Education or have five years of duly proven professional experience.

And other professional activities, including administrators and managers of companies promoting productive investment, as long as they are allocated to eligible projects and with contracts granting tax benefits

Tax treatment of foreign source income under the NHR regime

Beneficiaries of the NHR regime in Portugal with some foreign incomes are largely exempt from taxation in Portugal due to DTAs.

If income is sourced in a country with a double taxation treaty with Portugal, the income will not be taxed in Portugal.

Employment income

  • Foreign source income is taxed at a flat rate of 20 percent if it falls under the list of eligible professions.

Self-employment:

  • Foreign source income is taxed at a flat rate of 20 percent if it falls under the list of eligible professions.
  • This income is also subject to social security contributions unless the individual in question already pays social security contributions into another system.
  • Royalties, Dividends and Interests
  • Typically exempt between countries that have DTAs between them
  • In the absence of DTA, the OECD model convention must still be used
  • If they are not exempt, they will be taxed at 28% in Portugal
  • Otherwise taxed at 35 percent if the origin country is a blacklisted tax haven

Real estate income and capital gains 

Real estate income is typically taxed at source meaning it should be taxed in the country where it is earned.

Capital gains from the disposal of securities (shares, bonds, etc.) will be subject to a rate of 28 percent  

Pension income: Taxed at a flat rate of 10 percent (since March 2020).  Typically, pension income is subject to withholding tax in the country of origin.  After paying tax in Portugal, it is necessary to recover the tax withheld at

How to buy property in Portugal, Ultimate Guide by local experts

Tax treatment of Portuguese source income under the NHR regime

Employment and Self-Employment income

  • Usual progressive tax rates apply if employment does not fall under the list of eligible professions.
  • If employment falls under eligible NHR professions, or if the income comes from a high value-added activity a flat tax rate of 20 percent is applicable.

Real estate income and capital gains 

  • Rental income is taxed at an optional rate of 28 percent or otherwise at standard progressive rates.
  • Net capital gains are taxed at 50 percent at standard progressive rates.

Pension income

  • Under the NHR, pensions are taxed at usual rates (10 percent)

Portuguese tax table for 2023

Portuguese income tax bands

Portuguese tax rate

up to €7,116

14.5%

€7,117–€10,736

23%

€10,737-€15,216

26.5%

€15,217-€19,696

28.5%

€19,676-€25,076

35%

€25,076-€36,757

37%

€36,758-€48,033

43.5%

€48,034-€75,009

45%

€75,010+

48%

Timeline and Important Dates for NHR application

In order to register for the NHR regime in Portugal, applicants must be registered as a Portuguese tax resident.

NHR applicants must prove tax residency and enroll as such with the tax authorities. The NHR application then has to be made before 31 March to start the tax residency year. It usually takes about two days for an application for the NHR regime to be accepted or declined.

NHR status is granted for a period of ten years, retroactively effective from the date on which the applicant became a resident.

Step-by-Step Application Guide: Non-Habitual Resident Tax Regime in Portugal

Step 1 – Proof of residency

The first step towards applying for the non-habitual resident regime in Portugal is securing residency status in the country. To do so, you must have the legal right to reside in Portugal.

NHR portugal step by step application processEU/EEA/Swiss citizens

EU/EEA/Swiss are allowed to register for residency without a visa. Depending on the municipality you are applying to/from, you will need certain documents. All that is needed to register citizens can register for residency at their local town hall (Câmara Municipal). Be sure to take the following with you:

  • Passport
  • Proof of address (You will need to give a current address, but will not require proof of residency)

At the town hall, you will need to find the correct ticket to register as a “Cidadão Europeu”. The process is fairly straightforward, and the attendant should fill out the form for you. You will then have to pay a fee of around €15.

Non-EU citizens

Non-EU citizens who wish to apply for the NHR regime must first obtain a residence permit to be allowed to settle in Portugal. This can be granted through a number of different methods, but the most common is through the Golden Visa or through the Portugal D7 Visa program.

The process takes place through the “Serviço de Estrangeiros e Fronteiras” (SEF) or at your closest Portuguese Embassy or Consulate.

Take a look at our Golden Visa guide for more information.

Step 2 – Find a specialist accountant for professional advice

The safest way to apply for NHR status in Portugal is with the help of a specialist. This way you can ensure that you have the best understanding of Portuguese tax law and find the best solution for your needs. However, should you wish to apply on your own, you can follow the steps below.

Step 3 – Obtain a Portuguese tax number (NIF)

Everyone who intends to reside or do business in Portugal must have a tax identification number (NIF) in Portugal  (Numero de Identificação Fiscal). This is a 9-digit number that serves as an identification for tax purposes.

There are a number of different ways to acquire a NIF. If you are already in Portugal, you can go to your local government finance office (finanças). To get a NIF at a finanças you will need proof of residence (such as a utility bill or rental contract), your residency certificate or visa, and your passport.

Step 4 – Register as a tax resident in Portugal

After you have your NIF, you must register as a tax resident in Portugal. This can also be done at finanças provided that you show you are allowed to live in Portugal (meaning you are previously registered as a European Citizen or holder of a Residence Permit.

Step 5 – Apply for your NHR Status

If you choose to apply for the NHR on your own, the easiest way is online through the government’s financial portal. To use the online service, you must first register on the website.

To do this you will need your NIF, your fiscal address, email address, and phone number. These should be the same details that you used to initially register for your NIF. You will also be asked to provide an answer to a security question.

Once you have registered, a password will be sent to you by post. It should take at most two weeks to arrive.

When your password arrives, you can log into the finanças portal and register your application for the NHR regime. You can do this by accessing Aceda aos Serviços Tributários, clicking on Entregar Pedido, and then finally Inscrição Residente Não Habitual.

To complete your application, you may be required to submit the following documents:

  • A declaration stating that you have not been a tax resident in Portugal for the previous 5 years
  • Tax returns for the past 5 years
  • Proof of purchase of property in Portugal or a rental contract

Request for further evidence

The most common reason behind NHR rejections is a failure to provide enough supporting evidence. You might be required to prove that you have not been a tax resident in Portugal within the past five years. This means submitting further evidence proving that you have been a tax resident in another country.

NHR Regime for US Citizens

US citizens can certainly apply for the scheme. Anyone who meets the requirements can request NHR status. You must live abroad, not have been a resident in Portugal within the last five years and want to move to Portugal.

To be considered a tax resident and benefit from the NHR Scheme in Portugal, applicants must have a place of residence in Portugal on 31 December of that year with the intent to hold habitual residence.

NHR status can also hugely benefit US citizens retiring in Portugal due to its exemptions around income related to pensions.

NHR Regime for UK Citizens

Following the UK’s departure from the EU due to Brexit, it has become slightly more complicated for UK citizens to obtain NHR status. We recommend that UK citizens apply for a D7 Visa or Golden Visa. Upon securing an appropriate visa, the steps to NHR status are the same as outlined above.

Frequently Asked Questions about Portugal’s NHR Tax Regime

What if my income is paid in another country?

If you are being taxed by a country that has a double taxation agreement with Portugal, you will be exempt from having to pay tax in Portugal.

What if my income is earned in Portugal?

Depending on your profession or source of income, you could still be eligible for significant tax breaks. That being said, if your income is being earned in Portugal and you are a tax resident in Portugal, you’ll be subject to Portuguese taxes.

Can applications for non-habitual residency in Portugal be tracked?

If you are registered online at the Portal das Finanças, you can track the progress of your application.

How do you know if registration as a Portuguese non-habitual resident has been accepted?

You can consult the status of your application through the finanças portal. On the website, click Aceda aos Serviços Tributários, then Consultar Pedido, and then finally Inscrição Residente Não Habitual.

How long does it take to apply for the NHR tax regime in Portugal?

You should know within a couple of weeks whether your application has been accepted or declined.

Generally, it takes about two weeks to hear back. If your NIF was recently obtained, then it may take as little as 2 days.

Do I have to be resident outside of Portugal to be a non-habitual tax resident?

No, you can live in Portugal, but the key part is that you must not have been a tax resident for 5 years prior to application. Then, it is necessary to become a tax resident in order to become a non-habitual resident.

Do I have to make a statement of assets to apply for the NHR regime?

No, you will only have to state your income on your tax returns.

How long has the NHR regime in Portugal been available?

The scheme has been in place since 2009 and is growing more popular every year.

Will the NHR regime in Portugal change in the foreseeable future?

The government has presented the State Budget Proposal for 2024, which outlines significant changes that mark the end of the non-habitual resident regime. This initial version is subject to further debates and votes. However, it is important to note that the government party’s majority in the Assembly implies that these changes should not be overlooked or dismissed. The final vote on the budget law is scheduled for 29 November 2023. Until then, we will diligently monitor the developments related to this matter.

Is it possible to backdate my registration as a non-habitual tax resident?

Once your application is successful, your status as a non-habitual tax resident will automatically be backdated to when you first registered as a tax resident in Portugal.

When is the best time to apply for the Portuguese NHR tax regime?

You must apply for the NHR regime before 31 March of the year following the one in which you became a tax resident in Portugal.

Author

Find the right Legal Expert for your business

The premier guide to leading legal professionals throughout the world

Specialism
Country
Practice Area
LAWYERS RECOGNIZED
0
EVALUATIONS OF LAWYERS BY THEIR PEERS
0 m+
PRACTICE AREAS
0
COUNTRIES AROUND THE WORLD
0

Join

who are already getting the benefits
0

Sign up for the latest legal briefings and news within Global Law Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox.

Naturally you can unsubscribe at any time.

Newsletter Sign Up

About Us

Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.

Contact Us

Stay Informed

Join Mailing List

GLE