The Portugal non-habitual residency (NHR) tax regime is a fiscal exemption initiative created by the Portuguese administration. It originated in 2009 to attract foreign investors, highly skilled professionals and retirees.
Under the NHR tax regime, Portugal offers substantial tax advantages and savings. It has proven to be a successful venture, offering a wide range of perks and features to its beneficiaries.
The Non Habitual Residency is a portuguese tax residency status with two income tax benefits:
Any individual that receives a qualifying non-resident income (such as a pension, dividend, royalty and interest income) can apply for a tax free NHR status.
Professional individuals from high value-added activities are eligible to apply for a flat income tax rate of 20%, when practicing this activity in Portugal.
Learn how to apply for the non-habitual residency tax regime in Portugal and how to avail of very favourable income tax benefits over a maximum 10 year period.
For starters, the main key advantage is getting a 20% flat rate for some Portuguese income. Keep in mind that the regular income tax rate in Portugal goes as high as 48%.
The flat rate applies to income sources from some high-valued professions, as well as income from self-employment.
Benefits for non-habitual residents in Portugal include:
Portugal has signed a Double-Taxation Agreement (DTA), meaning that most income earned in foreign countries won't be taxed, as it's implied that it will be taxed abroad.
Hence, NHR residents in Portugal benefit from completely tax free income from most foreign sources.
A great advantage of the NHR regime is that foreign source income is not subject to tax or it's taxed at a 20% flat rate, if it comes from any of the professions listed as high-value occupations.
Due to the Double-Taxation Agreement (DTA), if the source of the income comes from a country with a double taxation treaty with Portugal, it won't be taxed in Portugal.
If the income comes from a country without a DTA but is not blacklisted as a tax haven, the income is tax-exempt. If on the contrary, the country is blacklisted as a tax haven, a tax between 28% or 35% will be applied.
Only private sector pensions are subject to qualify under the NHR status in Portugal. As of March 31st, 2020, foreign pension income is taxed 10%.
If your income comes from self-employment, it will be subject to social security contributions (unless you already contribute to the social security system of your country of origin).
Furthermore, the taxpayer can choose whether to have their income taxed at a flat rate of 20% or have it taxed at normal progressive rates. It can be tax-exempt if the income is sourced from one of the eligible professions and comes from a country with a DTA (or otherwise, not blacklisted as a tax haven).
Activities of high added value are those with a technical, scientific or artistic nature, primarily. Before NHR status is granted, every individual case is analyzed under the same criteria, however every individual's situation is unique and approval can depend on many factors.
In the technical field, occupations like directors, managers, engineers, geologists, auditors, computer consultants and higher management positions are well thought of, as well as farmers and skilled agriculture and livestock workers.
Within the scientific field, professions like medical doctors, dentists, general practitioners, surgeons, biologists and medical analysts are greatly appreciated.
Last, but not least, investors of artistic nature such as musicians, singers, painters, authors, ballet performers, as well as cinema, radio, and television artists are also considered high-value professions.
To qualify for the Portugal non-habitual residents regime, applicants must comply to these requirements:
Investors who obtain residency through the Golden Visa program, are qualified for the non-habitual resident status.
There's no need to purchase a property in Portugal in order to get the NHR status. In fact, non-habitual residents in Portugal can demonstrate a proof of residence by providing a lease agreement or rental contract. In such cases, a 12 month rental contract will suffice as proof or residence.
Nonetheless, buying a property in Portugal is certainly the best choice to become an NHR tax resident.
These are the 4 steps you need to follow to register as a non-habitual resident in Portugal.
Before applying for the NHR tax regime, all petitioners must be registered for legal residency in Portugal. In the text below, you'll find the requirements for both EU and Non-EU citizens.
All citizens of the European Economic Area, including the EFTA states (Iceland, Liechtenstein, and Norway) and Switzerland, can register for residency without the need of a visa.
To register, applicants must head to the local Sítio da Câmara (or town hall) and ask for a ticket to register as "Cidadão Europeu". You must provide: passport, European Health Insurance Card and current address. The fee for this process costs approximately €16 EUR.
Before applying, non-EU citizens must obtain a residence permit. For instance, the most straightforward method for non-EU citizens is through the Golden Visa program, although there are other processes available.
Concerning the Portugal NHR regime for British residents, their income is free of taxation because it's already being taxed in the UK, thanks to DTA treaties with Portugal.
In this respect, in spite of Brexit, taxation for British citizens already registered as living in Portugal will not be affected.
You can make this process in a Portuguese embassy in your own country or through the online service of Foreigners and Borders Service (SEF).
The NIF is a nine digit identification that accounts for the Portuguese tax number. Everyone who wishes to be a Portuguese tax resident, must have their own NIF number (Número de Identificação Fiscal), also referred to as "Número de Contribuinte".
You must head to your local finance office of Portuguese Tax and Customs Authority and ask for a ticket to apply for the NIF identification. You must submit the following documentation:
Once you have the NIF number assigned, the next step is to register as a tax resident in Portugal. You can do so also in the Portuguese Tax and Customs Authority office.
Keep in mind that a person is considered a tax resident in Portugal if:
The Portugal tax regime for non-habitual residents can be obtained online, through the government's finance website. You must register to the website and provide NIF number, fiscal address, email address, and phone number.
After you've registered successfully, a password will be sent via post mail, after approximately two weeks.
Once you have that password, log into the Portuguese Tax and Customs Authority portal and complete the final step for the NHR status. To do so you must:
You will be asked to submit the following documentation:
Timing is an important consideration when applying for the NHR regime. Remember that you must submit proof of an established household by December 31st. Then, the application has to be made no later than March 31st of the tax year in which you became a Portuguese tax resident.
Usually, it takes no longer than 2 weeks for an application to be accepted or declined. If accepted, the Portugal NHR status is given for a non-renewable 10 year period, valid retroactively from the date the applicant became resident.
Ultimately, the advice of a professional specialist can be the best way to guarantee that all the procedures are done correctly and ensure the best possible outcome for your NHR status in Portugal.
If an individual already qualified as a tax resident in Portugal moves abroad, the NHR status is not lost. During the 10-year period, the person can always return and benefit again from its advantages for the rest of the remaining years of the plan.
In such a case, the 10-year period of the NHR status cannot be postponed.
A non-habitual resident is an individual that under the Portugal NHR tax regime, can qualify as a tax resident. It's directed to expatriates and foreign investors who can and benefit from a wide range of advantages, as long as certain conditions are complied.
On the one hand, those who meet the requirements are granted considerable tax benefits leading to lasting savings.
On the other hand, Portugal is a safe and peaceful country, with a high quality of life, mild climate and a stable economy. It's also one of Western Europe's most affordable countries with a large expat community.
To qualify for the Portugal non-habitual residents regime, applicants must comply to these requirements:
Investors who obtain residency through the Golden Visa program, are qualified for the non-habitual resident status.