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A Guide to Non-Habitual Tax Residency (NHR Portugal 2024)


Updated: February 11, 2024 | Natalia


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non habitual resident tax benefits in portugal Portugal has become a popular destination for expats due to its sunny climate, rich culture, low cost of living, and friendly people.

The Non-Habitual Resident (NHR) scheme is a tax regime created by the Portuguese government with the approval of the Investment Tax Code to attract foreign investors and retirees to Portugal.

Introduced in 2009, NHR status allows qualifying individuals to enjoy significant benefits, such as a personal income tax treatment over a period of ten years.

In this article, we will discuss the latest updates on the NHR scheme. We’ll also let you know about the benefits of NHR, the requirements for the NHR, how to apply for NHR status online, the importance of a NIF and bank account for NHR status, and the tax residency requirements for the Portuguese non-habitual resident regime.

 

Latest Update on the NHR scheme

Since its launch in 2009, Portugal’s Non-Habitual Resident (NHR) regime has been a major attraction for expats and investors, providing several benefits such as tax-free transactions and low taxes on pension income or wealth.

Structured correctly, under the scheme, it is possible to secure significant tax benefits for up to ten years.

However, at the beginning of October 2023, the Portuguese Prime Minister announced his intention to eliminate the NHR regime beginning in 2024.

On 10 October, as expected, the Government submitted the State Budget Proposal for 2024 and it includes the changes that determine the end of the non-habitual resident regime.

This is the initial version, which will still be subject to debates and votes, but which, given the majority that the Government party holds in the Assembly, cannot and should not be ignored.

In effect, the proposed change has the following consequences from 01/01/2024:

Anyone who already has the NHR at the time of entry into force maintains the regime under the same terms until completing 10 years of benefiting from the status;

Anyone who meets the conditions for registration as non-habitual residents on December 31, 2023, as well as holders of a residence visa valid on that date, will be able to register within the deadline normally available (until 31 March 2024) and benefit from the scheme in full for 10 years.

For everyone else, the scheme will no longer be available.

The final vote on the budget law will take place on 29 November 2023, until then we will closely monitor the evolution of this topic.

 

Benefits of the NHR Tax Regime

The NHR status offers several tax benefits, including a flat tax rate of 20 percent on most types of income earned in Portugal, such as employment income, rental income, and gains.

This is significantly lower than the top marginal tax rate of 48 percent for residents in Portugal. Additionally, foreign-sourced income is exempt from taxation in Portugal if it is subject to tax in another country under the terms of a double taxation agreement (DTA) with Portugal. This means that individuals can potentially avoid double taxation on their income due to a double taxation treaty.

Retirees can also benefit from the NHR status, as retirement pensions received from abroad are taxed at a flat rate of 10 percent under the NHR tax regime. This can provide significant tax savings for retirees, particularly those from countries with high tax rates on pension income.

Here’s a summary of some of the key advantages of NHR status in Portugal:

  • No wealth tax, unlike in some other European countries
  • No tax on cryptocurrency, as personal gains are not subject to taxation
  • No tax on dividends of foreign origin
  • No tax on foreign income (if a double taxation agreement is in place)
  • Better opportunities to work remotely
  • 20 percent tax on self-employment
  • 10 percent flat tax on pensions from a foreign source

Double Taxation Agreements (DTAs)

To date, Portugal has signed Double-Taxation Agreements with 79 countries. In the absence of a DTA, the OECD model tax convention may be used.

 

NHR Portugal Requirements

renting in porto portugal To be eligible for the NHR tax regime, applicants must meet the following requirements:

1. Possess the right to live in Portugal, either naturally as a national of an EU/EEA country or Switzerland or through programs like the Golden Visa program and the Portugal Digital Nomad Visa 2024

2. Not having been a tax resident in Portugal in the five years prior to relocating to Portugal

Applicants must have a place to live in Portugal on 31 December of that year to preserve their resident status in the country. This accommodation must be available in such a way as to suggest an intention to retain and occupy it as regular accommodation.

To avail of NHR status, you must stay for a minimum of 183 days in the country per year or maintain a property as your habitual residence.

 

Applying for NHR Status as a Digital Nomad

Holders of the Portugal Digital Nomad Visa can qualify for the NHR regime if they stay more than 183 days in the country.

With it, you can avail of preferential tax rates for the first ten years. If eligible, you’re only charged a flat rate of 20% on qualifying income instead of 48% without the NHR status.

Remote workers who make at least four times the Portuguese minimum wage, amounting to around $3,350 (€3,040) per month, are eligible to apply for the Digital Nomad Visa Portugal. With the Digital Nomad Visa – a specific remote worker visa – remote workers can easily live and work in Portugal for up to one year or apply for residency and stay for a longer period in the country.

Portugal’s Digital Nomad Visa is split into two categories. Remote workers can either apply for a temporary stay visa (short stay visa) for up to one year or a residency permit that can then be renewed for up to five years. The two Portugal Digital Nomad Visas are very appealing, whether you are looking for a short-term temporary stay visa or are looking to obtain a residency visa and perhaps live longer in the country.

If you obtain a residency visa, after five years, you can apply for permanent residency and even Portuguese citizenship, provided that you fulfill all the requirements. With citizenship, you will have the right to live, work, and study in any European Union (EU) member country.

 

Can you apply for NHR status online?

You can apply for NHR status in Portugal online. For this, you need to provide the following:

  • A residency permit in Portugal or an EU passport
  • Proof of your Portuguese fiscal address (this can be a rent contract registered at the tax authorities in Portugal or your residential property)
  • A NIF number (Portuguese tax identification number)

You can use your account in the Portal das Finanças to apply for the NHR tax regime online. You can only create an account with Finanças if you have a NIF. The online application process is straightforward and can be completed within a few minutes.

The individual must provide their personal details, tax identification number (NIF), and information on their income and assets. Once the application is submitted, the tax authority will review it and inform the individual of their NHR status within a few weeks.

If you still don’t have a NIF, you can get one using our service instead of applying in person and waiting in long queues. Just contact us to get your NIF hassle-free. We also provide assistance in opening a Portuguese bank account so that you can enjoy your first weeks living in Portugal without worrying about setting up the essentials.

 

Requirements for the Non-Habitual Resident Tax Regime

To maintain NHR status, an individual must continue to meet certain requirements to be considered a tax resident in Portugal. This means spending at least 183 days per year in Portugal or having a home in Portugal that is considered their habitual residence.

If an individual does not meet the tax residency requirements for a particular year, they will lose their NHR status for that year and will be taxed under the normal tax regime in Portugal.

It is also important to note that the NHR status only applies to certain types of income. Income earned from Portuguese sources not covered by a tax treaty or agreement with Portugal will be subject to the normal tax regime.

Capital Gains Tax

NIF in Portugal

The Non-Habitual Tax Resident (NHR) regime in Portugal offers a favorable capital gains tax rate of 28 percent for those selling real estate, shares, and other assets in Portugal.

However, it’s crucial to note that this rate only applies to gains realized within Portugal. For gains from assets sold outside of Portugal, there is no taxation in Portugal, provided they are not from a Portuguese source.

Moreover, individuals who have held assets for over a year may qualify for a tax exemption on capital gains realized in Portugal as long as they have not been tax residents in Portugal in the past five years. The exemption applies to gains from selling shares in Portuguese companies or real estate used for permanent residence.

Double Taxation Agreements (DTAs) with Portugal can also impact the taxation of gains for NHR individuals. These agreements allow individuals to claim a tax credit for taxes paid on gains in Portugal against the taxes owed in their home country.

Given the complexity of capital gains tax under the non-habitual tax regime, it’s essential to seek professional tax advice to ensure compliance with Portuguese tax laws and maximize tax savings.

NHR Portugal, list of professions:

Under the non-habitual tax regime, professions considered of ‘high cultural and economic worth’ are given generous tax exemptions. The following professions are considered to be of high added value:

Architects

Engineers

Geologists

Theater, ballet, cinema, radio, television artists

Singers

Sculptors

Musicians

Painters

Auditors

Tax consultants

Dentists

Medical Analysts

Clinical surgeons

Ship's doctors

General Practitioners

Dentists

Medical physiatrists

Doctors

University lecturers

Psychologists

Archaeologists

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 in natural sciences and engineering

Research and development in biotechnology

Designers

Investors

Managers

Directors

Higher management


Non Habitual Resident NHR, what happens after ten years?

After ten years, you lose your NHR status and tax exemptions and pay tax at standard Portuguese rates.

non habitual resident nhr Inheritance Tax under non-habitual resident status

Under non-habitual resident status, a non-habitual resident (nhr) is not subject to inheritance tax on assets inherited from non-Portuguese tax residents. However, if the inheritor has tax resident status in Portugal, they may be subject to inheritance tax on the inherited assets. It’s worth noting that gift tax in Portugal is also subject to different rates, depending on the relationship between the giver and the receiver.

non habitual resident nhr Income Tax under NHR regime

The non-habitual resident status offers attractive tax rates for personal income tax. NHRs are exempt from paying taxes on most foreign source income, including dividends, interest, capital gains, rental income, and income from employment outside of Portugal if the source country has a Double Taxation Agreement with Portugal.

However, foreign pension income is subject to a flat tax rate of 10 percent if it is not eligible under a DTA.

non habitual resident nhr Wealth Tax-free Remittance

NHR tax residents are entitled to a wealth tax-free remittance of income generated outside of Portugal. This means that they can transfer income from foreign sources to Portugal without paying any taxes on it.

non habitual resident nhr Tax Status and Paying Taxes

To be eligible for the NHR regime, individuals must have the right to reside in Portugal and not have had tax resident status in Portugal in the five years before residence in Portugal. After ten years, individuals lose their NHR status and tax benefits, and must pay tax at standard Portuguese rates. It is important to seek professional tax advice to ensure compliance with the country’s tax laws and optimize tax savings.

non habitual resident nhr Pension Tax

NHR non-habitual tax residency Foreign pension income is subject to a flat tax rate of 10 percent if it is not eligible under a DTA. However, it’s worth noting that some countries have DTAs with Portugal, which can impact the taxation of foreign pension income for NHR individuals.

In conclusion, non-habitual resident status in Portugal offers significant tax savings for foreign investors and professionals. However, it’s important to understand the eligibility requirements and potential tax implications of inheritance tax, income tax, and pension tax under NHR tax status. Seeking professional tax advice is highly recommended to ensure compliance with tax laws and optimize tax savings.

 

Importance of a NIF and Portuguese Bank Account

To apply for NHR status, an individual must have a tax identification number (NIF) in Portugal. The NIF is a unique nine-digit number assigned by the tax authorities. It is required for all tax-related activities in Portugal, including purchasing property, signing contracts, and opening a bank account. Having a NIF is essential to sign up for NHR status.

Having a bank account in Portugal is also important for NHR status, as it allows the individual to receive income and pay expenses in Portugal. Most banks in Portugal require proof of NHR status before opening an account, so it is advisable to obtain NHR status before proceeding to open a bank account.

 

How we can help you

We’re the experts in getting you a NIF and helping you open up a Portuguese bank account from anywhere in the world. Order a NIF online through our application form, and we’ll have one sent straight to your inbox in two to three weeks.

If you’re a non-EU/EEA/Swiss national, you’re required by Portuguese law to hire a fiscal representative who will help you apply for a NIF and serve as a point of contact between you and the Portuguese tax office. We also offer fiscal representation services.

 

Taxation of Foreign Source Income under NHR Tax Status in Portugal

Under the Non-Habitual Tax Resident regime in Portugal, individuals with foreign source income can largely be exempt from taxation in Portugal due to Double Taxation Agreements. If the income is sourced from a country with a DTA with Portugal, the income will not be taxed in Portugal.

Employment income

Foreign source employment income is either tax-exempt under NHR tax status or taxed at a flat rate of 20 percent if it falls under the list of eligible professions.

Self-employment income

non habitual resident tax benefits for remote workers with passive incomeSelf-employment income is taxed at regular progressive rates unless it falls under the eligible profession categorization. This income is also subject to social security contributions unless the individual already pays social security contributions into another system. Contributions can be made to the Portuguese social security system by signing up for a NISS.

Optionally, it can be taxed at a flat rate of 20 percent. If the income is from an eligible profession and comes from a country with a DTA or in the absence of a treaty under the OECD model tax convention (provided the country is not a black-listed tax haven), it is tax-exempt.

Royalties and income from financial assets

Income from royalties and financial assets is tax-exempt if it comes from a country with a DTA. If the income originates from a country without a DTA but which is not a blacklisted tax haven, it is also tax-exempt. Otherwise, it is taxed at 28 percent or 35 percent if the country is a blacklisted tax haven.

Real estate income and capital gains

Real estate income and capital gains are tax-exempt if they come from a country with a DTA or from a country without a DTA but which is not a blacklisted tax haven. Capital gains from the disposal of securities (shares, bonds, etc.) are subject to an optional rate of 28 percent or 35 percent if the gains are from a blacklisted tax haven.

Pension income is taxed at a flat rate of 10 percent since March 2020.

 

Taxation of Portuguese Source Income under the NHR Regime in Portugal

Employment income

If the employment does not fall under the list of eligible professions, usual progressive income tax rates apply. If the employment falls under eligible NHR professions, an optional tax rate of 20 percent income tax is applicable.

Self-employed income

If self-employment does not fall under the list of eligible professions, usual progressive income tax rates apply. If it falls under eligible NHR professions, an optional tax rate of 20 percent is applicable to self-employed persons, although usual progressive tax rates can also be applied.

Real estate income and capital gains

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

Pension income

Pension income is taxed at the usual rates, currently 10 percent.

Portuguese tax table for 2023

INCOME (€)

TAX RATES (%)

0 - 7,479

14.5

7,479 - 11,284

21

11,284 - 15,992

26.5

15,992 - 20,700

28.5

20,700 - 26,355

35

26,355 - 38,632

37

38,632 - 50,483

43.5

50,483 - 78,834

45

Over 78,834

48

Portugal’s global income tax rate

Types of income

The rate on general conditions

The rate for a Non-Habitual Resident

Dividends, interest, and royalties

28 percent

0 percent

Capital gains

28 percent

0 percent

Rental income

28 percent

0 percent

Labor income

Up to 48 percent

0 percent

 

Helpful Resources

If you’re thinking about relocating to Portugal and registering as a non-habitual resident, the following articles will be of help to you:

 

Conclusion

tax residents portugal The Non-Habitual Resident Tax regime in Portugal offers generous tax exemptions for qualifying individuals for a period of ten years, making the country an attractive destination for foreign investors and retirees.

The NHR status allows individuals to enjoy a flat income tax rate of 20 percent on most types of income earned in Portugal.

It exempts income sourced from abroad from taxation in Portugal if it is subject to income tax in a second country under a tax treaty or agreement with Portugal.

To qualify for the program, an individual must meet certain requirements, such as applying for NHR status with the Portuguese tax authorities within the first six months of becoming a tax resident in Portugal. It is also important to have a tax identification number (NIF) and a bank account in Portugal.

The NHR status only applies to certain types of income, and individuals must continue to meet the tax residency requirements to maintain NHR status. If an individual does not meet the tax resident requirements for a particular year, they will lose their NHR status for that year and will be subject to the normal tax regime in Portugal.

 

Frequently Asked Questions about Non-Habitual Residence Portugal

What kind of exemptions exist under the Portugal NHR program in 2023?

Holders of NHR status may not be required to pay taxes on their worldwide income. For income earned in Portugal, income tax is a flat 20 percent. By obtaining NHR status, foreign investors can minimize their tax obligations when they live in Portugal and avail themselves of significant tax breaks.

What are the advantages of the NHR scheme?

The advantages of the NHR scheme include beneficial tax treatment on most income from abroad and certain earnings from Portugal.

NHR status in Portugal is valid for ten years, giving you enough time to become a citizen of the country while enjoying the tax advantages of being a Portuguese tax resident (i.e., not having to pay wealth tax).

What happens if my income comes from another country?

If a country is taxing your income and Portugal has a double taxation agreement with them, you will not be subject to Portuguese taxation.

What if I earn income in Portugal?

You may still be eligible for tax breaks depending on your profession or source of income. However, if you earn income in Portugal, you will most likely be subject to Portuguese taxes.

Is it possible to track my non-habitual residency application in Portugal?

Yes, if you are registered on the Portal das Finanças, you can track the progress of your application.

How can I find out if my non-habitual residency application in Portugal has been accepted?

You can check the status of your application through the finanças portal by clicking on Aceda aos Serviços Tributários, then Consultar Pedido, and finally, Inscrição Residente Não Habitual.

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

You can expect to hear back about your application within a couple of weeks. The process typically takes around two weeks.

Do I have to live outside Portugal to qualify for the Non-Habitual Resident tax regime?

No, but you do need to maintain a permanent residence in the country by renting a home or purchasing a property. To avail of NHR status, you must stay for a minimum of 183 days in the country per year or maintain a property as your habitual residence.

Do I need to declare my assets when applying for the NHR regime?

No, you only need to report your income on your tax returns.

How long has Portugal’s NHR regime been in place?

The Non-Habitual Resident NHR tax regime has been available since 2009. The program is becoming increasingly popular every year.

How do you qualify for NHR in Portugal?

To qualify for the Non-Habitual Resident (NHR) status in Portugal, you must meet specific conditions. First, you must not have been a tax resident in Portugal in the last five years prior to your application.

Secondly, you should apply for NHR Portugal status upon establishing Portuguese tax residence. Being a tax resident typically means you spend more than 183 days in Portugal in a tax year or you have a habitual residence in Portugal as of 31 December of the tax year. Note that this status is available for EU and non-EU citizens alike.

The benefits of being a Portugal non-habitual resident are particularly attractive for certain types of income, like from freelance work or specific professions. The NHR Portugal list of professions includes a range of high value-added activities under the European qualifications framework, such as architects, engineers, artists, doctors, teachers, and IT professionals, among others.

What is the minimum stay in Portugal for NHR?

The Portugal NHR minimum stay requirement is not clearly defined in the law, meaning there’s no official minimum number of days you must spend in Portugal within a tax year to keep your NHR status.

However, to be considered a tax resident in Portugal, which is necessary for obtaining and maintaining NHR status, you typically need to spend more than 183 days in the country within a tax year or have a habitual residence in Portugal as of 31 December of the tax year.

What is the income tax rate in Portugal for NHR?

The NHR tax regime offers significant tax advantages, including a flat income tax rate of 20 percent on certain types of Portuguese-sourced income for eligible professions. This includes NHR Portugal freelance workers in high-value-added fields. For income sourced from abroad, you pay income tax depending on the type of income and the applicability of a tax treaty.

For example, certain types of foreign income like dividends, royalties, and interest can lead to tax exemption if they are taxed in the source country under a tax treaty or, in the absence of a treaty, can be taxed in another jurisdiction. Some types of foreign income, like employment or self-employed income, might also be exempt if certain conditions are met.

NHR Portugal: What happens after 10 years?

The NHR tax regime in Portugal applies for a period of 10 years. After this period, individuals will revert to the standard Portuguese tax residency status unless they qualify for another type of tax regime. This means that their global income would become subject to the standard progressive Portuguese income tax rate, which can range from 14.5 percent to 48 percent.



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