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PORTUGAL - SPECIAL TAX REGIME FOR NON-HABITUAL RESIDENTS

Why Portugal is a top residence destination

Portugal has long been recognised as a destination of excellence for tourism, with its pleasant climate, friendly and hospitable population (most of which is fluent in at least one more language, predominantly English), rich history, gastronomy, landscape diversity, excellent infrastructures at all levels, international airports with regular connections with major cities, modern road network and high-quality services.


It is also a top residence destination due to a combination of the same reasons that contribute to its excellence as a tourist destination with both a good standard of living and a (comparatively) low cost of living, excellent health care facilities, being the 4th  most peaceful country in the world according to the Global Peace Index of 2022, having stable political and social environments and a favourable business climate (occupying the 23rd position in World Bank`s “Ease of Doing Business Rank” of 2015).


Portugal is part of the European Union, the Eurozone, the Schengen area, and the OECD. It has an extensive network of signed international treaties, such as double-tax treaties and treaties for the mutual protection and promotion of investments.


Part of a broader strategy to attract foreign investment (and Ultra and High Net Worth Individuals) and increase its economic competitiveness, becoming a premium real estate location as well as one of the leading EU countries in R&D and new technologies, in 2009, Portugal introduced a privileged (voluntary) Personal Income Tax regime for non-habitual residents, intended to attract:


  • Skilled professionals in high-added value activities of scientific, artistic or technical nature;
  • Entrepreneurs and investors (know-how, intellectual and industrial property);
  • Retired individuals, beneficiaries of pension schemes granted abroad.


These will be tax-exempt regarding most foreign income while benefiting from reduced taxation on some Portuguese income, provided some conditions are met.

Qualifying for the Non-Habitual Residency Status
The non-habitual resident tax regime is available to applicants that meet all of the following conditions:

1. Are entitled to Portuguese residency:

  • European Union / Switzerland / European Economic Area countries citizens may freely register as Portuguese Residents;
  • Other foreign nationals that obtained Portuguese residence by undertaking qualified investment activities, i.e. (Portuguese) Golden Visa holders;
  • In all other cases where a residence permit was granted.


2. Have not been taxed as Portuguese residents in the five years before acquiring Portuguese residence;


3. Apply for Portuguese tax residency, which requires that the applicants, during any 12 months, beginning or ending in the fiscal year of the application (conditions for Portuguese tax residency):


  • Stay in Portugal for more than 183 days (consecutive or not); or
  • On any day of the 12 months, have a residential accommodation in Portugal, bought or rented, in such conditions that leads to the assumption that it is intended to be used as their habitual home.

Residency is established as of the first day of permanence in Portugal, and applications for registration as non-habitual residents should be submitted at the moment of the registration as a Portuguese resident or by the end of March of the following year.
Duration of the Non-Habitual (Special) Tax Regime
The non-habitual resident status, for tax purposes, applies for a consecutive 10-year period, provided that the conditions for maintaining Portuguese tax residency are fulfilled during each year of that period.  
If the beneficiary decides to interrupt his / her special status for one or more years, he / she may still claim his / her status back, provided that he / she is deemed a tax resident for that remaining period.

Tax advantages of applying for Portugal NHR status:

  • Benefit from a special personal income tax treatment over a 10-year period
  • Enjoy tax exemption on almost all foreign source income
  • 20% flat rate for certain Portuguese source incomes (from specific professions and from self-employment), as opposed to normal Portuguese income tax rates of up to 48%
  • Become part of a white-listed tax environment within the EU
  • A tax exemption for gifts or inheritance to direct family members
  • No wealth tax
  • Free remittance of funds to Portugal
Which incomes can be tax exempted
Foreign sourced incomes:
  • Interests;
  • Capital gains;
Exception: Shares, securities and bonds are taxed at a flat 28% rate.
  • Dividends;
  • Income from real estate properties;
  • Royalties (some);
  • Other incomes from capital;

If these incomes are potentially taxable in the source State, under the rules of the Double Treaty Agreement (DTT) signed between PT and the source income State (or in the absence of a DTT, under the rules of OECD Tax Model Convention); and that income is not considered as sourced from a tax heaven blacklisted territory;

  • Employment income is exempted, as long as is effectively taxed in the source State under the rules of the DTT or, when not signed any, when it is potentially liable to taxation at the source State under of the OECD Model Tax Convention; and that the income is not considered as sourced from a tax heaven blacklisted territory;
  • Independent Service Provider incomes are exempted when arise from high value-added activities of a scientific, artistic, or technical nature, as defined by Ministerial Order, and is potentially liable to taxation in the source State under the rules of the DTTT or when not existing, under the rules of the OECD Tax Model Convention; and that income is not considered as sourced from a tax heaven blacklisted territory.
Which incomes have reduced taxation
Foreign sourced incomes:
  • Pensions: 10% rate when not considered as derived from a Portuguese source;

Portugal sourced incomes:
  • Employment income: 20% rate when arise from high value-added activities of a scientific, artistic or technical nature, as is defined by Ministerial Order;
  • Independent Service Provider: 20% rate when the incomes and when arise from high value-added activities of a scientific, artistic or technical nature, as is defined by Ministerial Order
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Disclaimer

This website is intended for guidance and general information only and does not constitute or purport to provide you with legal or investment advice.  Such information is subject to changes without notice.  Each case is unique and depends on the facts and circumstances of the individual and due consideration should be taken if applying the general information to your personal situation.