What is the non-habitual resident programme?
The non-habitual resident (“NHR”) taxation regime was established in 2009 to boost the economy by attracting “high value” residents and investors, such as professionals with desired qualifications or industrial know-how, pensioners, and passive-income earners. It offers tax exemptions on foreign income and capital gains for a period of 10 years.
The scheme has been thriving, attracting over 10,000 non-habitual tax regime residents to Portugal so far.
What are the advantages for non-habitual residents in Portugal?
No wealth tax or inheritance tax for direct family members
Tax exemption on almost all foreign income
Special personal income tax treatment over a 10-year period
20% flat rate for certain Portuguese source incomes*
10% tax rate on foreign pension income
Be part of a white-listed tax environment within the EU
*From specific professions as well as income from self-employment — as opposed to the standard Portuguese income tax rates of up to 48%
Benefits for retirees
Foreign pension income in Portugal is taxed at only 10% and most double taxation agreements (DTAs) grant exclusive taxation rights on pension income to the country of residence.
Furthermore, the definition of “retirement” in terms of the NHR is loose. Should you have any business interests elsewhere in the world, you’ll still be able to keep these alive and running while you maintain your residency in Portugal.
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Tax benefits by income source
| Income type | Income type Taxation on income earned in Portugal | Taxation on income from a foreign source* |
|---|---|---|
| Pensions | Up to 48% | 10% |
| Employment income from high-added value activities | 20% | 0% |
| Other employment income | Up to 48% | 0% |
| Business or professional income from high-added value activities | 20% | 0% |
| Other business or professional income | Up to 48% | 0% |
| Intellectual or industrial property income | 16.5% or 28% | 0% |
| Capital income | 28% | 0% |
| Rental income | 25% | 0% |
| Capital gains (shares) | 28% | 0% |
| Capital gains (real estate) | 14.5% - 28% | 0% |
| Trusts | 28% | 0% |
*Each case is different as this depends on source and sometimes double tax agreements between the countries. Source tax may still apply. Income from Blacklisted Jurisdictions considered tax havens is taxed differently.
How to qualify for the NHR programme
To qualify for NHR status, you need to have the right to live in Portugal and you need to be a new Portuguese tax resident (you cannot have been a Portuguese tax resident in the five years preceding your application).
To be considered tax resident in Portugal, you generally must either have lived in Portugal for more than 183 days in the past 12 months or have a home in Portugal on 31 December of the year in question. You do not have to own this property and may show a 12-month lease as proof of residence.
Frequently asked questions
Who can apply for NHR status?
To be eligible, an applicant must be a Portuguese tax resident, and must not have been a Portuguese tax resident in the five years preceding their application.
Does the term “non-habitual” mean that I have to be a tax resident outside Portugal?
The term used to define this tax status can be confusing. However, to benefit from this regime, you are required to have your tax residency in Portugal and to live in Portugal for more than 183 days per year
Do I have to purchase a property in Portugal?
You do not need to purchase a property in Portugal to apply for nonhabitual resident status. It is sufficient to lease a property.
How long does the application take?
The application is done online and takes some months to be processed by the Portuguese tax authorities, so careful forward planning is required. It can be made only once you have changed your tax residency to Portugal. If you have a value-added activity, you should have evidence available if this is ever required.
How long does this status last?
Non-habitual tax resident status has a duration of 10 years.
When does the Portuguese tax year run from?
The Portuguese tax year coincides with the calendar year and runs from 1 January to 31 December.
Do I need to apply for residency?
EU/EEA/Swiss nationals need to obtain a residence certificate from the local municipality. Non-EU/EEA/Swiss nationals must obtain a residence authorisation from Portugal’s Border Agency (SEF).
Early cross-border financial planning is crucial and will help you avoid costly mistakes later.
Move to Portugal – your residency options
Citizens of the European Union (EU), the European Economic Area (EEA) and Switzerland may freely live and work in Portugal. Otherwise, you will need to apply for a residence visa or permit.
Resident visas are applied for from outside of Portugal and allow you to travel into the country. They’re genuinely only valid for four months to give you enough time to apply for your residence permit. The residence permits are valid for longer and can lead to permanent residency and citizenship.
The Retirement visa
For retirees
The Type I (or D7) visa
For foreigners who have stable passive income they’re able to live off
Work visas
For those seeking employment in Portugal
The Startup visa
For entrepreneurs.
The Tech visa
To bring technological skills into the country
The Green
An investment visa for those willing to contribute €500,000 or more to environmental development projects
Portugal also offers a Golden Visa programme that grants residence in exchange for an investment in Portugal’s economy. One of the popular ways to qualify is to purchase a property, which means this programme is perfect for anyone who doesn’t yet hold the right to reside in Portugal, but would like to claim the benefits of the NHR.
Plan for your move to Portugal
Early cross-border financial planning is crucial and will help you avoid costly mistakes later. Some things to consider before you make the move:
- You cannot register for the NHR if you are already a tax resident in Portugal or if you were a Portuguese tax resident in the previous five years, so you should be prepared to register before you submit your declaration and first tax return with the Portuguese tax office.
- Once you are considered tax resident in Portugal, you will be required to pay tax in Portugal. How much you pay will be determined by many factors, including any double taxation agreements (DTAs) that are in place between Portugal and any other country where you have tax residency. It may be tax efficient to notify the tax office in these other countries of your intention to move to Portugal, so you become tax resident in only one jurisdiction and avoid double taxation.
- The special NHR tax rates only apply for 10 years, after which you will be taxed at the general Portuguese income tax rate. However, with early, careful planning you are able to mitigate your ongoing tax burden.
Speak to a cross-border adviser today
Don’t hesitate to get in touch if you have any questions or would like to discuss cross-border wealth planning solutions.