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.
Benefits 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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What counts as a high value-added job in Portugal?
Non-habitual residents who earn income in Portugal (category A) or self-employed persons such as freelancers and entrepreneurs (category B) from high value-added activities are taxed at a flat rate of 20%. Ministerial Decree no. 12/2010 of 7 January defines what is meant by “high added value activities” of a scientific, artistic or technical nature.
Workers in these fields must have at least the level of qualification of the European Qualifications Framework Level 4 or the International Type Classification of Education of level 35 or five years of duly justified professional experience. The qualifying professional activities covered by the NHR regime include the following:
Qualifying high value-added jobs list for NHR status
112 - Director General and Executive Director of companies
12 - Directors of Administrative and Commercial Services
13 - Directors of production and specialised services
14 - Director of hotel, restaurant, business and other services directors
21 - Specialists in the physical sciences, mathematics, engineering and related techniques
221 - Doctors
2261 - Dentists and stomatologists
231 - University and higher education teacher
25 - Experts in information and communication technologies (ICT)
264 - Authors, journalists and linguists
265 - Creative Arts and Entertainment Artists
31 - Technicians and Intermediate Occupations in Science and Engineering
35 - Information and Communication Technology Technicians
61 - Farmers and skilled workers in agriculture and livestock breeding for trade
62 - Skilled workers in forestry, fishing and hunting
7 - Skilled workers in industry, construction and crafts, including in particular metallurgy, metalworking, food processing, woodworking, clothing, crafts, printing, precision instrument manufacturing, jewelers, craftsmen, electrical and electronic workers
8 - Plant and machine operators and assembly workers, namely operators of stationary machines
Directors of companies promoting productive investments, as long as they are eligible for eligible projects and tax concession agreements concluded under the Investment Tax Code, approved by Legislative Decree No. 162 / 2014 of October 31
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 about the Portugal NHR programme
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 NHR 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 NHR 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 Portuguese 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.
Factors to consider about the NHR programme
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.
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