The Portugal NHR tax regime is a hugely successful scheme that offers lucrative tax breaks for foreign residents.
This preferential tax treatment for new residents of Portugal allows entrepreneurs, high-net-worth individuals, and pensioners to enjoy Portugal’s white-sand beaches and genial sunshine while benefitting from the lowering costs on many points.
According to the Portuguese Ministry of Finance, the main nationality who benefited from the NHR are French people. However, in fact, plenty of other individuals derive advantage of one of the most competitive taxation climates in the world as well.
One of the ways to join this privileged circle is to get the Portugal Golden Visa Program, which gives you a Portuguese residency and makes you one step closer to becoming a Portuguese tax resident and getting an HHR regime far less.
The guide will tell you what sort of tax benefits you can expect, how to make sure you’re eligible, and what is a step-by-step walk-through on how to apply. So let’s take a closer look at Portugal’s non-habitual resident’s tax regime.
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The Portuguese tax system is one of the most generous in Europe. As a result, this country has quickly become one of the popular destinations for ex-pats wishing to lower their tax burden, expand their business, and change a lifestyle for the better.
The main difference in the Portuguese tax regime is whether you are already a tax resident in Portugal or not. But what if you don’t know your legal status? Don’t worry, everything comes down to the number of days you will spend in Portugal.
At a basic level, the rules for becoming a Portuguese tax resident are quite straightforward. The simplest approach is that if you live in Portugal for more than 183 days in a single calendar year, you are a tax resident of this country. A tax residence certificate can prove this.
For example, if you managed to get the Portugal Golden Visa, you can reside there for only 7 days per year, as this program has a low stay requirement. In this case, you need to pay only for Portuguese-sourced income. Services managers, such as Migronis, can help you know more about what you can get with Portugal Golden Visa, Portuguese taxes, and other relevant issues.
Reach out to this guide and get the most out of an NHR regime in Portugal!
First introduced in 2009 by the Portuguese government, the non-habitual resident’s tax regime aims to attract investors of high cultural and economic worth. Such exchange is just a win-win for both parties.
First, let’s say that the name is completely confusing. When first encountering this tax incentive, it may seem that it is referred only to non-residents of Portugal. That’s not true. In fact, quite to the contrary. Applying for NHR, you first need to know that you have to be a tax resident of the country.
Wealthy and highly literate people may help boost Portuguese competitiveness in the global market by attracting foreign investment, bringing new ideas, and developing the Portuguese economy. And UHNWIs may also benefit — With NHR tax status, they finally got a chance to breathe freely by lowering their tax burden.
Portuguese income tax works on the same basis as in the UK. The tax rate starts at 14.5% and goes up to 48%, which is not a tax-saving solution at all. However, with the NHR regime in Portugal, your income is limited to a flat rate of 20%. Furthermore, nearly all of your foreign income can also be tax-exempt. This means that the total savings could be huge. And this is the reason why Portugal is so popular among Brits (and other nationalities as well). Statistics say that in 2022 over 34,000 British nationals live in Portugal. Many of them have relocated due to the Golden Visa Program.
It is important to note that the non-habitual tax regime is granted for 10 years from the year of first tax residence in Portugal.
The upside of this status is that it does not have a stay requirement. And you can also stop being a Portuguese tax resident for a year or two without losing all benefits of NHR for future years. So this tax system is flexible.
A non-habitual tax regime is not given automatically. It is granted upon successful completion to the Portuguese government. However, the procedure is quite simple. You just need to file a request stating that you were not a Portuguese tax resident during the last 5 years.
In fact, NHR is quite a broad tax incentive. And not only because it covers large numbers of people but also in view of the fact that it has different implications for different population categories. Let’s delve more deeply into this topic.
Generally, tax benefits depend on where you are going to do business. If an income you derive from your business activity will not be associated with Portugal, then you will get a tax exemption and be able to make a good thing from a double taxation agreement. However, with Portugal-sourced income, entrepreneurs end up paying a 20% rate.
High-value activity professionals can accrue many benefits from the NHR regime. Specifically, this can be a 20% flat rate of tax, which may be better than the standard Portuguese tax rates.
Freelancers and Retirees may also benefit from the NHR regime.
GOLDEN VISA PRESENTATION
Understanding the tax system is always a big job. The tax system of another country is an even greater challenge. However, the better you can understand taxes and how to benefit from them, the better you are equipped to make decisions.
Depending on the nature of your income, Portugal can offer a number of benefits if you apply for this favorable tax regime. First, one should note that most foreign source income is not taxable. Another nice bonus is that wealth tax and capital duty are not taxed at all, as well as inheritance tax and gift tax.
The following types of taxes can potentially benefit you as long as they apply to foreign source income:
For now, cryptocurrency is not recognized as a legal tender in Portugal. This means that you won’t be taxed on any crypto gains.
Where to begin? What are the pitfalls? It seems that the head would explode this minute
We answered all your questions for you. So just dive into this article where we break down the nuances
A key feature of the Portuguese NHR Regime is Double-Taxation Agreements (DTA). In fact, Portugal signed about 90 such treaties. See all of them in the table below.
| Annual income | NHR rate (%) | General rate (%) |
|---|---|---|
| Up to €7,112 | 20 | 15 |
| €7,113 - €10,732 | 20 | 23 |
| €10,733 - €20,322 | 20 | 29 |
| €20,323 - €25,075 | 20 | 35 |
| €25,076 - €39,967 | 20 | 37 |
| €39,968 - €80,882 | 20 | 45 |
| €80,883 + | 20 | 48 |
In theory, many double taxation treaties grant the source country the possibility of taxing income paid to other country residents. However, countries avoid doing so in practice and don’t use this possibility. This means that most of your activities will be zero-taxed.
The Portuguese government blacklists some jurisdictions for the purpose of NHR. This means that income derived from any of these countries would not qualify for NHR (only in the case of double tax agreement rules).
One small example: You draw your income from Jersey (a blacklisted tax haven that does not tax individuals). In this case, you would end up paying standard tax rates. Another example is Antigua and Barbuda, which is also a blacklisted tax haven.
According to the Internal Revenue Service, if you want to possess the beneficial NHR status, you have to fit under the following conditions:
You can also live less than 183 days annually, but only if you have bought a property here during the last 12 months. This should be a habitual place of residence. Therefore, buying real estate is beneficial for new tax residents. However, a rental contract for 12 months is also sufficient proof of residence.
The last exception to the rule is given to people who perform public functions for the last 12 months in Portugal or to the part of the crew of a ship or aircraft.
Important! UK citizens can also apply for tax residency in Portugal. However, first, they need to apply for a residence visa, such as a D2, D3, or Portugal Golden Visa Program. There is also the same requirement, as with the EU/EEA/Swiss citizens, which implies that the NHR tax regime in Portugal is given only in case a person has not been registered as a tax resident in Portugal for the last 5 years. The same goes for USA citizens.
One of the main requirements of Portuguese tax authorities regarding the NHR tax regime is the necessity to fit into a list of activities that are considered of high value.
Here is a list of high added value activities in the NHR according to the no. 6 of the article 72. and the no. 5 of the article 81.º do CIRS:
Other professional activities:
Activities excluded from the NHR:
Activities such as auditors, tax consultants, psychologists, and archaeologists are no longer on the list.
However, professionals who applied for the status until March 30, 2021, will not be excluded from the tax benefit regime and will be able to take advantage of the benefits until the end of their 10-year period.
What income does not fall under the NHR regime?
(1) The income from local (Portuguese) sources, with the exception that there is a special 20% tax rate for certain income from qualified professions, (2) The foreign income which is not taxed at source under the relevant double tax treaty (and is not designed to be taxed under the OECD model tax treaty), for example, the capital gains from the sale of shares not deriving value from immovable property
How long does it take to get NHR status?
This is a simple filing procedure
How much money do I need to qualify for NHR status?
No requirements apply.Are there any processing fees or additional expenses?
Immaterial expenses
What are possible reasons for NHR status rejection when basic requirements are met?
None, this is a very simple procedural exercise
Can both spouses apply for NHR status?
Yes
When is NHR status not applicable? In which cases will I not benefit from zero tax on foreign income?
There are no major restrictions or limitations
How does the 183-rule work? Do I need to bring any evidence that I was in Portugal all the time?
183 days is not the only criterion of the tax residence: it should be enough to have family-based in Portugal, or immovable property owned or rented in Portugal, provided the individual does not become a tax resident elsewhere
Here we covered the main benefits of paying taxes with the NHR tax regime. But, of course, there are other advantages as well!
Note! The non-habitual resident status has undergone a minor change in 2020. Pension income was not taxable earlier. But now it has a 10% rate.
Only in 2016, more than 10,000 people applied for NHR, as an attractive tax regime. Since then, the number of applicants enjoying the tax advantages of this status has continued to rise.
You can get a non-habitual resident status either when you register as a Portuguese resident (on the website http://www.portaldasfinancas.gov.pt/) or at any Tax Office or Citizen Shop.
Important! The submission must be made by March 31st if you want to become a non-habitual resident exactly this year. People who make their requests too late are often denied NHR status. Be aware of this. We are sure that you don’t want to miss your NHR deadline!
You can be registered as a non-habitual resident if the following requirements are met:
you have not been a Portuguese resident in any of the five years before the year you applied for a non-habitual resident condition
If you meet the criteria established in no. 1 of the art. 16 of the Personal Income Tax Code (CIRS). This means you are an EU/EEA/Swiss citizen, and you have the right to become a Portuguese resident. Otherwise, you applied for a Portugal Golden Visa.
NHR Portugal is given for 10 years (calculated from the year of first tax residence in Portugal).
Firstly, you should register as a tax resident in Portugal. Then you need to request a password through http://www.portaldasfinancas.gov.pt/. Finally, fill in the application form.
After receiving an access password and filling out an application, you need to declare that you meet the necessary conditions and were not a tax resident in Portugal during the last 5 years.
NHR tax residents acquire tax exemptions on most of the tax dividends received from overseas. An NHR status must be non-renewable, being valid for a period of 10 years.
You can check the status of your application within 2 days after submission.
To qualify for this highly beneficial regime in Portugal, one needs to live overseas, have a desire to become a resident in Portugal, and not have been a Portuguese resident within the last 5 years.
Processing an application commonly takes about 2 weeks. After that period, you will be either accepted or declined.
Non-habitual residents should stay in Portugal for at least 183 days per year.
NHR regime is granted only for 10 consecutive years.
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