If you are planning to move to Portugal, you should learn about the fiscal benefits available in the country to newcomers. Non Habitual Residence (NHR) is a fiscal regime that allows paying taxes at reduced rates for the first 10 years of living in the country. Some income made by non-habitual resident of Portugal abroad is not taxed in the country at all.
Naturally, you have to meet certain criteria to qualify for the NHR status. Below we describe the criteria and offer a step-by-step guide on acquiring NHR in Portugal.
The preferential tax regime was first introduced in Portugal in 2009 and some changes were made to the program in 2020. The rules are going to change once again in 2024. We are describing the things as they stand for now.
The goal of the NHR initiative is to attract skilled professionals and investors to Portugal from foreign countries. Tens of thousands of foreigners have made use of the opportunity. It is available to all newcomers who have been paying taxes elsewhere over the last five years.
Please note that the opportunity to pay less in taxes is available for 10 years only. When the period expires, you will have to pay the taxes at normal rates.
You have to meet the following key requirements to be eligible to apply for non-habitual residence in Portugal:
- Legally reside in the country for at least 183 days during the previous year;
- Have livable residential accommodations in Portugal;
- Be a highly-qualified specialist.
The application for NHR has to be filed before March 31 of the year following the year when you acquired a legal residence permit in Portugal.
The tax benefits can be enjoyed for 10 years even if you spend part of the time in other countries. However, you cannot ‘freeze’ your NHR status if you want to be a tax resident of another country for a certain period within the 10 years. Extension of the beneficial period is also impossible. You can learn more about the specific program conditions if you click here.
Because the Government of Portugal is eager to attract foreign specialists to the country, it offers tax incentives to them that cannot be found in most other EU countries. The incentives include the following ones:
- Personal income tax is payable at a reduced rate for 10 years;
- Income from almost all foreign sources is tax-exempt in Portugal;
- The income tax rate is fixed at 20% (personal income is taxed at a progressive scale in Portugal and the rate can be as high as 48%);
- You will be a full-fledged tax resident of the EU;
- No gift tax is payable;
- No inheritance tax is payable if the property is inherited by members of the family;
- No wealth tax is charged either.
You have to carry out ‘high added value activities’ to qualify for the status. On January 1, 2020 the list of occupations was changed and some professions left it (such as architects, for example) and some new occupations were added (such as farmers, for example).
Below we list the professionals who can qualify for non-habitual residence in Portugal:
- CEOs and executive company directors
- Directors of administrative and commercial services
- Directors of production and specialized services
- Directors of hotels, restaurants, commercial and other services
- Professionals working in the physical sciences, mathematics, engineering and similar technical fields
- University and high school teachers
- Information and Communication Technology (ICT) professionals
- Writers, journalists, and linguists
- Artists and performing artists
- Mid-level scientists and engineers
- Information and communication technology specialists
- Farmers and skilled agricultural and livestock workers
- Skilled forestry, fishing, and hunting workers
- Skilled laborers, construction workers and craftsmen, including skilled workers in metallurgy, metalworking, food processing, woodworking, garment manufacturing, crafts, printing, precision tool making, jewelers, and electricians
- Fixed plant operators and machine operators
People working in these professions in Portugal are exempted from taxes on incomes derived from other countries including dividends, interests, royalties, and property lease as well as salaries paid in foreign countries.
Taxes will be charged in the country where the income is made. Another important condition for tax exemption in Portugal is that there should be a bilateral.
Below we describe the steps that a non-EU/ EEA/ Swiss citizen has to go through in order to acquire the status of a non-habitual resident in Portugal.
1. Confirm your residential address.
Before you can apply for the NHR status, you have to obtain a legal residence permit in Portugal. There are various methods of doing that and the ‘golden visa’ program is one of the most popular such methods.
2. Obtain a NIF (Portuguese acronym for taxpayer’s number).
A NIF is a nine-digit number that you have to acquire if you are planning to work in Portugal or engage in business activities there. You don’t have to visit Portugal to acquire a NIF because a representative of yours (who already has a NIF) can do it on your behalf. Otherwise, you can pay a personal visit to the fiscal service bringing your passport and proof of address.
3. Register as a tax resident of Portugal.
When you have a NIF, this task can be completed online.
4. Apply for the status of non-habitual resident of Portugal.
You can apply for NHR by logging onto the financial web portal of the Portuguese Government. You will need to supply your NIF to gain access to the government services. When requesting access, you will have to supply your email address and your telephone number in addition to your NIF. They will send you the login and password to your email address within 2 weeks.
How to do ?
Once you have the login (which will be your NIF) and the password, you should log onto the web portal and do the following:
- Enter the system.
- Click on the following icons sequentially: Aceda aos Serviços Tributários > Entregar Pedido > Inscrição Residente Não Habitual.
- Supply the required information (indicate the year when you became a legal resident of Portugal and the country whose taxpayer you were last year).
- State that you have not been a tax resident of Portugal for the previous five years.
You will need to supply tax declarations from the foreign country whose tax resident you have been up till now to confirm your statement. Besides, you will have to supply a property purchase agreement or a rent agreement to prove that you have a place to stay in Portugal.
Even though theoretically you can apply for the NHR status without anybody’s help, this is a bureaucratic process anyway. Many newcomers to Portugal often seek legal support in applying for the NHR status.