1. What is the NHR regime?
The non-habitual tax resident (NHR) status is a tax regime created to improve Portuguese international competitiveness. This regime targets non-resident individuals who are likely to establish a permanent or a temporary residence in Portugal. Golden Visa holders automatically qualify for the Portuguese Non-Habitual Tax Regime (NHR).
2. What are the benefits of the NHR regime?
The NHR regime establishes, under certain conditions, IRS exemptions on foreign source income, as well as a limited 20% taxation of income from employment and independent personal services, in both cases if deriving from listed of high value added activities.
3. How do you acquire tax residence in Portugal?
Staying for more than 183 days in the Portuguese territory, whether these days are consecutive or not, in any 12-month period beginning or ending in a given tax year;
If staying for a shorter period in the Portuguese territory, on any day of the period referred above, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode;
4. What is the procedure to register as tax resident in Portugal?
Registering as a tax resident in Portugal is a requirement to obtain the non-habitual resident status, which means that those wishing to apply for the regime generally must:
- register as non-resident taxpayers;
- obtain residence permits (for non-EU nationals) and residence certificates (for EU nationals);
- register as tax residents; and
- only then you can apply for the non-habitual resident status.
5. For how long may you enjoy the NHR status?
Non-habitual resident individuals may enjoy the status for a ten-year period. After this period they will be taxed under the normal IRS tax regime.
6. Once you have the NHR status, what are the tax requirements?
After obtaining the non-habitual resident status it will be necessary to file annual tax returns in Portugal, stating your worldwide income and expenses.
7. For how long are the benefits of the regime granted?
The NHR status is granted for a ten-year period.
8. What types of income are eligible for exemption under NHR regime?
Foreign-sourced passive income (interests, dividends, certain royalties, other income from capital, capital gains and income from immovable real estate) derived by NHR is exempt (without progression except in the case of capital gains on real estate) in Portugal, provided that it is potentially liable to taxation in the source State (i) under the rules of an existing Double Tax Treaty (DTT) or (ii) in the absence thereof, under the rules of the OECD Model Tax Convention if such income is not deemed to arise from a State, region or territory included in the Portuguese tax havens’ blacklist nor from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced income from pensions falls under the IRS exempt (with progression) if not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced employment income is IRS exempt (with progression), provided that it is effectively taxed in the source State (i) under the rules of a DTT or in, the absence thereof, (ii) of the OECD Model Tax Convention, as long as such income is not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced employment income is IRS exempt (without progression) in Portugal, provided that it is income derived from high value added activities of a scientific, artistic or technical nature and it is effectively taxed in the source State (i) under the rules of a DTT or in, the absence thereof, (ii) of the OECD Model Tax Convention, as long as such income is not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced income from independent personal services is IRS exempt (without progression) in Portugal, provided that it derives 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 (i) under the rules of an existing DTT or (ii) in the absence thereof, under the rules of the OECD Model Tax Convention, if such income is not deemed to arise from a State, region or territory included in the Portuguese tax havens’ blacklist nor from a Portuguese source under the IRS Code territoriality rules.
9. What types of income are eligible for reduced rates under NHR regime?
Income deriving from employment or independent personal services of a domestic or foreign source but not qualifying for the mentioned exemptions will be liable to autonomous taxation at a special 20% flat rate and not to the general and progressive IRS rates (currently of up to 53% for yearly taxable income above € 250.000), provided that it derives from high value added activities of a scientific, artistic or technical nature.
- Dividends
- Interest
- Real estate income
- Capital gains from the disposal of real estate
- Occupational pensions
- Royalties
- Business and self-employment profits derived from eligible occupations (but be mindful of relevant double taxation agreements in this respect)
