For 15 years, Portugal’s Non-Habitual Resident (NHR) tax regime has drawn more than 10.000 new residents by providing reduced tax rates and even complete tax exemptions for the first decade of residence. NHRs enjoyed a flat 20% tax rate on their income and were exempt from taxes on global earnings.
However, in late 2023, it was announced that the NHR tax regime would be ending, as parliament deemed it no longer advantageous for the country.
The new NHR tax regime retains most of the previous benefits, but the eligibility criteria have become much stricter. The updated regime now emphasizes employment in scientific research and innovation, excluding retirees and other high-value professions from its benefits.
NHR 2.0 (Non-Habitual Resident Tax Regime)
The new NHR tax regime in Portugal is known as the Fiscal Incentive for Scientific Research and Innovation (IFICI) Program. It is designed for highly qualified professionals relocating to Portugal.
Under this new regime, you will be subject to a special 20% Personal Income Tax rate (plus social security contributions). This rate applies to both dependent and independent work-related income for a consecutive period of 10 years. It’s important to note that this benefit is non-renewable.
Tax Benefits of the New NHR Program
The main benefit of the new Fiscal Incentive for Scientific Research and Innovation (IFICI) Program is the reduced Personal Income Tax (PIT) rate of 20% on employment income.
Additionally, you can enjoy exemptions from income tax on various foreign income sources, as well as from all foreign income sources except those from blacklisted countries.
Eligible foreign income sources include:
- Employment
- Independent work
- Capital investment income (interest or dividends)
- Royalties
- Capital gains
- Real estate income or gains
However, foreign pensions are not covered by this exemption and will be taxed at Portugal’s normal progressive rates, ranging from 14.5% to 53%.
Comparison Between Old NHR Regime and New NHR Regime
Qualification Requirements for the new NHR
- Taxpayers who establish tax residency in Portugal starting in 2024, according to paragraphs 1 and 2 of Article 16 of the IRS Code, and who have not been resident in Portugal at any time during the previous five years.
- Additionally, taxpayers who have not previously benefited from the Non-Habitual Resident (NHR) regime and do not choose to be taxed under the “ex-residents” regime are also eligible.
- Having professional activity in Portugal (under the required categories, accessed annually)
Eligibility Criteria for NHR Tax Regime 2024
The government designed this new program to specifically attract professionals in targeted fields.
Jobs in Strategic Sectors: Positions within organizations approved by IAPMEI or AICEP (public agencies promoting economic activity and innovation). While specific industries have yet to be defined, these businesses are likely based and operated in Portugal.
R&D Personnel: Individuals whose research expenses qualify for Portugal’s R&D tax incentive program (SIFIDE).
Startups: Directors or employees of accredited Portuguese startups demonstrating significant growth potential or securing venture capital funding. A start-up is defined, under Portuguese law as follows:
- Less than 10 years of activity
- Less than 250 employees
- Less than €50 million turnover
- Not held by a large company
- Based in Portuguese territory or have more than 25 employees
- Be an innovative company, have one round of VC financing, or investment from Banco Portugês de Fomento.
Azores & Madeira: Residents of these regions whose roles are outlined by local regulations.
DTA (Double Taxation Agreements)
The international Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (DTT) or Double Taxation Convention (DTC), is an agreement between two countries that aims to prevent double taxation of income or assets that may arise when a taxpayer resides in one country but earns income or holds assets in another country. Here is the list with the countries that have DTA with Portugal:
Timeline for NHR Application
How To Apply for the NHR Portugal
Here’s the guide for you on how to become a non habitual resident in Portugal:
Step 1: Get your residency proof
Step 2: Obtain Your NIF
A NIF (Número de Identificação Fiscal) number is your tax identification number in Portugal, essential for conducting business or engaging in official or legal activities. Non-residents can obtain it through their representative or lawyer in Portugal, while residents can apply directly at the local tax offices (finanças). To apply, you need to provide an ID card or passport and proof of residency.
Step 3: Register as a Tax Resident
After you obtain your NIF, you must register as a tax resident in the finanças.
Step 4: Apply for the NHR status
First, you need to register on the relevant government website. Once registered, you will receive a password by post within approximately two weeks. After receiving your password, you can complete the application process online by submitting the following documents:
- A statement confirming you were not a tax resident in Portugal for the past five years
- Tax returns for the past five years
- A rental agreement or property deed in Portugal
How to Obtain Residency in Portugal
To qualify as a non-habitual resident, you must have lived in Portugal for over 183 days within a 12-month period. Alternatively, you can qualify if you have lived in the country for fewer than 183 days but have purchased property in Portugal during that same period.
If neither of the previous conditions applies to you, you’ll need to obtain residency to qualify for the non-habitual tax regime. Portugal offers several appealing long-stay national visas, also known as residency visas, that enable you to benefit from the 10 years of tax incentives under the NHR status. Here they are:
Portugal D7 Visa
Portugal D7 Visa, also known as the Retirement Visa or Passive Income Visa, was introduces in 2007 by the Portuguese government, allowing non-EU/EEA/Swiss citizens to apply for temporary residency in Portugal.
Retirees and individuals with a minimum regular minimum passive income of €820 per month can apply for the Portugal D7 Visa. This income can include pensions, real estate, royalties, dividends, financial investment, or intellectual property.
Portugal D8 Digital nomad Visa
The D8 Visa also know as, Digital Nomad Visa Portugal, was introduce in October 2022 by the Portuguese government, allowing non-EU/EEA/Swiss citizens with monthly income of €3280 to apply for temporary residency in Portugal while working remotely from Portugal.
Portugal D2 Visa for Entrepreneurs
D2 Visa Portugal also known as the “Entrepreneur Visa” or “Business Visa” was launched in 2018 and is a type of long-stay visa for Portugal that is specifically designed for entrepreneurs who want to start or buy a business in Portugal.
The visa allows non-European Union citizens to stay in Portugal for up to 4 months and after applying for the resident permit. A Portuguese Residence Permit after the D2 Visa is valid for two years and then it can be renewed for three years contingent on the continuity of the applicant’s professional activities.
Portugal Golden Visa for Investors
The Portugal Golden Visa program in Portugal, also known as the Residence Permit by Investment Program, is an investment immigration program that grants residency and citizenship rights to foreign investors who make a significant economic contribution to the country.
- Venture Capital /Private Equity Funds: €500,000
- Scientific research: €500,000
- Cultural Donation: €250,000
- Job Creation: 10 jobs positions or €500,000 + 5 job positions
Frequently Asked Questions About Portugal's NHR Tax Regime
What is the Non-Habitual Resident (NHR) program?
The NHR program is a tax regime designed to attract foreign individuals to Portugal by offering significant tax benefits. It provides reduced tax rates and exemptions on certain types of income for a period of ten years.
Who is eligible for the NHR program?
To be eligible, you must not have been a tax resident in Portugal for the previous five years and must establish tax residency in Portugal. This typically involves living in Portugal for more than 183 days within a 12-month period or owning property there.
What are the main benefits of the NHR program?
Under the NHR program, you can benefit from a flat 20% income tax rate on certain professions and exemptions on foreign income, such as dividends, interest, and royalties, with some exceptions.
What types of income are exempt under the NHR regime?
The NHR regime offers exemptions on various foreign income sources, including employment income, independent work, capital investment income, royalties, and capital gains. However, foreign pensions are not exempt and are taxed at Portugal’s normal progressive rates.
How long does the NHR program last?
The benefits under the NHR program are available for a consecutive period of ten years. The regime is non-renewable, meaning it cannot be extended beyond this period.
Can I apply for the NHR program if I already live in Portugal?
Yes, you can apply for the NHR program if you are already residing in Portugal, provided you meet the eligibility criteria, including not having been a tax resident in Portugal for the previous five years.
How do I apply for the NHR program?
Register as a tax resident in Portugal and submit necessary documents to apply for the NHR program. This often involves providing proof of non-residency in the past five years and other relevant documents.
What documents do I need to apply for the NHR program?
Provide proof of non-residency in Portugal for five years, your tax returns, and a rental agreement or property deed.
Are there any new changes to the NHR program for 2024?
Yes, the NHR program has been updated to the Fiscal Incentive for Scientific Research and Innovation (IFICI) Program, which now focuses on attracting highly qualified professionals in specific sectors and offers a special 20% tax rate. The scope has been narrowed, and the benefits are more targeted.
What if my income is earned in Portugal?
If your income is earned in Portugal, it will generally be subject to the Portuguese tax rates. For certain professions or activities specified under the new Fiscal Incentive for Scientific Research and Innovation (IFICI) Program, you will benefit from a reduced flat tax rate of 20%.
Income earned through other activities or professions not covered by the IFICI Program will be taxed according to standard Portuguese income tax rates, which range from 14.5% to 53%, depending on the income bracket.
What if my income is paid in another country?
If you are paying taxes in a country with a Double Taxation Agreement (DTA) with Portugal, you generally won’t need to pay taxes again in Portugal on that income. However, depending on your income level, you might still need to pay the tax difference in Portugal if your effective tax rate is higher in Portugal.
