Introduced in 2009 and updated in 2020, the non-habitual tax regime offers reduced tax rates and tax exemptions for new residents in Portugal for the first ten years. This makes Portugal a very attractive country for individuals to reside, especially for those who want to enjoy retirement in the country. With over 23,000 non-habitual tax regime residents registered in Portugal today, the scheme has been highly successful and the 2021 State Budget confirms that Portugal will continue to offer these benefits for new residents in 2021.
Why become a non-habitual resident in Portugal?
- Flat 10% tax rate on foreign pension income. Private sector pensions are the ones accepted to qualify for NHR status.
- Tax exemption on many foreign sources of income, such as dividends, real estate gains, rental income and interest.
- Flat 20% tax rate for employed or self-employed Portuguese income from pre-defined scientific, artistic or technical professions.
- Exemption of tax on gifts or inheritance to family members
- No wealth tax
- Free remittance of funds to Portugal
Who can apply for NHR?
- Everyone who has the right to reside in Portugal either by being an EU/EEA/Swiss citizen, or has a residence permit from the Portuguese consular office in their home country.
and
- has not been a Portuguese tax resident in the five years prior to taking up residence in Portugal.
How to apply for NHR?
The first step is to prove that you have the legal right to reside in Portugal. Citizens of EU/EEA/Switzerland can register without a visa. They can register for residency at their region’s city hall given the freedom of movement within the EU.
Non-EU citizens must first receive a residence permit allowing them to settle in Portugal. They can obtain the permit in different ways, but the two most common methods are via the Golden Visa Program or D7 visa, also known as the “Passive Income” visa. They can do this either online (on the site of “SEF”) or in their country’s Portuguese embassy.
To successfully apply for NHR, you must be registered as Portuguese resident and tax resident and hold a place of abode by the 31st of December in the year of registration. You can then apply for the Non-Habitual Resident programme until the 31st of March the following year.
How to maintain the NHR status?
To maintain the NHR status you must spend a minimum of 183 days in Portugal or when spending less than 183 days in a year, you should have a real estate property in a condition that makes it possible to presume the intention to keep it and to occupy it as your primary and usual place of residence.
What is my obligation when having NHR status?
Once registered as a Non-Habitual tax resident you are obliged to file tax returns in Portugal which include your total worldwide income and expenses.
Note: to find out which benefits apply to you when becoming a Non-Habitual tax resident, we recommend consulting a specialist. We can provide recommendations on a financial advisor to assist you.