Portugal Non-Habitual Residency Regime: NHR tax resident status explained

The NHR scheme helps foreigners to alleviate their tax burden in Portugal. The preferential tax status is issued for 10 years without the possibility of renewing it.

The Portugal NHR program has been operating since 2009 and allows paying fewer taxes. The conditions for the tax regime registering and operating for holders of NHR Portugal status are enshrined in Legislative Decree No. 249 of September 23rd, 2009.

The NHR status is disabled to apply for after January 1st, 2024. However, those who already obtained the status will enjoy its benefits right until the 10-year term ends.

The so-called “transition” is established for those who can prove their intention to move to Portugal in 2024. In this case, it is possible to apply for NHR status until the end of 2024.

Portugal will consider a limited amount of documents as proof of intent, including an employment contract or lease agreement.

Additionally, if a foreigner were to get a residence permit in Portugal before December 31st, 2023, they can still apply for the NHR status until March 31st, 2024.

The abolished NHR regime will continue to exist for specific applicants. University professors, research scientists, and qualified employees of projects classified by the Portuguese government as “startups” can still obtain the NHR status regardless of the application date.

Individuals can obtain a Portugal residence permit in different ways: applying for a job in a Portuguese company, enrolling in a Portuguese university, or marrying a Portuguese citizen. However, the fastest and easiest paths are the following:

1. Under the Portugal Golden Visa Program, wealthy people can also obtain a residence permit by investing in the Portuguese economy. The program offers five investment options, including purchasing an investment fund unit.

2. Financially independent people can get residence permits through D7 visas.

3. The D8 visa is available to digital nomads wishing to relocate to Portugal.

Holders of Portugal residence permits have the right to live, work, conduct business, and study in the country without restrictions.

1. The fixed tax rate on income from employment. In a standard situation, the income tax is levied on a progressive scale. The rate can be up to 48% and depends on the yearly income:

• 14,5% — on an income of up to €7,112;

• 23% — on the income of €7,112 to 10,732;

• 28,5% — on the income of €10,732 to 20,322;

• 35% — on the income of €20,322 to 25,075;

• 37% — on the income of €25,075 to 36,967;

• 48% — on the income of €36,967 to 80,882;

• 48% plus an additional tax of 2,5% — on the the income of €80,882 to 250,000;

• 48% plus an additional tax of 5% — on the income of over €250,000.

Highly qualified professionals who receive salaries from Portuguese companies or work in Portugal as self-employed can pay income tax at a flat rate of 20%.

2. The flat tax rate for pensions from other countries is 10%. The rule applies if the recipient changed his tax residence to Portuguese and received Non-Habitual Resident status after April 1st, 2020.

Tax residents of Portugal without Non-Habitual Resident status pay pension tax as income tax on a progressive scale with a rate of up to 48%.

3. No taxes on gifts, inheritance and wealth are paid by non-habitual residents in Portugal.

4. Foreign-sourced income is not taxed at all. The holder of the Non-Habitual Resident status does not pay tax in Portugal on dividends, interest and royalties, capital gains, rental income from real estate outside Portugal, or employment in another country.

The income must be received from foreign companies and funds. You do not need to pay dividends and interest taxes if the income is received from a country that is not an offshore jurisdiction.

The standard global income tax rates in Portugal are the following:

• 28% on dividends, interest and royalties;

• 28% on capital gains;

• 28% on rental income;

• Up to 48% on labour income.

The global income and retirement benefits are tax-exempt in Portugal if taxes are paid in the source country. A Double Taxation Agreement (DTA) or a model convention of the Organisation for Economic Cooperation and Development on income taxation must be concluded between Portugal and such a country.

From 2009 to 2023, only new tax residents of Portugal could apply for Non-Habitual Resident tax status. To do this, the applicants fulfilled at least one of the conditions:

• have lived in Portugal for more than 183 days in the last year;

• purchased residential real estate in Portugal;

• served on a ship or aircraft of a company registered in Portugal on December 31st of the reporting year;

• have been in public service in the foreign missions of the Portuguese government in the past 12 months.

Highly qualified professionals could participate in the NHR program and pay income tax at a flat rate as well. The list of professions included architects, engineers, geologists, programmers, IT specialists, research and development specialists, etc.

Starting January 1st, 2024, new rules apply. The NHR status will be granted if a foreigner obtains a residence permit or permanent residence in Portugal before December 31st, 2023. In this case, they are given time to apply until March 31st, 2024.

Those who already obtained the status before January 1st, 2024, do not need to give up on it; it will be kept until the 10-year term ends.

A "transitional" tax regime is introduced for those who can demonstrate their intention to move to Portugal during 2024. In this case, applying for the NHR status will be possible until the end of 2024. As proof of intent, foreigners can provide:

• an employment contract signed before December 31st, 2023;

• lease, purchase and sale agreement or other agreement on the right to use or own real estate conducted before October 10th, 2023;

• a certificate stating that the child or other financially dependent relative was enrolled in a school, college or university in Portugal issued no later than October 10th, 2023;

• a residence visa or residence permit valid by December 31st, 2023.

In the aforementioned cases, it is possible to apply for the NHR status until December 31st, 2024.

Exceptions among specific specialists. In any other case, new residents of Portugal no longer have a chance to apply for NHR status unless they fall under the following categories of workers:

• employed in and are tax residents of Madeira and the Azores;

• professors, scientists, researchers, or innovation centre employees;

• employed in or lead entities benefiting from tax incentives for IAPMEI or AICEP registered companies with investment over €3 million;

• highly qualified workers of the companies that benefit from the Investment Promotion Tax Regime (RFAI);

• highly qualified professionals in entities that export at least 50% of their turnover;

• employed in companies of significant value to the Portuguese economy;

• Research and Development workers who benefit from the R&D tax incentive system (SIFIDE).

Those who work for start-ups can also get an NHR status. A start-up is a company or business that:

• is operating for 10 years or less;

• has less than 250 employees;

• has a turnover under €50 million;

• is not affiliated with a larger company;

• is based in Portugal or has more than 25 employees;

• is an innovative company that attracts investment from Banco Português de Fomento.

Vladlena Baranova,

Head of Legal & AML Compliance Department, CAMS, IMCM

Each tax story is different and combines many factors. Your plans for earning income and living in a particular country are of fundamental importance in tax planning. We recommend that you seek advice from specialists in tax structuring who will help you choose the best tax regime based on your current situation and goals.