The IFICI – a sharper edge for attracting global talent to Portugal

A record-breaking 142,000 millionaires are projected to relocate internationally this year, with the UK expected to see the largest net outflow of high-net-worth individuals (HNWIs) by any country since global wealth intelligence firm New World Wealth began tracking millionaire migration 10 years ago.

In Europe, Portugal is one of the key beneficiaries of this trend It is set to attract a net gain of more than 1,400 HNWIs, driven by its favourable tax regime, lifestyle appeal and active investment migration programmes, writes Shelley Wren, Head of Business Development at Sovereign Portugal.

The ongoing appeal of Portugal includes its lifestyle and climate, security and safety, easy access to the European Union and the Schengen area, and its vibrant cities and coastal areas. Key locations attracting millionaires include Lisbon, Cascais and the Algarve, with the latter two particularly known for their desirable luxury properties.

Portugal’s new IFICI regime – “Tax Incentive for Scientific Research and Innovation” – was launched in December 2024 and is a new, targeted residence regime for highly qualified professionals. It delivers significant tax benefits and generous tax exemptions, especially for overseas income, to eligible new tax residents in Portugal.

The IFICI replaces the well-known Non-Habitual Resident (NHR) special tax regime, which was closed to new entrants at the end of 2023, and is commonly known as ‘NHR 2.0’. Like the previous NHR regime, it provides the following key tax benefits, which are available for 10 calendar years from the time the applicant becomes tax resident in Portugal:

• A special Personal Income Tax (IRS) flat tax rate of 20% applies to employment and professional income obtained in Portuguese territory.
• Non-Portuguese income in most categories – dependent work, professional activities, capital income, rental income and capital gains – is exempt from IRS provided that the income is being taxed abroad under a double tax agreement (DTA), or if it is otherwise taxed in the source country and not classified as Portugal-source, or if it is taxable under OECD treaty principles.

Unlike the previous NHR regime, which taxed foreign pension income at a flat tax rate of 10%, foreign pension income is fully taxable in Portugal under the IFICI. Additionally, any income earned in countries listed by the Portuguese Finance Department as ‘preferential tax regimes’ – the so-called ‘blacklist’ – will not qualify for exemption unless the listed country has a DTA with Portugal.

Only individuals who move to Portugal for eligible roles related to science, research, or innovation are eligible. But the professional scope is broad, from CEOs to technicians, and the range of eligible activities is wide – extractive industries, manufacturing industries, utilities, construction, hospitality, ICT, financial, scientific and technical, education, administration, health, and cultural or natural interest.

Individuals can either establish tax residency in Portugal voluntarily by securing a residence permit and establishing a permanent address, or by residing in Portugal for more than 183 days within any 12-month period or by establishing a habitual residence. Applicants must not have been tax resident in Portugal in the previous five years or have previously benefited under the NHR regime.

The granting of the IFICI is dependent on prior registration with the Portuguese Tax Authority (AT) and the relevant government agencies responsible for receiving and verifying registration applications. Applicants will also require accreditation by their respective employers or those contracting their services.

It is important to note that IFICI is designed to attract talent and foster the growth of Portuguese companies, so eligible businesses must have economic substance in Portugal. Industrial and service companies must also export at least 50% of their turnover.

While IFICI unlocks powerful benefits, the route to qualification and maintaining ongoing compliance is not straightforward. Each case requires careful structuring, eligibility validation and continuous record-keeping. A professional advisory approach is strongly recommended for every step, particularly for high-value cross-border tax planning.

Sovereign Portugal specialises in concierge IFICI onboarding and residency planning, smoothing the path for new residents and their companies to enjoy the regime’s benefits. As part of the global Sovereign Group, we are also well placed to provide the tailored global tax advice and compliant structuring that is often required.

We will provide clear, tailored pathways for applicants and entrepreneurs, as well as their families, to successfully establish their lives and ventures in Portugal. My deep knowledge of Portuguese tax regimes, visa requirements and corporate structuring enables me to offer clients confident, seamless integration strategies that deliver financial efficiency as well meeting their personal and professional goals.