Portugal Non-Habitual Residents (NHR) Regime

Portugal’s special tax regime for Non-Habitual Residents (NHRs) enables qualifying entrepreneurs, professionals, retirees and high net worth individuals to enjoy reduced rates of tax on Portuguese-source income, while most foreign-source income is exempt from Portuguese taxation, for a decade.

Individuals of any nationality (including non-EU/EEA citizens) can potentially benefit from Portugal’s NHR regime for 10 consecutive years if they qualify as a tax resident in Portugal and have not been taxed as a Portuguese tax resident in any of the five years preceding the year in which residence is established.

You also need to meet the criteria for being a tax resident in the year of application – the simplest way of achieving this is to be present in Portugal for more than 183 days. Portuguese-source salary or self-employed income derived from one of the eligible professions (listed below), would then be subject to a final flat rate tax of 20%.

In addition, non-Portuguese income in most categories – including self-employed income, real estate income (rentals), capital income (interest and dividends) and capital gains on property – will be exempt from Portuguese personal income tax provided that:

  • The source country has the right to tax that income under the terms of a Double Tax Agreement (DTA) signed between Portugal and that country; or
  • The income is taxed in the other country and is not considered as obtained in Portugal; or
  • The income is taxable in any other country under the OECD Model Tax Convention.

Until recently, the NHR regime also allowed for most foreign pension income to be received in Portugal free of tax, but a flat 10% tax rate was introduced in the 2020 Portuguese Budget. This new tax applied as of 1 April 2020, although existing NHR holders remain eligible for exemptions for the remainder of their ten-year NHR period.

However, this 10% tax rate is still a highly attractive option for NHR applicants because it will be lower than the rates that would apply in their home countries and is also significantly lower than Portugal’s standard tax rate of between 14.5% and 48%. There is also no inheritance tax, gift tax or wealth tax in Portugal for NHRs.

It should be noted that the right to enjoy NHR benefits in each fiscal year will only apply if the applicant has been considered resident in Portugal during that year. If, however, the applicant fails that test in any one or more years, he/she may still enjoy the benefit in following years up to the 10 year limit.

Additionally, any income earned in countries listed by the Portuguese Finance Department as ‘preferential tax regimes’ – the so called “blacklist” – will not qualify for the NHR regime unless the listed country has a DTA with Portugal

The qualifying professional activities covered by the NHR regime include the following:

General Managers and Executive Managers of companies;
Administrative Managers and Commercial Managers;
Production Managersand Specialised Services Managers;
Hospitality, Restaurant, Retail and Other Services Managers;
Specialist Physicists, Mathematicians, Engineers and related Technologists;
Medical Doctors;
Dentists and Stomatologists;
University and Higher Education Teachers;
Information and Communication Technology (ICT) Specialists;
Authors, Journalists and Linguists:
Creative and Performance Artists:
Intermediate level Science and Engineering Technicians and Professionals;
ICT Technicians;
Farmers and market-oriented skilled Agricultural and Livestock workers;
Market-oriented skilled Forestry, Fishing and Hunting workers;
Skilled industry, construction and craft workers, including skilled workers of metalwork, food processing, woodwork, clothing, handicraft, printing,
manufacture of precision instruments, jewellers, artisans, electricians and electronics professionals; Plant and machine operators and assembly line workers;
Directors and managers of companies carrying out productive investment activities, to the extent such personnel are engaged in projects for which contractual tax benefits have been granted under the Investment Tax Code.

Individuals in these professional activities must also comply with one of the following criteria:

Level 4 of the European Qualifications Framework;
Level 35 of International Standard Classification of Education (ISCED); or
Five years of applicable working experience, duly demonstrated.

It should be noted that the NHR regime does not include foreign professional sports players, which is understood to be a result of the controversy over Spain’s so-called ‘Beckham Law’, which allowed very highly paid foreign sports players to pay reduced tax rates which were not available to ordinary taxpayers.

Sovereign offers a concierge service for clients wishing to become resident in Portugal under the NHR regime, which requires close liaison with the Portuguese Tax Department (Serviço de Finanças), local councils (Câmara Municipal), the Borders and Immigration Agency (Serviço de Estrangeiros e Fronteiras (SEF)) and social security (Segurança Social).

Sovereign’s concierge service includes:

Initial application support and consultancy
Pre-application cross border planning and tax advice
Fiscal check with the Portuguese tax system to ensure eligibility for the application
Fiscal Representation (to include Fiscal Number application, if necessary)
Guidance on the documentation required for residency certificate applications, either at the Câmara Municipal for EU clients or the SEF for non-EU clients. This may include the booking of appointments on behalf of clients or in some areas, accompanying them (this may incur additional time charges)
Liaison with the client in respect of their appointment with the Portuguese Tax Department to register the residency application, or in some areas, accompanying them (this may incur additional time charges) Submission of the NHR status application with the Portuguese Tax Department
Registration of employment activity at the Portuguese Tax and Social Security departments, when applicable.

The following services are not included in the concierge fee and would be charged separately:

Preparation and submission of personal income tax (IRS) tax return in subsequent years
Administrative follow up on activity registration and file audit
Submission of DTA forms to the tax authority in the NHR holder’s home country.

Once the residency application has been completed, our team of fully qualified accountants and administrators will continue to assist clients with their fiscal obligations and queries, providing support and keeping them informed of fiscal matters that may affect them in Portugal.

For more information, contact us by telephone on +351 282 340480 or by email to serviceinfo@sovereigngroup.com

Interested in Portugal Non-Habitual Residents (NHR) Regime?
Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.