Discover the remarkable advantages of Portugal's NHR tax regime. This guide outlines the process of becoming a non-habitual resident and explores tax-free transactions, reduced taxes on pension and wealth income, as well as significantly lower tax rates on self-employment and other sources of income. Learn about the ten-year tax exemptions, benefits, requirements, rates, and key dates of this highly successful tax regime.

Portugal's NHR Tax Regime: A Comprehensive Overview

Non-Habitual Residence (NHR) is a program in Portugal that grants tax residency status to individuals for 10 years, offering reduced tax rates on income and capital gains. NHR holders are not bound by specific residency requirements. The scheme was introduced in 2009 to attract investors and professionals who could contribute to Portugal's economy and culture. NHR status provides tax exemptions on global income and income earned in Portugal, with a flat tax rate of 20 percent. Foreign investors with a Golden Visa and digital nomads can also apply for NHR status to optimize their taxes.

Advantages of Becoming a Non-Habitual Tax Resident in Portugal

If you're considering tax residency in a white-listed EU country, Portugal's Non-Habitual Residency (NHR) program offers several significant advantages. Here's a concise overview of its key features:

1. Special Tax Treatment for Ten Years: NHR status grants you a unique personal income tax treatment over ten years, allowing you to benefit from reduced tax rates.
2. Exemption on Almost All Foreign Income: Most foreign source income earned by NHR individuals is not taxed in Portugal. This enables you to receive foreign income tax-free.
3. 20 Percent Flat Rate on Certain Portuguese Income: For specific professions and self-employment, a flat 20 percent tax rate applies to Portuguese source incomes. Compared to the national tax rates of up to 48 percent, this offers substantial savings.
4. No Minimum Stay Requirement: There is no need to meet a minimum stay requirement to be eligible for NHR status, making it an attractive option for individuals with international lifestyles.
5. White-Listed Tax Environment within the EU: Portugal's NHR program allows you to become part of a white-listed tax environment within the European Union, enhancing your financial flexibility.
6. Tax Exemption on Gifts to Family Members: NHR residents enjoy a tax exemption on gifts or inheritance given to their direct family members.
7. No Wealth Tax: Portugal does not impose a wealth tax, which further contributes to the appeal of the NHR program.
8. 10 Percent Flat Tax Rate on Foreign-Sourced Pension Income: If you receive pension income from abroad, you can benefit from a favorable flat tax rate of 10 percent.
9. Free Remittance of Funds to Portugal: NHR status allows you to remit funds to Portugal from overseas without any tax implications.
10. Double-Taxation Agreements (DTAs): Portugal has signed Double-Taxation Agreements with 79 countries. Under NHR, most foreign source income is not taxed in Portugal if it's already taxed in the country of the income source.

By leveraging Portugal's NHR program, you can optimize your tax situation, enjoy a tax-efficient lifestyle, and take advantage of the country's favorable tax environment for non-residents.

Eligibility Criteria for Applying as a Non-Habitual Resident in Portugal

To qualify for Non-Habitual Resident (NHR) status and tax residency in Portugal, applicants must meet the following conditions:

• Residency Eligibility: You must have the right to reside in Portugal, either as an EU/EEA/Swiss citizen or through programs like the Golden Visa scheme.
• Previous Tax Residency: Applicants should not have been a Portuguese tax resident in the five years prior to moving to Portugal.

Maintaining Residency Status in Portugal:

To maintain NHR residency status in Portugal, you must:

• Place of Abode: Have a place of abode in Portugal by 31 December of each year, indicating an intention to keep and occupy it as your habitual home.

NHR Portugal Minimum Stay:

To avail of NHR status, you are required to stay in Portugal for a minimum of 183 days per year or maintain a property as your habitual residence.

After Ten Years:

After ten years, you will lose your NHR status and tax benefits, and you will be subject to standard Portuguese tax rates.

NHR and the Portugal Golden Visa Program:

Non-EU/EEA/Swiss citizens can apply for NHR status through Portugal's Golden Visa program. By first acquiring residency through this program, investors become eligible for the NHR regime in Portugal.

Residency Proof for NHR:

NHR beneficiaries are not obliged to buy property in Portugal. To meet the requirements, applicants need to have a domicile available in Portugal that demonstrates the intention to hold it as their habitual residence. Buying property can be beneficial, but a rental contract for 12 months also suffices as proof of residence.

Documentation for Residency Proof:

If you choose to rent a property, you must provide proof of a lease or loan agreement. Alternatively, a purchase deed can be provided if you have bought a property.

For more personalized advice and assistance with investments and residency programs in Portugal, Global Citizen Solutions can guide you in making the best decision.

Tax Benefits Under Portugal's Non-Habitual Resident Regime

Professions considered to be of high value under the NHR (Non-Habitual Resident) tax regime in Portugal are granted generous tax exemptions and benefits.

NHR Portugal list of professions: High-added value

High-added value professions eligible for NHR status include:

• Employment income from foreign sources: Tax-exempt or taxed at a flat rate of 20 percent for eligible professions if sourced from a country with a double taxation treaty (DTA) with Portugal.
• Self-employment income: Taxed at regular progressive rates unless it falls under an eligible profession categorization. Optionally, it can be taxed at a flat rate of 20 percent. Social security contributions apply, unless already paid into another system (NISS required for paying social security). Income is tax-exempt if it comes from an eligible profession and a country with a DTA or under the OECD model tax convention (if not a tax haven).
• Royalties and income from financial assets: Tax-exempt if the income comes from a country with a DTA or from a non-blacklisted tax haven country. Otherwise, taxed at 28 percent or 35 percent if the country is a blacklisted tax haven.
• Real estate income and capital gains: Tax-exempt if from a country with a DTA or from a non-blacklisted tax haven country.
• Capital gains from the disposal of securities: Subject to an optional rate of 28 percent or 35 percent if the capital gains are from a blacklisted tax haven.
• Pension income: Taxed at a flat rate of 10 percent since March 2020.

For Portuguese source income under NHR status:

• Employment income: Usual progressive tax rates apply if not from eligible professions. If eligible, an optional tax rate of 20 percent is applicable.
• Self-employment income: Usual progressive tax rates apply if not from eligible professions. If eligible, an optional tax rate of 20 percent can be applied, or usual progressive rates can be used.
• Real estate income and capital gains: Rental income is taxed at an optional rate of 28 percent or standard progressive rates. Net capital gains are taxed at 50 percent using standard progressive rates.
• Pension income: Taxed at usual rates (10 percent).

Overall, NHR status offers favorable tax treatment for individuals in certain high-value professions and foreign income sources, making Portugal an attractive destination for these professionals and investors seeking tax benefits.

Portuguese tax table for 2023

Portugal’s global income tax rate

Timeline and Key Dates for NHR Application in Portugal

To register for NHR status in Portugal, applicants must be both registered as a Portuguese resident and tax resident. Important points to consider:

• Applicants need to prove their habitual abode by 31 December.
• The NHR application must be submitted before 31 March.
• The processing time for NHR application acceptance or rejection is approximately two weeks.
• NHR status is granted for ten years, starting from the date the applicant became a resident.

Step-by-Step Guide to Obtaining Non-Habitual Resident Status in Portugal

To apply for the non-habitual resident regime (NHR) in Portugal, follow these steps:

Proof of Residency:

• EU/EEA/Swiss citizens can register for residency without a visa at their local town hall (Sítio da Câmara). Bring your passport and EHIC card. Proof of residency is not required.
• Non-EU citizens must obtain a residence permit through methods like the Golden Visa or Portugal D7 Visa program.

Specialist Accountant:

• It is recommended to seek professional advice from a specialist accountant to navigate Portuguese tax law effectively.

• Obtain a Portuguese Tax Number (NIF):

• Everyone residing or doing business in Portugal needs a 9-digit tax identification number (NIF).
• If you are in Portugal, visit your local government finance office (finanças) with proof of residence, residency certificate or visa, and your passport.

Register as a Tax Resident:

• After obtaining your NIF, register as a tax resident in Portugal at the finanças office.
• To be eligible for NHR status, you must not have been a tax resident in Portugal for the past 5 years.

Apply for NHR Status:

• The easiest way to apply is online through the government's financial portal.
• Register using your NIF, fiscal address, email, and phone number.
• Once registered, you'll receive a password by post within two weeks.
• Log into the finanças portal and register your application for NHR status by providing the required documents, such as a declaration of non-tax residency for the past 5 years, tax returns for the past 5 years, and proof of property purchase or rental contract in Portugal.

To recap briefly:

• EU/EEA/Swiss citizens can register for residency without a visa, while non-EU citizens must obtain a residence permit.
• Consider seeking professional advice from a specialist accountant.
• Obtain a Portuguese Tax Number (NIF).
• Register as a tax resident in Portugal if you meet the NHR eligibility criteria.
• Apply for NHR status online through the government's financial portal, submitting the necessary documents.

Follow these steps to apply for NHR status in Portugal successfully.

Request for Further Evidence in NHR Application

When applying for Non-Habitual Residency (NHR) in Portugal, it is essential to ensure that you provide sufficient supporting evidence. The primary cause of NHR rejections is often a lack of proper documentation. One crucial requirement is proving that you have not been a tax resident in Portugal within the last five years.

To strengthen your application, you must submit additional evidence that confirms your tax residency in another country during the specified period. This documentation will play a crucial role in the success of your NHR application. Be thorough and accurate in your submissions to increase your chances of approval.

NHR Status Explained for US Citizens in Portugal

Important information regarding the NHR scheme in Portugal for US citizens:

• US citizens are eligible to apply for Portugal's NHR (Non-Habitual Resident) status.
• To qualify, applicants must live abroad, not have been a resident in Portugal within the last five years, and have the intention of moving to Portugal.
• Being considered a resident requires either spending at least 183 days per year in the country or having your primary home there.
• NHR status offers significant benefits for US citizens retiring in Portugal, particularly in terms of exemptions on income related to pensions.

NHR Status Explained for UK Citizens in Portugal

Following the UK's departure from the EU due to Brexit, obtaining Non-Habitual Resident (NHR) status in Portugal has undergone some changes for UK citizens. To achieve NHR status, UK citizens are advised to apply for either a D7 Visa or Golden Visa. After securing the suitable visa, the steps to attain NHR status remain the same as previously outlined.

FAQ

Q: What if my income is paid in another country?

A: If your income is being taxed by a country that has a double taxation agreement with Portugal, you will be exempt from paying tax in Portugal.

Q: What if my income is earned in Portugal?

A: Depending on your profession or source of income, you could still be eligible for significant tax breaks. However, if your income is earned in Portugal, you are likely to be liable to pay Portuguese taxes.

Q: Can applications for non-habitual residency in Portugal be tracked?

A: Yes, if you are registered online at the Portal das Finanças, you can track the progress of your application.

Q: How do you know if registration as a Portuguese non-habitual resident has been accepted?

A: You can check the status of your application through the finanças portal by clicking on "Aceda aos Serviços Tributários," then "Consultar Pedido," and finally "Inscrição Residente Não Habitual."

Q: How long does it take to apply for the NHR tax regime in Portugal?

A: Generally, it takes about two weeks to hear back about the acceptance or rejection of your application.

Q: Do I have to be resident outside of Portugal to be a non-habitual tax resident?

A: No, but you need to maintain a permanent residence in the country, either by purchasing property or renting a home.

Q: Do I have to make a statement of assets to apply for the NHR regime?

A: No, you will only have to state your income on your tax returns.

Q: How long has the NHR regime in Portugal been available?

A: The NHR scheme has been in place since 2009 and is becoming increasingly popular every year.

Q: Will the NHR regime in Portugal change in the foreseeable future?

A: It is unlikely that the NHR scheme in Portugal will change soon, as it is seen as a valuable way to attract professionals and investors to the country.

Q: Is it possible to backdate my registration as a non-habitual tax resident?

A: Yes, once your application is successful, your non-habitual tax resident status will automatically be backdated to when you first registered as a tax resident in Portugal.

Q: When is the best time to apply for the Portuguese NHR tax regime?

A: You must apply for NHR status before March 31 of the tax year during which you became a tax resident in Portugal.

Q: How popular is the non-habitual resident regime in Portugal?

A: The non-habitual resident regime is already popular, with at least 10,000 non-habitual residents in Portugal, and the number of applicants is steadily growing each year.

Q: Does Portugal have any kind of wealth tax?

A: Portugal does not have a wealth tax, but there is an annual property tax called Imposto Municipal Sobre Imóveis (IMI) that is paid only on Portuguese properties, depending on their value.

Q: What is the Portuguese law in regard to civil partnerships?

A: In Portugal, civil partnerships and marriage are treated with equal weight for tax purposes.

Q: What taxes must be paid when buying property in Portugal?

A: Taxes on a property purchase in Portugal include Municipal property tax (IMI), Real estate transfer tax (IMT), and Stamp duty (IS), depending on the circumstances.

Q: Is there inheritance tax in Portugal?

A: Spouses, direct descendants, and ascendants are exempt from inheritance tax in Portugal. For others, there is a 10% stamp duty on Portuguese assets.

Q: Is there a gift tax in Portugal?

A: Spouses, direct descendants, and ascendants are exempt from gift tax in Portugal. Others pay a 10 percent stamp duty on Portuguese assets and an additional rate of 0.8 percent on real estate.

Q: Is foreign source rental income, investment income, and capital gains taxed in Portugal?

A: Rental income, investment income, and capital gains from foreign sources are not taxed in Portugal.

Q: How might the renegotiation of double tax treaties between my country of residence and my country of income affect the NHR regime in Portugal?

A: It is unlikely that existing double tax treaties between Portugal and other countries will be terminated, although some agreements might be amended.

Q: What is the non-habitual resident tax regime in Portugal?

A: Portugal's non-habitual resident status aims to attract investors and professionals of high cultural and economic worth, providing them with substantial tax savings.

Q: What are the requirements for the non-habitual resident tax regime?

A: To apply for the non-habitual resident regime, you must have the right to reside in Portugal, not have been a Portuguese tax resident in the last five years, and have a residence in Portugal that you intend to keep and occupy as your habitual home.

Q: How do I apply for the Portugal NHR?

A: You need to have all the necessary documents to prove residency and a Portuguese tax number. Then, you can apply to be a tax resident in Portugal and subsequently apply for NHR status.

Q: Who can apply for the non-habitual tax regime in Portugal?

A: Freelancers, pensioners, business owners, and other professionals of high cultural or economic worth can apply for the non-habitual tax regime in Portugal.

Q: Who qualifies for NHR in Portugal?

A: To qualify for NHR, you must live overseas, not have been a resident in Portugal within the last five years, and intend to reside in Portugal. You must also spend 183 days a year in Portugal or have your primary home there.

Q: Who qualifies for non-habitual residency in Portugal?

A: Portuguese tax residents who have not been tax residents in the past five years in Portugal qualify for non-habitual residency.

Q: How long can a non-habitual resident stay in Portugal?

A: NHR tax residents must stay in Portugal for 183 days a year. You can stay in Portugal as long as you have a valid residence permit, and your NHR status can last for ten years.

Q: What are the benefits of non-habitual residence in Portugal?

A: Some benefits of NHR status include fixed rates of personal income tax on both local and foreign-sourced income, a 10 percent tax on foreign-sourced pension income, and low wealth and inheritance taxation in Portugal.