Portuguese Non-Habitual Resident Regime (or Portugal NHR Program ). 🇵🇹 Everything you need to know! 💸💸
Portugal has become an attractive place for digital nomads and ex-pats, due to its great weather, sunny days, and affordable prices. However, one issue that comes out is the fact that taxation in Portugal is quite high. In order to attract ex-pats, retirees, investors, high net-worth individuals, and qualified foreign professionals, the government implemented the Non-Habitual Resident Tax regime (Portugal NHR Program ). The Portugal NHR Program continues to be an attractive factor for ex-pats when deciding to relocate to Portugal.
From Luxton Legal, we explain everything you need to know about the Portugal NHR Program and how to benefit from this regime.
What is the Portugal NHR Program?🤓
The tax regime for non-habitual residents reduces the tax burden of ex-pats and nationals returning to Portugal after not having been tax residents in Portugal for the last few years.
Self-employed and qualified professionals 👨🏻🔬👩🏼⚕️🧑🏻🏫
The NHR is of interest to self-employed persons in certain highly qualified professions. Under the Portugal NHR Program, they will only pay 20% tax on local income (which applies to digital nomads). This implies significant tax savings as the tax rate in Portugal can be as high as 48%.
In addition, the Portugal NHR Program is of much interest to individuals who receive dividends from companies abroad. In this case, dividends from companies in another country will be exempt.
* It is important that the work is not done from Portugal even if the company is registered in another country, as you could end up paying the taxes of a Portuguese company.
Retirees and Pensioners 👴🏻👵🏼
Finally, it should be noted that the Portugal NHR Program is very beneficial for retirees or pensioners. Under this regime, they only pay 10% tax on the pension they receive.
* However, this will only apply if there is a double taxation agreement (“DTA”) stipulating that expatriates’ pension income is taxed in Portugal.
👉 Requirements to acquire the Portugal NHR Program
- Acquire tax resident status in Portugal. To do this you must be entitled to reside in Portugal by being a citizen of the EU/EEA/Switzerland, or through systems such as the Golden Visa program. To be eligible for this benefit, you need to spend at least 183 consecutive or non-consecutive days of the year.
- You cannot have been taxed as a tax resident in Portugal in the five years prior to the year in which you settle.
- Special personal income tax treatment for a period of 10 years.
- Income from employment and self-employment may be subject to a special flat rate of 20% if derived from high value-added activities of a scientific, artistic, or technical nature carried out in Portugal, as set forth in a Ministerial Order. By way of example:
- Directors and executives of production, industrial, service, and business companies;
- Specialists and technicians in engineering, computer science, communication, science and, related subjects;
- Journalists and artists.
- Enjoy tax exemption on almost all foreign source income.
- No minimum stay requirement. As explained, to obtain the Portugal NHR Program you must live in the country. However, after obtaining recognition of the NHR regime, there is no official minimum stay.
- Tax exemption for gifts or inheritance to immediate family members.
- No wealth tax
- Other types of domestic income received by NHR beneficiaries are subject to personal income tax according to the rules applicable to ordinary tax residents.
Procedure to request the Portugal NHR Program 🚀
The Portugal NHR Program is not obtained automatically, you must apply for it through the Portal das Finanças. You must apply for NHR status until March 31 of the year following the year in which you become a tax resident in Portugal. Unfortunately, this means that it is only possible to apply once you are a tax resident in Portugal.
As a general rule, it is sufficient to complete and submit the application online. In exceptional cases, the authorities may request additional documents, for example, tax residence certificates and other documents proving that the individual’s personal and economic interests were located in another state in the five years prior to arrival in Portugal.
The resolution period is usually 5 working days from the request.
⚠️ Most people interested in living and working in Portugal are familiar with the Portugal NHR Program, but not with the simplified tax regime. The simplified tax regime is a system for companies or freelancers with a turnover of less than €200,000 per year and who can credit 15% of their income on expenses. With this system you will only pay taxes on a percentage of your income, the percentage depends on the activity.
In any case, before deciding on the relocation to Portugal, it is advisable to conduct a taxation study to avoid unpleasant surprises in the future!
Contact us if you have any questions!