Obtain residency in Portugal and benefit from the special tax regime for non-habitual residents (NHR)
Why live in Portugal?
– 900 years of history as an independent and sovereign State;
– Democratic rule of law;
– Member State of the European Union;
– Associated with the Schengen area thus allowing for free movement throughout 26 European countries;
– Special tax benefits;
– Security, social tranquility, and low crime levels;
– Excellent infrastructure;
– Population with high levels of academic and professional qualifications;
– Good weather, great cuisine, and 800 km of coast and beaches.
NHR special tax regime
The NHR tax regime was instituted via Decree-Law no. 249/2009 on the 23rd September. It is also known as the Investment Tax Code, which introduced various fiscal regulatations in order to increase Portugual’s economic competitiveness in the world scenario.
The NHR tax regime is aimed at attracting foreign professionals who either have qualifactions in high value-added activities, work with intellectual or industrial property, have know-how, or are beneficiaries of pensions obtained abroad.
According to most thorough analyses, beneficiaries of this system are exempt from double taxation as it relates to income earned outside Portugal and enjoy a fixed rate of 20% income tax on earnings garnered inside the country.
Who can benefit from this system?
An NHR in Portuguese territory is classified as any taxable individual who had not been a resident in Portuguese territory in any of the five years prior to becoming a taxable resident.
Therefore, an individual seeking NHR status should meet the following requirements:
– Be considered, for tax purposes, a resident in Portuguese territory in the year in which they want taxation to start as an NHR;
– Have not been considered a resident in Portuguese territory in any of the five years preceding the year in which they intend to start taxation as an NHR.
Who can be considered a taxable resident in Portugal?
A taxable resident in Portugal is defined as an individual who:
– Has remained in Portugal for more than 183 consecutive or non-consecutive days;
– Having stayed in the country for a shorter period of time up to the 31st of Decemeber of this year, and, by their own will, inhabiting housing that illustrates the stong intention to maintain and occupy it as a permanent residence;
– Upto and on the 31st of December, be a crew member of a ship or aircraft – provided that they are in the service to a company which resides, has a head office, or is effectivally managed in Portuguese territory;
– Perform foreign functions or commissions of a public nature at the service of the Portuguese State.
Resident’s household members are also considered residents.
What is the deadline for requesting NHR status?
NHR status must be requested from the tax authorities by the 31st of March of the year following in which it is to take effect.
Ways to obtain legal residency in Portugal
The prerequisite for acquiring NHR status is obtaining legal residence in Portugal.
Legal residence in Portugal can be obtained in several ways, namely:
– The granting or acquisition of Portuguese nationality;
– Residence visa for immigrant entrepreneurs, also known as D2 visa;
– Residence visa for legal income holders, also known as D7 visa;
– Residence Permit for Investment Activities, also known as “Visa Gold”.
Special tax rights for an NHR
The general features of the NHR tax regime are the application of a fixed income tax rate in relation to income earned in Portugal and the elimination of double taxation in relation to income earned outside Portugal.
To obtain the best possible benefits, it will always be necessary to analyze the application of the tax regime in concrete cases both in terms of income obtained abroad and in terms of income earned in Portugal.
Fixed rate of 20% on income tax for earning garnered in Portugal
A taxable person who is considered an NHR is granted the right to be taxed as such for a period of 10 consecutive years from the year, and including the year of their registration as a resident in Portuguese territory.
Thus, net income of high value-added activities of a scientific, artistic, or technical nature, as defined by law, obtained by an NHR in Portuguese territory, is taxed at a rate of 20%.
Elimination of double taxation
An NHR is also granted the right to not be double taxed in relation to income earned in other countries.