Tax benefits in Portugal for Non-Habitual Residents 

29.11.23 10:18 PM Comment(s) By Portugal For Retirees

Ministers have approved yesterday (November 28th 2023) the rule that keeps the NHR regime only accessible in the future to workers from companies certified as 'startups'.

However it is still possible to apply for NHR under the current rules as we explain below.


What is it and why has it been in the spotlight in the past weeks?

The Non-Habitual Residency, commonly known as NHR was introduced by the Portuguese government in 2009 to attract ‘high value’ foreign residents to live here and offers reduced tax rates and some tax-free exemptions for your first 10 consecutive years of residence.

Most NHR tax advantages apply to foreign income, but if you are employed in Portugal in a ‘high value activity’ you can benefit from a flat 20% income tax rate on the income. Normal income tax rates range up to 48%.

Briefly, the benefits of the special tax regime for Non-Habitual Residents (NHR) in Portugal were the following:

  • A special tax rate of 20% applicable to employment and self-employment income derived from a “high value-added activities”.
  • A tax exemption (with progression) on foreign-source income (e.g. professional income, rental income, capital gains, interest, dividends, as well as other investment income), provided certain conditions are met. In most cases, capital gains on the sale of securities are taxable at a flat rate of 28%.
  • A flat tax rate of 10% on pensions from a foreign source, as well as to other payments from pension funds and similar retirement schemes.

An individual may benefit from this regime during a 10-year period starting from the year of his/her registration as tax resident in Portugal.

What happened?

Recently, the Prime Minister António Costa said the NHR was “a measure of fiscal injustice that is no longer justified and is a biased form of inflating the housing market, which has reached unsustainable prices”.

And that is why the end of the tax regime for non-habitual residents (RNH) is one of the measures contained in the State Budget law proposal for 2024 (OE2024).

However, this announcement that NHR was going to end generated a wave of concerns among economists and professionals from different sectors, including real estate. Many entities were surprised and opposed to these measures, claiming that it will be harmful to the Portuguese economy.

Extension of deadline for obtaining NHR

With all these objections, the PS party decided to propose and amendment to the original document creating a transitional NHR regime next year, to safeguard workers, retirees or investors who prove that they have prepared their move to Portugal during 2023.

The Portuguese government has proposed extending the deadline for obtaining the special tax regime for Non-Habitual Residents (NHR) to 2024, subject to certain conditions.

According to the government’s official statement there are six ways to benefit from the transitory regime:

  • Having a promise of employment or signed work contract, or secondment agreement celebrated or similar document until December 31, 2023, with work duties having to be performed in Portuguese territory;
  • Entering a lease contract or another contract granting the use or possession of property in Portuguese territory concluded until October 10, 2023;
  • Having a reservation contract or promissory purchase contract with rights over property in Portuguese territory concluded until October 10, 2023;
  • Enrolling or registering dependants in an educational institution located in Portuguese territory, completed until October 10, 2023;
  • Holding a residence visa or residence permit valid until December 31, 2023;
  • Initiating the necessary procedures for the granting of a residence visa or residence permit, until December 31, 2023, including making an appointment or submitting an application with the relevant authorities.

But if your plans are to move to Portugal only in the 2nd semester of 2024 or in 2025, we can keep you posted about coming. Just contact us.

Portugal For Retirees

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