Blog (NHR) Non Habitual Residency

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The non-habitual tax resident (NHR) is a tax regime created to improve Portuguese international competitiveness. This regime targets non-resident individuals who are likely to establish a permanent or a temporary residence in Portugal.

The NHR regime establishes, under certain conditions, IRS exemptions on foreign source income, as well as a limited 20% taxation of income from employment and independent personal services, in both cases if  deriving from listed high value added activities.

Entrants in the regime that became Portuguese tax resident as from 1 April 2020 are liable to a 10% tax rate on pension income, instead of the previous exemption.

WHO CAN APPLY FOR NHR?

Individuals who become resident for tax purposes in Portugal without having been so in the previous five years. 

WHAT ARE THE BENEFITS?

A Non Habitual Resident (NHR) will be exempt from personal income tax on certain types of qualifying income if this income is subject to tax in the country of source under an existing Double Tax Treaty that allows for this or, if no Tax Treaty exists, were subject to tax in another jurisdiction and are not considered as Portuguese source income under domestic rules. Certain types of qualifying income under the regime will also benefit from a double tax exemption i.e. an exemption in Portugal and in the source jurisdiction. A special flat rate of 20% is also applicable for certain types of income arising from a number of highly qualified activities.

Entrants in the regime that became Portuguese tax resident as from 1 April 2020 are liable to a 10% tax rate on pension income, instead of the previous exemption. 

HOW TO GET YOUR NHR?

Staying for more than 183 days in the Portuguese territory, whether these days are consecutive or not, in any 12-month period beginning or ending in a given tax year;

If staying for a shorter period, having in the Portuguese territory, on any day of the period referred above, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode;

HOW TO APPLY FOR NHR?

An application must be submitted until March 31st of the tax year following that in which Portuguese tax residence is acquired. If you wish to apply for the NHR regime Abacoz Algarve can offer support through our recommended lawyers. 

OTHER TAX BENEFITS TO LIVING IN PORTUGAL

Outside of the NHR regime, Portugal can still provide tax advantage. Unlike other countries like Spain and France there is no wealth tax in Portugal and the inheritance tax regime is benign (it only applies to Portugal assets; the tax rate is 10% and spouses and children are exempt). Also there are arrangements available here which allow you to enjoy extremely favourable tax treatment on your capital investments and pension income. Indeed, if you are eligible for the NHR regime, often combining these structures with the regime rules produces the best results.While the non-habitual residents regime can offer significant tax benefits, it is complex and has pros and cons.

This is only a summary an it's important to take professional advice to establish what would be most advantageous for you.

This information should be used as a guide only.

At the time of publishing it's correct but is subject to change at any time. Abacoz Algarve Properties assumes no responsibility for the accuracy of the content, to be fully updated you can always contact us.


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