The non-habitual resident program is a Portuguese special tax regime for inbound individuals and entities.

This summary provides an overview of the non-habitual resident (NHR) regime for new inbounds transferring their residence to Portugal and for Portuguese nationals returning to Portugal after an extended period of living abroad.

NHR

The non-habitual resident status (NHR) is related to tax residency and is limited to a 10 year period. This means it offers a 10 year tax relief from the standard rates.

Any income gained from Pensions, Interest, Capital Gains and Property Rentals can benefit from this regime.

Individuals covered by the  NHR regime can benefit from a special personal income tax (“PIT”) regime for this ten-year period.

There are essentially two main sources of personal income:

1. Portuguese Source Income – Employment and self-employment income is liable to a special 20% flat rate if derived from high value-added activities of scientific, artistic, or technical character performed in Portugal, as listed in a Ministerial Order. It’s pretty much all activities: from Directors to Artists and a barometer of activities in between like teachers, salespeople, engineers, doctors, journalists.

2. Foreign Source Income – 

I. Employments income is exempt from PIT if:

a) It is taxed in the source State according to the applicable Tax Treaty or

b) If no Treaty is applicable, the income is effectively taxed in the source State, and it is not deemed as derived in Portugal.

II. Other Income

Foreign source dividends, interest, capital gains, and rental income is exempt from PIT if it can be liable to tax in the country of source, according to the applicable Tax Treaty or to the OECD Model Tax Convention,  not deemed derived in Portugal, and not deemed obtained in a tax haven. (Guernsey, Isle of Man, Gibraltar)

General Tax Rules for a NHR:

1. Non habitual residents will be subject to a reduced 20% PIT rate

both on salaries and business and professional income of a Portuguese source arising from high added value activities of a scientific, artistic or technical nature.

2. Rental income, investment income and capital gains

of a non Portuguese source obtained by non habitual residents are also PIT exempt, provided the above mentioned conditions are met. 

3.  Foreign source pensions

including periodic and lump sum payments from life insurances policies, pension funds, retirement savings plan and other complementary social security regimes are liable to a 10% flat rate with the possibility of offsetting the taxes eventually paid in the country of source.

4. Wealth taxes

Portugal does not have wealth taxes. Only local taxes on Portuguese real estate apply. Portugal levies a municipal tax on the acquisition of Portuguese properties at rates up to 7.5%. Stamp tax duty at 0.8% is also due on the same amount.

5. Annual property tax

Portugal levies an annual municipal tax based on the registered value of Portuguese real estate at rates between 0.3% and 0.45% (depending on the municipality and the type of real estate).

Additional Property Tax will also be levied at a rate between 0.7% and 1.5% on properties with registered tax value equal or higher than €600,000.

Rates may be higher depending on several factors (type of property, type of owner, etc).

6. Inheritance tax

Stamp Duty is levied at a 10% rate on Portuguese assets only except for spouses, descendants and ascendants, who are exempt.

7. Gift tax

Stamp Duty is levied on gifts located in Portugal at a 10% rate except for spouses,
descendants and ascendants, who are exempt. An additional rate of 0.8% is due on gifts of
real estate

How to Qualify for the NHR status?

To qualify as an NHR, an individual must meet the following guidelines:

1. Become a tax resident

2. Not having been taxed as a Portuguese resident for the previous five years

An individual is a tax resident if:

1. stays in Portugal for a period greater or equal than 183 days within a 12 month period. This doesn’t need to be consecutive.

2. has a Portuguese residence

How to Apply for the NHR Status?

1. Apply for a Portuguese NIF(Taxpayer number)

2. Obtain a Certificate of residence

2. Register as a tax resident and request access codes

3. Apply for the NHR

Important Dates

The NHR status must be requested until March 31 of the year after taking up tax residency in Portugal.

If you are accepted, you will enjoy your NHR status for 10 years from the date of application.