IFICI - the new Portuguese regime for non-habitual residents (RNH 2.0)

Big news: we officially entered the NHR 2.0 (or “IFICI”) era! After nearly a year of waiting – coinciding almost perfectly with the end of grandfathering provisions of NHR 1.0 - we finally got our hands on the first NHR 2.0 regulation.

Before delving into the bits and pieces, let’s do a quick recap on the key NHR 2.0 benefits:

• 20% flat tax rate on qualifying Portuguese-sourced employment and self-employment;
• Tax exemption on foreign-sourced business profits, employment, dividends, interest, royalties, rents, and capital gains.

It’s important to remember that pensions are entirely excluded from NHR 2.0 benefits, as is income originating from blacklisted jurisdictions.

Also, eligibility is limited to those who became Portuguese tax residents after January 1, 2024, and were not tax residents in Portugal during the preceding five years​​.

New NHR - What has been regulated and what is still pending?

This first regulation defines the registration process and deadlines that will apply to the several NHR 2.0. routes.

It also outlines certain eligibility criteria. Our emphasis on “certain” is deliberate, as regulations for several other NHR 2.0 routes remain pending. To date, only two routes have been fully regulated.

1. Highly qualified professions performed in companies with relevant qualifying investments under RFAI (a Portuguese investment support tax regime); and
2. Highly qualified professions in companies whose main activity corresponds to a CAE code defined by the regulation (see below) and which export at least 50% of their turnover, in the fiscal year in which the applicant began its functions or in any of the two previous years.

Of these, route 2. is clearly the one we anticipate having the greatest impact. Hence, it will be the focus of the next section.

IFICI - What is a highly qualified profession?

The eligible professions include:

• Directors of companies (e.g. board members, CEOs, executive managers)
• Directors of administrative and commercial services
• Information and Communication technology (ICT) specialists
• Specialists in physical sciences, mathematics, engineering
• Medical doctors
• University professors

The applicants must possess at least level 6 of the European Qualifications Framework (equivalent bachelor’s degree), combined with three years of proven professional experience.

The proven professional experience requirement is waived whenever the applicant has level 8 of the European Qualifications Framework (equivalent to a PhD/Doctorate).

Which companies make me eligible under this route?

First, the company needs to export at least 50% of its turnover, in the fiscal year in which you join the company or in the two preceding years. Also, it must have its main activity within the following Portuguese CAE codes:

• Extractive industries (divisions 05 to 09)
• Transformative industries (divisions 10 to 33)
• Information and communication (divisions 58 to 63), including:
  • Publishing activities (can include books, newspapers, computer programmes)
  • Film, video, television programme production, sound recording and music editing activities
  • Software programming activities
  • Software consultancy activities
  • Data processing, hosting and related activities
  • News agency activities
• Research and development of physical and natural sciences (group 721)
• Higher education (subclass 85420)
• Human health activities (subclasses 86100 to 86904)

How and when can I apply for the new RNH?

Applicants must submit their applications by January 15 of the year following their residency in Portugal – a much tighter deadline than the 31 March once provided by NHR 1.0. An exception is provided for those who became tax residents in Portugal in 2024, with the period being extended to 15 March 2025.

The competent entity for the analysis of each application depends on your route for NHR 2.0. Some key examples:

What documents will I need to apply for the new NHR?

The applicants will need to submit the following documents to the relevant entities: 

• Copy of the employment contract (when applicable);
• Up-to-date company registration certificate (when applicable);
• Copy of the scholarship contract/scientific grant (when applicable);
• Proof of the applicable academic qualifications;
• Statement from the employer attesting compliance with the requirements relating to the activity carried out;

Other documents may be requested throughout the application process, with the Tax Authorities expected to confirm the NHR 2.0 status by 31 March each year.

What is the best way to apply for NHR 2.0?

While it is important to note that specific regulation remains pending on other key routes for NHR 2.0, these are expected to focus on eligibility criteria while maintaining the application process that has now been implemented.

These additional regulations will cover routes such as (i) qualified professions and members of corporate bodies within entities conducting economic activities recognized as relevant to the national economy by AICEP or IAPMEI, (ii) board members or employees of certified startups and (iii) NHR Madeira. We’ll report on these as soon as they are made available.

The bottom line: NHR 2.0 presents a highly competitive array of tax advantages, which can be combined with other attractive Portuguese tax features (pro tip: no inheritance tax on foreign based assets!). However, the application process appears more complex and will require more input from both applicants and relevant companies: instead of automatic approvals characteristic of NHR 1.0, the regulation places a clear emphasis on conducting thorough eligibility checks as part of the application process.

Perhaps it’s fitting to say that with great tax advantages comes great responsibility? In any case, professional and experienced guidance will be more critical than ever.

At NEWCO, we support you every step of the way on your journey to NHR 2.0, offering:

• Personalized tax analysis tailored to your needs;
• Comprehensive assessment of your NHR 2.0 eligibility, both from the applicant’s perspective and from the company or investment standpoint;
• Evaluation of highly qualified professions to meet program criteria;
• Seamless registration process for the applicant and the relevant company;
• Continuous tax support from our accountants, providing expert guidance whenever you need it.