NHR 2.0: Ready, set, apply!

We waited, waited some more, and almost lost hope: NHR 2.0 was starting to feel like an urban myth. But after more than a year of waiting, it’s finally here—and ready to roll!

The regime has significant advantages (as we will see below) but is stricter than NHR 1.0. From the first application to the last day of the 10 years of benefit, more documents will need to be prepared, and more checks will be carried out, with the burden split between the individual and the company/institution involved.

Moreover, we now have several entities potentially involved in the process, each with its route and requirements. However, there is a common principle: NHR 2.0 is designed for people who work in Portugal for a Portuguese company.

But first things first: are you eligible for NHR 2.0/IFICI?

Our six-step approach to getting an NHR 2.0 in 2025

We consider this six-step test a good way of determining eligibility:

1. Did you ever benefit from NHR 1.0? Or Return Program? Or Youth IRS? If you did, then you are automatically excluded from NHR 2.0.
2. Were you a tax resident of Portugal in the previous five years? If not, that’s perfect.
3. Are you willing to move your tax residence to Portugal? If so, you are fine again. Remember that moving your tax residence to Portugal means taxation over your worldwide income.
4. Do you work for a Portuguese company/institution foreseen in any of the NHR 2.0 routes?
5. Do you effectively exercise an eligible profession in such a company/institution?
6. Do you have the necessary level of academic qualifications?

If the answers to these questions are positive, you're closer to starting to gather your documents and submitting your NHR 2.0 application, being mindful of the deadlines:

• If you become a tax resident in 2024, your application deadline is 31 March 2025;
• If you become a tax resident in 2025 or later, your deadline will be 15 January of the following year.

Of course, you can always manage everything yourself—ChatGPT and similar resources might even provide some useful tips. But beware: the devil really is in the details. An incorrect application or oversight could lead to significant headaches down the line and waste your time and effort.

At NEWCO, we're here to guide you step-by-step, ensuring your move to Portugal is hassle-free from start to finish.

Key benefits of the NHR 2.0

Now that the boring registration side is done, let’s go through the main benefits of NHR 2.0:

• PIT rate of 20% on employment income (category A) and professional income (category B) obtained in the Portuguese territory;
• PIT exemption on income obtained abroad referring to categories A (dependent work), B (professional activities), E (capital income), F (rental income) and G (capital gains), being, however, compulsorily aggregated to determine the rate to be applied to the remaining income.
• Income from a blacklisted jurisdiction is liable to specific tax rules (for capital income and capital gains) that foresee an aggravated taxation of 35%.

For the avoidance of doubt, we highlight that:

• NHR 2.0 does not have any benefit over pensions. Pension income will be subject to the standard Portuguese tax rules;
• All other Portuguese-sourced income will be taxed at the standard Portuguese PIT rates;
• Benefitting from NHR 2.0 exemptions does not mean that you will not need to report your worldwide income to the Portuguese Tax Authorities – this is indeed mandatory, as its amount will contribute to the determination of the tax rate applicable to the remaining taxable income that may be subject to progressive rates (if any).

The NHR 2.0 has no nationality restrictions. However, considering it requires Portuguese tax residence, the beneficiary must secure a residence permit (e.g. Golden Visa, D7 Visa, Tech Visa or D2 Visa) whenever its nationality does not grant the right to live in Portugal.

Most relevant routes to qualify for NHR 2.0

This next part is quite extensive, and—trust us—we'd love nothing more than to skip it entirely. But after careful consideration, we realised no article on this topic would be complete without it. So, deep breath, here we go:

* The codes that identify the economic activities relevant to the national economy are the following:

• Extractive industries – divisions 05 to 09;
• Manufacturing/transformative industries – divisions 10 to 33;
• Electricity, gas, steam, hot and cold water and cold air – division 35;
• Construction – division 42;
• Accommodation, food service and similar activities – classes 5511 and 5512;
• Information and communication activities – divisions 58 to 63;
• Financial and insurance activities – classes 6420 and 6630 – Includes fund management activities
• Consulting, scientific, technical and similar activities – class 7010 and divisions 71 to 72;
• Administrative and support services activities – class 8211;
• Education – class 8542;
• Human health and social support activities – division 86 (except subclasses 86905 and 86906).

Are you saddened because you do not fit the NHR 2.0?

Well, if you have concluded that NHR 2.0 does not fit you, there might be an alternative that will still make your move to Portugal interesting from a tax perspective.

• First, there are PIT tax breaks for workers/freelancers below 35 (regardless of nationality). The breaks can apply for up to 10 years and start on 100% of PIT exemption for the first year (up to 28,737 EUR in 2025).
• Second, if you have ever lived in Portugal but left for at least 5 years and want to return, there is the Return Program, which offers a 50% exemption on employment and freelance income.
• Lastly, our tax system provides interesting benefits for insurance wrappers, estate planning, and, if done properly, income stemming from foreign trusts. Also, if you are a crypto investor (but not a professional trader), there is an exemption on capital gains from assets held for at least 365 days.

Final take

The NHR 2.0 has benefits that even go beyond the ones that were provided by NHR 1.0 (in particular, on foreign capital gains from the sale of securities).

Nevertheless, it is essential to note that this is a whole new regime—indeed, it’s not even officially called NHR, but instead “IFICI.” Therefore, we will need some months or even years to grasp its bits and pieces fully.

Being the first ones submitting an application, renovating status, and filing tax returns is exciting, but it’s something that taxpayers and ourselves will need to learn to navigate. Just be sure you have the best possible advice because the tax leakage generated by a failed NHR 2.0 application can be considerable and ultimately harm your plans.