Tax regime for Non-Habitual Residents in Portugal (NHR)

Portugal offers various tax incentive programmes. Over the years, the Non-Habitual Resident ("NHR") tax regime has become extremely popular and internationally recognised.

NHRs in Portugal benefit from several income tax exemptions and reductions provided the conditions for access are met.

It's important to note that the NHR was repealed in 2023. However, a transitional regime is in place, so in some cases, it is still possible to become a NHR in Portugal in 2024.

What is the Non-Habitual Resident Tax Regime?

The NHR tax regime was established in 2009.

Under this tax regime, an NHR benefits from a reduced tax rate on their personal income for a fixed period of ten years.

How to become an NHR (mandatory requirements)

Anyone can become an NHR in Portugal if they acquire tax residency in Portugal without having done so in any of the previous five years.

Tax residency in Portugal (how to obtain it)

Anyone who stays 183 days (consecutive or interpolated) in Portuguese territory during a 12-month period is considered a tax resident in Portugal.

A person may also be considered a tax resident if, on any day during that 12-month period, he or she owns a dwelling in Portugal under conditions that suggest that he or she intends to keep it and occupy it as his or her habitual residence.

Can I still become an NHR in 2024?

The NHR tax regime, as we know it, was repealed by the Portuguese government on 31 December 2023.

However, there is a transitional regime, so in some cases, it is still possible to become an NHR in 2024.

The transitional regime

The transitional regime of the NHR scheme in Portugal covers various cases. Therefore, if you are covered by one of the transitional arrangements described below, you can still access the NHR regime:

• Have initiated, by 31 December 2023, a procedure for granting a residence visa or residence permit with the competent authorities in accordance with the applicable immigration legislation in force, namely by requesting an appointment or actually making an appointment to submit an application for the granting of a residence visa or residence permit, or by submitting an application for the granting of a residence visa or residence permit;
• Have obtained a valid residence visa or residence permit by 31 December 2023;
• Have signed, by 31 December 2023, a promise or employment contract, promise or secondment agreement, the performance of whose duties must take place in national territory;
• Have, by 10 October 2023, signed a lease or other contract granting the use or possession of a property in Portuguese territory;
• Have, by 10 October 2023, entered into a reservation contract or promissory contract for the acquisition of a right in rem over real estate in Portuguese territory;
• Have, by 10 October 2023, enrolled or registered their dependents in an educational establishment domiciled in Portuguese territory.

Please note that beneficiaries of the transitional regime must register as tax residents in Portugal by 31 December 2024.

What other tax incentives exist in Portugal?

In addition to the Non-Habitual Resident tax regime, Portugal offers various tax incentive programmes, such as:

• Tax Incentives for Scientific Research and Innovation
• Return Programme

Taxes for Non-Habitual Residents

Like any other Portuguese tax resident, NHRs in Portugal are liable to pay tax in Portugal on all their income, including that obtained abroad. However, NHRs benefit from important reductions and exemptions from personal income tax ("IRS") on some categories of income.

Labour Income

Income earned in Portugal from activities considered to have high added value of a scientific, artistic, or technical nature (whether dependent or self-employed) is taxed at a flat rate of 20%. This is a substantial reduction compared to the progressive rates applicable to other Portuguese residents, which can go up to 48% (or 53% if the additional solidarity tax is added).

Employment income earned abroad is exempt from taxation in Portugal if it is effectively taxed in another country with which Portugal has a double taxation agreement.

Self-employment income obtained abroad is exempt from taxation in Portugal if it comes from activities considered to have high added value of a scientific, artistic or technical nature and can be taxed in the other country under an agreement to avoid double taxation. Otherwise, they will be taxed in Portugal at a flat rate of 20%.

It should be noted that, in practice, this is the most common situation since most of the conventions signed by Portugal only grant the right to tax to the source state when the professional has a permanent establishment, or the work is carried out in the other state.

List of high-value-added activities

NHRs in the following professional categories may benefit from the exemption or reduced taxation of 20% on their income.

Table of high value-added activities:

• CEO and executive manager of companies.  
• Directors of administrative and commercial services.  
• Directors of production and specialised services.  
• Managers of hotels, restaurants, shops and other services.  
• Specialists in the physical sciences, mathematics, engineering and related techniques.  
• Doctors.  
• Dentists and stomatologists.  
• University and college lecturer.  
• Specialists in information and communication technologies (ICT).  
• Authors, journalists and linguists.  
• Creative and performing arts artists.  
• Intermediate-level science and engineering technicians and professions.  
• Information and communication technology technicians.  
• Market-orientated farmers and skilled workers in agriculture and animal production.  
• Market-orientated skilled workers in forestry, fishing and hunting.
• Skilled workers in industry, construction and crafts, including skilled workers in metallurgy, metalworking, food processing, woodworking, clothing, handicrafts, printing, precision instrument making, jewellers, artisans, and electrical and electronic workers.  
• Plant and machine operators and assembly workers, particularly fixed plant and machine operators.  

Workers involved in the above professional activities must have at least a level 4 qualification in the European Qualifications Framework or level 35 in the International Standard Classification of Education or have five years' duly proven professional experience.

Other professional activities: Directors and managers of companies promoting productive investment, provided they are involved in eligible projects and have contracts granting tax benefits under the Investment Tax Code, approved by Decree-Law no. 162/2014, of 31 October.

Capital gains, dividends and passive income

Capital gains, income from intellectual property, interest, dividends and other forms of passive income are exempt from taxation in Portugal as long as they are obtained and can be taxed in the other country with which Portugal has signed a double taxation agreement.

If this income is obtained in a country with which Portugal has not signed a double taxation agreement, it may still be exempt, provided that it can be taxed in the other country, territory or region, in accordance with the OECD model tax convention on income and wealth, interpreted in accordance with the observations and reservations made by Portugal; and provided that this country is not on the Portuguese list of "tax havens".

If the income is deemed to have been obtained in a "tax haven", an increased tax rate (35%) applies.

In the case of capital gains arising from the sale of shareholdings, to determine the source of the income, it should be noted where the entity issuing the security is domiciled. This will define which double taxation agreement applies (if any), whether or not the income can benefit from exemption under the NHR regime, and whether the increased tax rate of 35% will apply (in the case of tax havens).

Pension income

The net pension income earned abroad by non-habitual residents is taxed at 10%.

IBCM advantages for non-habitual residents

Madeira offers the chance to take advantage of one of the most favourable tax regimes in Europe, under the International Business Centre of Madeira (IBCM).

This is a preferential tax regime approved by the European Union (EU) in full compliance with all EU treaties and laws. One of its features is the 5% IRC rate applicable to income generated outside Portugal.

Non-habitual residents who choose to live and work in Madeira can set up a company in the IBCM of Madeira and enjoy the following advantages, among others:

• Reduced corporate income tax rate of 5% for income obtained outside Portugal;
• Reduced flat rate of 20% for the salaries of workers with activities considered to have high added value;
• Participation exemption regime applicable worldwide for dividends, reserves, capital gains and capital losses;
• Tax credit for international, legal and economic double taxation;
• Huge reductions in Stamp Duty, IMT, IMI, spillages, autonomous taxation and other fees and costs.