Living in Portugal? Know the tax advantages for non-habitual residents.

These are currently the tax benefits for non-habitual residents in Portugal.

The fiscal regime of Non-Habitual Residents (NHR) in Portugal offers significant benefits, making the country an attractive destination for skilled professionals, retirees, and high-income individuals. Established in 2009, the regime aims to attract talent, investment, and knowledge to Portugal. 

Although this regime has been repealed, with effect from January 1, 2024, it will still be possible to submit registration applications and benefit from the tax benefits associated with this regime until March 31, 2025. However, in this case, you must have become a resident in Portugal by December 31, 2024, in order to submit your registration request in the respective functionality on the Finance Portal, declaring that you meet the conditions legally established to be considered an Non-Habitual Resident.

So, these are the main tax advantages associated with the NHR:  

Reduced taxation on income from work and professional activities.

• Fixed rate of 20%: Qualified professionals in high value-added activities, such as engineers, doctors, architects, and consultants, can benefit from a fixed IRS (Individual Income Tax) rate of 20%, instead of the progressive rates that go up to 48%.

• Validity: This benefit is applicable for 10 consecutive years, as long as the status is maintained.  

> Tax exemption on income earned abroad

• Income from dependent work, pensions, investments, interest, dividends, or royalties obtained outside of Portugal may be exempt from IRS in Portugal, as long as:

• The country of origin of the income has a double taxation agreement with Portugal or the income is taxed in that country.

• And the income is taxable in the other country, but not subject to an effective tax rate in Portugal.

> Benefits for foreign pensioners

• For pensioners moving to Portugal, pensions earned abroad are taxed at a flat rate of 10% (applicable after 2020, replacing the previous total exemption).

• This benefit is valid for private retirement income, but does not apply to public pensions (which are taxed in the country of origin).  

Access to competitive tax burden.

• Passive income (such as interest, dividends, or royalties) obtained abroad may be exempt from IRS, as long as they are taxed in the country of origin, creating a situation of double non-taxation.

> Simplified and transparent regime

• The NHR status is easy to obtain for individuals who:

• Have not been tax residents in Portugal in the last 5 years.

• Live in Portugal for more than 183 days a year or maintain a habitual residence in the country.  

Efficient tax planning.

The NHR regime allows for advantageous tax planning, especially for expatriates, retirees, and highly skilled professionals looking to maximize their net income.

Competitiveness compared to other European countries

Combined with quality of life, security, mild climate, and relatively low cost of living, the NHR regime makes Portugal a preferred destination for foreigners looking to establish residence in Europe.

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