NHR

Portugal's Non Habitual Resident Tax Regime

**2024 update**

The government voted in favour of discontinuing the NHR scheme from the start of 2024. Therefore any one seeking this tax regime will not be able too. There has been a special privsions set up, until the end of 2024 for those who become tax residents during 2024, as long as the meet specific criteria. Namely having contracts for employment, or property transactions agreed by certain dates of 2023.

The NHR tax regime was first introduced in 2009 as a clever way for the Portuguese government to entice high net worth individuals and those of high cultural and economic worth to Portugal. A move that has seen substantial returns for the country, albeit with some kick back from countries who wish to retain their residents tax flow. Presently there over 10,000 non habitual tax residents in Portugal.

Who's applicable to apply for the Non Habitual Resident tax regime

To qualify for the NHR tax regime you must comply with the following:

• Own or have a an official rental contract of 12 months or more, to a property for habitation purposes on the 31st of December of that year
• Have a legal right to reside in Portugal. All EU/EEA and Swiss citizens qualify for this, including Portuguese who have not been living in Portugal for 5 years or more. Or those that have a valid Golden Visa
• Non of been a tax resident in Portugal in the 5 years prior to applying for the tax regime

What does the Portugal Non Habitual Tax Regime offer

There are a number of great tax incentives non habitual tax residents in Portugal:

• Tax exemption for, almost, all foreign sources of income
• 20% flat rate tax on income from certain Portuguese sourced income
• No tax on pensions (some exceptions apply)
• Tax free rental property income
• No inheritance tax to family members
• No wealth tax
• There is also no minimum stay requirement with the NHR regime

Double taxation and Portugal's non habitual tax regime

The double taxation treaty effectively allows the income earned by an individual to not be, as the name would suggest, double taxed. Most countries allow for non residents to pay their taxes in there country of residence, as Portugal does also. Potugal has a signed Double Taxation agreement with more than 70 different countries throughout the world, meaning those moving for the non habitual tax regime can do so with assurity that they will indeed be only subjeted to the preferential tax rates of the non habitual regime.

For example, if you own a rental property in the UK, the income would only be taxed here in Portugal not in the UK. Effectively allowing the rental income to be tax free for 10 years.

You can see the list of countries currently with a double tax treaty agreement with Portugal at the financas website here - Double Taxation Agreements (DTA) signed by Portugal

What professions fall under the "high value" category for the NHR tax regime

A list of the qualifying high cultural and economic worth can be found below. Those in these fields are elegible for tax exemptions on income derived from their occupations as they're deemed to be adding great value to Portugal.

How to apply for the NHR Tax Regime in Portugal

We're happy to help connect you with a lawyer/accountant who will be able to assist with the application for the NHR regime, if you're buying a property here in the Algarve then it may well make sense to have your lawyer arrange this for you as they will already be in possession of most of the required documentation and of course, would likley offer a discounted price along with the property purchase.

What you'll need for the application is detailed below:

• Proof of legal residency in Portugal - For EU citizens you just need to register your residency with the local town hall. For those outwith the EU, then you will first need to apply for a residence permit, commonly the Golden Visa, before registering as a tax resident at the town hall. The process is straight forward and just requires the completion of a form and a nominal cost.
• Obtain a Portuguese tax payers number (NIF) - This is the equivalent of a National Insurance number in the UK, or Social security number in the US and is a prequestite for pretty much any actiivity in Portugal, whether buying or renting a property you'll need this before any paper work can be drawn up. Your lawyer will obtain this for you, or if you prefer to do so yourself it's just a case of visiting the local finance department with proof of residence, passport and/or your visa.
• Register as a tax resident - Once you have completed the above you can then register your status as a Portuguese tax resident. It is from this date that your NHR will apply from (retroactiviely)
• Apply for your NHR status - You can apply for the NHR status yourself online here Financas Portal , or in person at the finance department. You'll need your passport, NIF number, fiscal address, email address and a phone number you can be contacted on. If you do this online you'll have to register first, which is worthwhile as you'll have access to anything associated with you whilst in Portugal.
• You will also need to supply the following paper work to complete the NHR application process:
  • Your last 5 years tax returns
  • Proof of your property purchase in Portugal, or a valid rental contract
  • A declaration confirming you have not been a tax resident in Portugal for the 5 years preceding your application

Although the process is fairly straight forward, most will appoint an accountant to process the NHR application on their behalf.

We're happy to help with your NHR application, or point you in the direction of a professional accountant or lawyer that can help. We have a substantial amount of experience in this area and will be happy to chat through the various options, at least in principal, with you to find the most advantageous solution for your personal circumstance.