Tax Regime for Non-Habitual Residents (NHR)
The NHR regime gives the opportunity to those who wish to become residents in Portugal to benefit from 0% tax on income from foreign sources, such as pensions, for the first 10 years.
Pensioners can be in most cases exempt of taxes both in their home nation and in Portugal.
This regime is available to anyone who has not been a resident in Portugal for tax purposes for the previous five years.
In addition, Non-Habitual residents benefit from a flat tax rate of only 20% on income received in Portugal, from the exercise of high added value activities
What is the NHR regime?
This competitive regime allows taxpayers who meet the requirements, to have a flat tax rate of only 20% on income received in Portugal, from the exercise of a high added value, and 0% tax on income from foreign sources.
Why the NHR regime has been implemented?
The NHR scheme has been created in order to attract skilled professionals, wealthy investors and retired individuals.
With the introduction of this special tax regime, Portugal has become a destination of choice for many high value persons.
When the NHR regime has been implemented?
The Legal Regime for Non-Habitual Residents was created in 2009 and is proven to be very attractive in the combination with the absence of wealth tax or of inheritance/gift tax for close relatives.
What are the conditions to benefit from the NHR regime?
To take advantage of the NHR regime, you must comply with the following requirements:
- Have not been deemed resident on Portuguese territory during the five years prior to the year pretended to be taxed as a non-regular resident
- Register as a tax resident in Portugal to the local office of the tax department
- Ask the status of non-habitual resident at the time of registration as a tax resident in Portugal, justifying a stay of more than 183 days (continuously or not) or disposing of a resident housing in Portuguese territory on December 31 of the tax year (suggesting the intention to keep or use this property as a primary residence)
- Submit the application for registration as non-regular resident at the moment of the registration as a resident on Portuguese territory or later until March 31st of the year following the year which you become a resident in Portugal
How long is the exemption for ?
It is valid for 10 years since registering as a tax resident in Portugal. Then will be applicable the traditional tax system. However if the expatriate return to live in its country of origin – or elsewhere – and he come back at least five year later, he will benefit again from this status.
Is it required to purchase a property to benefit from the NHR regime?
No. There is no obligation to purchase a home. A property may be rented.
I am French and receive a pension from the private sector. How will be taxed my pension?
The tax treaty between France and Portugal grants the exclusive right to tax private pensions to the State of residence. So if you have not been a Portuguese tax resident during the last 5 years you will be able to enjoy the status of non-habitual resident in Portugal and your pension will not be taxable in France and will be exempted in Portugal.
Most of the tax treaties concluded by Portugal, on the basis of the OECD model, provide for exclusive taxation of the State of residence of the taxpayer in respect of private pensions.
What if I receive a pension from the public sector?
Public sector pensions are different – they almost always remain taxable in the source country.
If I receive Portuguese source income, how will it be treated?
“High-value” income and self-employment income from a Portuguese source are taxed at a preferential flat rate of 20% in Portugal (with an additional surcharge of 3.5% in 2015).
The other categories of Portuguese source of income received by non-usual residents are normally taxed according to the ordinary rules applicable to ordinary residents and therefore are subject to progressive rates of tax on Portuguese income.
What is “high-value” income?
High value added activities are defined as those of a scientific, artistic or technical nature and include in practice architects, engineers, artists, sculptors, actors, musicians, painters, auditors and tax consultants, doctors, dentists, university professors, archaeologists, biologists, professionals, executives, etc.
If I receive foreign source income, how will it be treated?
Wage income from the value-added activities from sources abroad, are in principle exempt from income tax in Portugal, provided that these wages are effectively taxed in the source State in accordance with rules under the tax treaty between Portugal and the State of source.
However, if these wages are not taxed in the source State, they will benefit from the preferential tax rate of 20%.
Regarding the income of independent professionals, they will be eligible for exemption from income tax in Portugal when those revenues are from high-value activities and they can be taxed in the State of source in accordance with the rules of the tax treaty between France and the State of source. At tax default in the source State, that income may, however, benefit from the preferential rate of 20%.
If I receive passive income, how will it be treated?
Passive income (interest, dividends, royalties, capital gains and other investment income, property income) from foreign sources for their part are generally exempt from income tax in Portugal, provided that such income may be taxed in the State of the source under the rules prescribed by the tax treaty between Portugal and the State of source.
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