Created by the Portuguese government, the Non-Habitual Resident programme offers attractive taxes in Portugal for foreigners.
With its capital named the 6th best city in the world for expats and crowned the best country in the world for retiring abroad in 2020, there are a lot of reasons why international residents choose to call Portugal home.
Whilst lifestyle is undeniably one of Portugal’s main allures, there are also a number of financial reasons why so many people move to Portugal every year: one of these is Portugal’s Non-Habitual Resident scheme (often abbreviated as the NHR programme). Our Non-Habitual Resident, Portugal 2020 guide explores who is eligible for this programme and the many benefits of this scheme.
Created by the Portuguese government, the Non-Habitual Resident programme offers attractive taxes in Portugal for foreigners who decide to become citizens. The tax scheme was approved back in 2009 to improve the competitiveness of Portugal by attracting high net worth individuals.
THE THREE MAIN TAX BENEFITS OF THE NON-HABITUAL RESIDENT PROGRAMME
- Employment income and self-employed income from high-added-value activities of a Portuguese source will benefit from a reduced personal income tax (PIT) rate of 20%.
- A reduced PIT rate of 10% is applied to foreign pension income from overseas.
- Income from a foreign source may be exempt from tax, providing that certain conditions are met.
These benefits can be enjoyed by individuals for 10 consecutive years from the date of approval providing certain conditions are met.
WHO CAN APPLY FOR THE NON-HABITUAL RESIDENT PROGRAMME?
The Non-Habitual Resident tax programme is open to any non-residents who wish to become tax residents in Portugal, provided that they have not been taxed as Portuguese resident taxpayers in the past five years.
To be eligible for the Non-Habitual Resident programme, individuals need to become a tax resident in Portugal. The Portugal tax residency rules state that this can be achieved by spending at least 183 days a year in Portugal or, if they do not wish to spend this much time in Portugal, they need to have a property in Portugal which is considered to be their permanent and personal address.
Anyone wishing to benefit from the Non-Habitual Residents scheme will need to have proof of abode by 31st of December and will need to submit their Non-Habitual Resident application by the 31st of March of the following year.
NON-HABITUAL RESIDENT PORTUGAL CHANGES 2020
The benefits of the Portuguese NHR programme changed somewhat back in April 2020: a slightly higher tax rate of 10% instead of 0% will be applied to foreign pension income. However, individuals who applied to the scheme before the announcement will not be affected by the new regulations and will enjoy a 0% tax rate for 10 years. Nevertheless, this scheme still remains competitive internationally as well as nationally. Indeed, Portuguese nationals are taxed at up to 48% on their income.
FAQ
What is high-added-value activity?
In order to benefit from the Portuguese Non-Habitual Resident programme, high-added-value activities need to be of a scientific, artistic or technical nature. This expansive list encompasses a whole variety of professions ranging from healthcare professionals (like doctors, surgeons and dentists) and managers through to senior members of a business, administrators and investors.
What tax applies to employment income from low-added-value activity in Portugal?
Income from domestic sources which aren’t deemed ‘high-added-value’ is liable to the general progressive tax rates of up to 48%. Plus, there will also be a surcharge of up to 5%.
How much tax will I pay on capital gains in Portugal?
Domestic capital gains tax in Portugal for Non-Habitual Residents on the sale of securities are taxed at 28%. Individuals can also choose to pay tax on capital gains at a progressive rate.
How much tax will I pay in dividends and interest in Portugal?
Dividends and interest of a Portuguese source are liable to a final withholding tax rate of 28%. Individuals can also choose to pay this tax at the progressive rate, but do note that only 50% of the income from dividends can be taxed this way.
Do I need a visa to live in Portugal?
EU/EEA/Swiss nationals can reside in Portugal without a visa. However, other nationals will need to apply for a visa.
How much tax do I pay on my pension as a non-habitual resident in Portugal?
In accordance with the Non-Habitual Resident changes made in April 2020, those who apply for the programme after this date will need to pay a flat rate of just 10% on their foreign pension income.
How much gift tax do non-habitual residents pay?
Like citizens, for Non-habitual residents, gift tax in Portugal is paid via Stamp Duty a 10% rate. However, spouses, descendants and ascendants, do not need to pay gift tax. In addition, gifts of property will incur an additional rate of 0.8%.
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