Exploring NHR Benefits in Portugal: Essential Updates for 2024
If you’re considering relocating to Portugal and taking advantage of its attractive tax regime, you’re in the right place. Here’s a detailed guide on the Non-Habitual Resident (NHR) benefits in Portugal, including the latest updates for 2024. For a more in-depth look, you can also check out this comprehensive resource.
What is the NHR Regime in Portugal?
The Non-Habitual Resident (NHR) regime in Portugal is a tax regime designed to attract foreign individuals to the country by offering significant tax benefits. Introduced in 2009, this regime has been a magnet for thousands of foreign nationals seeking to relocate and enjoy a more favorable tax environment2.
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To qualify for the NHR status, you must not have been a tax resident in Portugal for the previous five years and must establish tax residency in Portugal. This typically involves living in Portugal for more than 183 days within a 12-month period or owning property there\1\2.
Key Benefits of the NHR Regime
The NHR regime offers several tax benefits that make it an attractive option for foreign residents:
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- Flat Tax Rate: A flat 20% tax rate on certain types of income, such as income from high-value-added activities earned in Portugal.
- Exemptions on Foreign Income: Exemptions on various foreign income sources, including employment income, independent work, capital investment income, royalties, and capital gains. However, foreign pensions are not exempt and are taxed at Portugal’s normal progressive rates\1\2.
- No Wealth Tax: There is no wealth tax for NHR residents.
- Free Remittance of Funds: You can remit funds to Portugal without any restrictions.
- Tax Exemption on Gifts: Tax exemptions on gifts or inheritance to direct family members2.
Updates to the NHR Regime for 2024
As of January 2024, the original NHR scheme has ended, and a new regime, often referred to as NHR 2.0 or the Fiscal Incentive for Scientific Research and Innovation (IFICI) program, has been introduced. Here are the key changes:
Eligibility Criteria
The new regime is more targeted and emphasizes employment in scientific research and innovation. To be eligible, individuals must:
- Become taxable residents in Portugal.
- Not have been taxable residents in the previous five years.
- Earn income in certain professional categories specified by the relevant legislation and an upcoming Ministerial Order\1\2.
Transitional Regime
For those who were in the process of applying or had already applied under the old regime, there is a transitional period. Taxpayers who establish residency in Portugal during 2024 must submit their registration request and report any changes by March 15, 2025. Relevant entities are required to submit their communications by April 15, 2025, and the Tax Authority will inform taxpayers about the status of their registration by April 30, 20251.
How to Apply for the NHR Status
Applying for the NHR status involves several steps:
Step 1: Get Your Proof of Residency
You need to establish your residency in Portugal, which can be done by living in the country for more than 183 days within a 12-month period or by owning property there.
Step 2: Obtain Your NIF
A NIF (Número de Identificação Fiscal) number is your tax identification number in Portugal. You can obtain it through your representative or lawyer in Portugal, or directly at the local tax offices (finanças) if you are a resident. You will need to provide an ID card or passport and proof of residency1.
Step 3: Register as a Tax Resident
After obtaining your NIF, you must register as a tax resident in the finanças.
Step 4: Apply for the NHR Status
You need to register on the relevant government website and submit the required documents online. Here is a detailed list of the steps involved:
- Register on the government website.
- Receive a password by post within approximately two weeks.
- Complete the application process online by submitting the required documents, such as proof of non-residency in Portugal for five years, your tax returns, and a rental agreement or property deed1.
Residency Options in Portugal
Portugal offers several residency options that can help you qualify for the NHR status:
Portugal D7 Visa
The D7 Visa, also known as the Retirement Visa or Passive Income Visa, allows non-EU/EEA/Swiss citizens to apply for temporary residency in Portugal. This visa is suitable for retirees and individuals with a minimum regular passive income of €870 per month, which can include pensions, real estate, royalties, dividends, financial investments, or intellectual property1.
Portugal D8 Digital Nomad Visa
The D8 Visa, or Digital Nomad Visa, introduced in October 2022, allows non-EU/EEA/Swiss citizens with a monthly income of €3,480 to apply for temporary residency in Portugal while working remotely1.
Portugal D2 Visa for Entrepreneurs
The D2 Visa, or Entrepreneur Visa, is designed for entrepreneurs who want to start or buy a business in Portugal. This visa allows non-European Union citizens to stay in Portugal for up to four months and then apply for a resident permit, which is valid for two years and can be renewed for three years contingent on the continuity of the applicant’s professional activities1.
Portugal Golden Visa
The Portugal Golden Visa program is an investment immigration program that grants residency and citizenship rights to foreign investors who make a significant economic contribution to the country. This can include investments in venture capital/private equity funds, scientific research, cultural donations, or job creation1.
Comparison Between NHR and IFICI Regime
Here is a comparison between the old NHR regime and the new IFICI regime:
| Aspect | Old NHR Regime | IFICI Regime (NHR 2.0) |
|---|---|---|
| Eligibility | Open to various professions and retirees | Limited to highly qualified professionals in scientific research and innovation |
| Tax Rate | Flat 20% tax rate on certain income | Flat 20% tax rate on eligible professional income from Portugal |
| Foreign Income Exemptions | Exemptions on various foreign income sources | Exemptions on professional foreign-sourced income, excluding pensions |
| Duration | Benefits available for 10 consecutive years | Benefits available for 10 consecutive years, with no option for extension |
| Application Deadline | No specific deadline for application | Must submit registration request by January 15 of the year following the year of becoming a resident |
Double Taxation Agreements
Portugal has Double Taxation Agreements (DTA) with several countries to prevent double taxation of income or assets. These agreements ensure that income is not taxed twice, once in the country of residence and again in the country where the income is earned. Here is a list of some countries with DTA with Portugal:
- United States
- United Kingdom
- Canada
- Australia
- Germany
- And many others
These agreements are crucial for NHR residents to avoid double taxation on their global income1.
Practical Insights and Actionable Advice
If you are considering applying for the NHR status, here are some practical insights and actionable advice:
- Understand the Eligibility Criteria: Ensure you meet the eligibility criteria, including not having been a tax resident in Portugal for the previous five years and earning income in eligible professional categories.
- Plan Your Residency: Establish your residency in Portugal by living there for more than 183 days or owning property.
- Obtain Necessary Documents: Secure your NIF and other required documents promptly to avoid delays in your application.
- Consult Professionals: It may be beneficial to consult with tax advisors or lawyers to ensure you navigate the application process smoothly.
The NHR regime in Portugal, despite the recent changes, remains an attractive option for foreign individuals seeking to relocate and enjoy significant tax benefits. By understanding the updated eligibility criteria, application process, and the various residency options available, you can make an informed decision about whether the NHR status is right for you.
As Diogo Pedro, a tax consultant, notes, “The IFICI+ tax benefit, designed for foreign taxpayers in Portugal, is a continuation of the country’s efforts to attract both capital and expertise by inviting individuals to establish residence in Portugal”3.
By leveraging the NHR regime, you can enjoy a more favorable tax environment, contribute to Portugal’s economy, and make the most of your residency in this beautiful country.
