NHR In Portugal: The Ultimate Guide
NHR (Non-Habitual Residency) in Portugal
The Portuguese government introduced the NHR (Non-Habitual Residency) in Portugal in 2009. This program offers a high value to tax residents. It often alleviates tax burdens, and in some cases, provides a complete exemption from particular taxes.
The program draws tax residents to Portugal and makes the country more appealing to global investors. Since its introduction, this program has attracted over 10.000 non-habitual residents. These residents enjoy many benefits on their taxes in Portugal.
In this guide, we’ll answer all the questions you might have about this program.
Who Can Benefit From the NHR
To benefit from this program, you need to have the right to be a resident in Portugal. EU, EEA, and Swiss citizens have residence rights in Portugal. You can also gain permanent residence through the Portugal Golden Visa Program.
Additionally, to benefit from this program, you shouldn’t be a Portuguese tax resident in the preceding five years of applying.
Moreover, to establish a tax resident status in Portugal, you must hold a place of abode by the 31st of December of that year. This shows the Portuguese authorities your intention to be a habitual resident there. You might opt to buy property in Portugal, but this isn’t required. If you have a rental contract of 12 months in Portugal, it is sufficient to prove your residence.
Furthermore, if you decide to buy a property in Portugal, you can show the purchase deed as proof of residence. Once you obtain your proof of residence (A.K.A place of abode), you can apply for the Non-Habitual program until March 31st of the next year.
What Does the NHR in Portugal Include
As mentioned above, this program has several advantages for non-habitual residents, such as:
- Exemption on most foreign source incomes
- A 20% flat tax rate for certain incomes in Portugal. As opposed to the standard tax rates, which can be up to 48% on determined professions and self-employment
- Special individual tax treatment on income tax for ten years
- Tax residence in Portugal, which is a white-listed tax residency country
- No tax on gifts or inheritance to family members
- No wealth tax
- Free cash remittance to Portugal
Step By Step Guide To Apply for
The NHR Regime in Portugal
Proof Of Residence
Getting a NIF Number and Registering as a Tax Resident
The NIF number is a nine-digit number that is necessary to obtain if you plan on doing any legal activity in Portugal. As a non-resident, you can ask your lawyer or legal representative to get it for you. If you’re already in Portugal, you need to go to the local tax office (finanças) to obtain it. To do that, you need to bring your ID and proof of residency.
After you obtain your NIF, you should register as a tax resident in the local tax office (finanças).
Application for NHR Status
- A document that states that the individual was not a tax resident in Portugal in the preceding five years
- The past five years’ tax returns
- A rental agreement or proof of property purchase in Portugal
High Added Value Professions
There are some professions the Portuguese tax authorities consider as “High Added Value.” These professions tend to have economic or cultural worth. Moreover, as an effort to draw such professionals into Portugal, the government offers them generous tax exemptions.
In the table below, you’ll find a list of all the High Added Value professions:
|Theater, ballet, cinema, radio, television artists||Singers||Sculptors|
|Tax consultants||Dentists||Medical Analysts|
|Clinical surgeons||Ship’s doctors||General Practitioners|
|Biologists and life science experts||Computer programmers||Software consultant|
|Computer consultants and related services||News agencies||Other information and service activities|
|Scientific research and development||Research and experimental development on natural sciences and engineering||Research and development in biotechnology|
Which Type of Foreign-Sourced Income Is Exempt From Taxes
Your employment income is exempt from tax under the NHR regime. Some professions which are not “High Added Value” (see the list above) may be subject to taxes at a 20% flat rate. In comparison, the regular income tax in Portugal is up to 48%.
Your self-employment income on eligible professions from a country with a DTA is exempt from taxes.
If the income is from a blacklisted country as a tax-haven and is not from one of the eligible professions, it will be taxed at a progressive rate. You will also need to pay social security contributions. This type of income might also be taxed at a flat rate of 20%. However, you can pay the usual progressive tax if it is less than the flat rate.
Royalties And Income From Financial Assets
This type of income is exempt from taxes if it comes from a country with a DTA. Additionally, it is also exempt from taxes when it comes from a country that is not blacklisted as a tax-haven. If the income comes from a blacklisted tax-haven, it will be taxed at 28% or 35%.
Real Estate Income And Capital Gains
Your Income on real estate and capital gains is tax-exempt from a country with a DTA or one that is not blacklisted as a tax-haven.
Capital Gains From The Disposal Of Securities (Shares, Bonds, Etc)
These are exempt from taxes unless they come from a blacklisted tax-haven, in which case they are taxed at 28% or 35%.
There is no tax on your pension income from countries that have a DTA. This is subject to change with the changes implemented in the NHR program. It will affect those who consider retiring in Portugal.
What Is the Tax on Portuguese-Sourced Income
The NHR also offers benefits to Portuguese-sourced income. In the case of employment income and self-employment income, they are taxed at the standard progressive rates. However, if your income is from a “High Added Value” profession, it will be taxed at a flat rate of 20%. You can also opt to be taxed at the usual progressive rate if it’s less than 20%.
Furthermore, rental income is taxed at the optional rate of 28%. It can also be taxed at standard progressive rates.
Finally, net capital gains and pensions income are taxed at the standard progressive rates.
Personal Income Taxes in Portugal
The table below reflects the tax rates as of 2021:
|INCOME (€)||TAX RATES (%)||BAND (€)||TAX ON BAND (€)||CUMULATIVE TAX (€)|
|0 – 7,091||14.5||7,091||1,028||1,028|
|7,092 – 10,700||23||3,608||830||1,858|
|10,702 – 20,261||28.5||9,561||2,725||4,583|
|20,262 – 25,000||35||4,738||1,658||6,241|
|25,001 – 36,856||37||11,655||4,386||10,627|
|36,857 – 80,640||45||43,783||19,702||30,329|
The DTA Between Portugal and The UK
The UK’s relationship with Europe is currently complicated. The UK and Portugal have a DTA, which means that UK citizens will be taxed under NHR rules. Furthermore, the Portuguese government assures that even after Brexit, if UK citizens have registered their tax residence in Portugal, their rights will be protected.
The NHR regime can benefit the resident for ten years. Then you’ll be taxed at regular tax rates in Portugal.
You’ll have to file annual tax returns in Portugal. The total worldwide expenses and income should be included in these returns.
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Spouses, direct descendants, and ascendants are exempt from inheritance tax. For others, there is a 10% stamp duty.
The wealth tax in Portugal is relatively low and only affects individuals who own a property valued at €600.000 or more. As a married couple or civil partners, then you’ll be taxed if you jointly own a property that is worth more than €1.2 million.
You can follow your application status on this following link:
https://www.portaldasfinancas.gov.pt/at/html/index.html > Aceda aos Serviços Tributários > Consultar Pedido > Inscrição Residente Não Habitual
The application process takes 5-8 weeks, depending on the current backlog of applications.
You should apply for it before March 31st of the tax year in which you became a tax resident in Portugal.