What is NHR TAX Status in Portugal?
The Portuguese government founded the non-habitual resident’s tax regime in 2009 to increase the country’s international competitiveness by attracting investors and skilled workers.
This tax system grants tax incentives to expatriates who reside in Portugal for a minimum of 10 years. It was designed to attract residents with high value-added potential, such as pensioners or skilled employees.
It became very popular with retirees from northern European countries with high net worth pensions and high taxes. By living in Portugal, they were eligible to a 20% tax rate from state pensions or total exemption with private pension funds. It resulted in a property boom in the Algarve and cities. More than 23,000 people benefited from this programme.
What changes happened to NHR in 2020?
The NHR scheme is unpopular with the local population, who argue it is unfair and doesn’t result in economic growth and promotes tax injustice.
In 2020 the Portuguese government decided to tax foreign pensions income at 10% for all applications from 31/03/2020. People who arrived before that date can still request 0% IRS tax.
What is NHR status?
- NHR status is a tax band granted in Portugal to allow ex-pats to benefit from a beneficial tax rate. This status is valid for a 10-year non-renewable period.
- It is only valid for as long as the applicant remains a tax resident in Portugal. However, you can leave and return at any point during the 10 year period.
- You will need to report your income in Portugal.
Benefits of NHR
- Personal income tax benefits for ten years.
- Tax exemption of foreign-sourced income.
- 20% flat rated for certain Portuguese incomes.
- Being part of a white-listed environment within the EU.
- Tax exemption for gifts or inheritance to close family members.
- No wealth tax.
- You do not need to purchase a property to apply.
How do I qualify for NHR status?
- You need to become a resident in Portugal by having the right to reside either as a member of the EU/EAA/ Swiss citizen or through the Golden Visa programme.
- You need to buy a property or obtain proof a 12-month rental lease.
- You can not have been taxed in Portugal for the five years preceding the application
- You need to have lived 183 days (consecutive or non-consecutive) in Portugal during a month period. This can be at the start or end of the year in which you apply for NHR.
- If you have lived in Portugal for less than 183 days, but have purchased a property in the last 12 months of the application and you intend to occupy the property as your primary residence.
- You need to file the application before 31 March of the year following your registration as a resident.
What Income Sources Qualify for NHR tax status?
- Income from Portuguese Sources.
Non-habitual residents who earn income from a list of accepted professions, skilled workers or self-employed freelancers or entrepreneurs or “high value-added” activities qualify for a flat tax rate of 20% Salaries. Employment not considered “value-added” will be taxed under the standard tax regime. - Foreign source income.
Foreign ex-pats can potentially receive pensions, rental income, real estate gains, interest, dividends and income from non-Portuguese sources by being tax-exempt.
How do you apply?
- NHR tax status is granted by the tax authority finanças and you need to apply through this entity here.
- You will need a NIF tax number. You can appoint a fiscal representative to help you apply.
- You will need to have residency in Portugal already.
How does Brexit affect NHR?
The UK left the EU on 31 December 2020. As a result, UK nationals no longer have the automatic right to become a resident in an EU country. You cannot apply for NHR without residency.
UK residents will have to acquire the right to permanent residency, which is most likely to be in the form of visas.
You will need to consult an advisor to help you through the immigration process.
For further help and guidance with Golden Visa, please get in touch with us at ten Hoopen Realty:
T: (+351) 914 564 506
