Portugal’s NHR 2.0 Tax Regime: What You Need to Know
At ONE Select Properties, with over 40 years of experience in the Algarve’s luxury real estate market, we’ve helped numerous international clients navigate the process of relocating to Portugal. While we do not provide tax advice, we work closely with trusted tax advisors who can guide you on important financial decisions, including understanding the Non-Habitual Residency (NHR) tax regime. Recently, the Portuguese government has introduced a revised version, known as NHR 2.0. Here’s an overview of what this means for you.
A Brief Timeline of Portugal’s NHR Regime
2009 – Introduction of the Original NHR Program
Objective: Attract skilled professionals, investors, and retirees.
Benefits: Tax exemptions or reduced rates on certain foreign income for up to 10 years.
2020 – First Major Reform
Change: Introduction of a 10% flat tax on foreign pension income, replacing the previous full exemption.
2024 – Announcement of NHR 2.0
Reason: Align the regime with current economic and social realities.
Implementation: Changes announced in October 2023, with the new regime effective from 2024.
Key Features of NHR 2.0
While awaiting official publication of all details, based on available information, NHR 2.0 includes:
Renaming and Refocusing
New Name: Incentivised Tax Status Program (ITS) or Tax Incentive for Scientific Research and Innovation (IFICI).
Focus: Attracting professionals in high-demand sectors, particularly scientific research and innovation.
Taxation Adjustments
Professional Income: Eligible professionals may benefit from a flat 20% tax rate on Portuguese-sourced income.
Foreign Income: Potential exemptions on professional foreign-sourced income, subject to specific conditions.
Eligibility Criteria
Prior Non-Residency: Applicants must not have been tax residents in Portugal for the five years preceding their application.
Application Deadline: Generally, applications should be submitted before January 15th of the year following the establishment of tax residency. For those who became tax residents in 2024, a transitional deadline of March 15, 2025, applies.
Implications for You
Existing NHR Beneficiaries
Status: Current beneficiaries retain their benefits for the remainder of their 10-year period under the original terms.
New Applicants
Preparation: Anticipate stricter eligibility requirements and a focus on specific professional sectors.
Action: Consult with tax professionals to understand how the new regime aligns with your circumstances.
Investors and Relocators
Opportunities: Despite changes, Portugal remains attractive due to its quality of life and investment potential.
Consideration: Evaluate how NHR 2.0 benefits align with your professional background and financial goals.
How ONE Select Properties Can Assist
Navigating tax regimes is a crucial aspect of relocating. At ONE Select Properties, we offer:
Property Selection: Helping you find the perfect luxury property in the Algarve.
Professional Network: Connecting you with trusted legal and financial advisors to ensure a seamless transition.
Portugal continues to be a top destination for its lifestyle, safety, and opportunities. While NHR 2.0 introduces changes, it remains a compelling option for those looking to make Portugal their home. Contact us today to explore how we can support your journey to a luxurious life in Portugal.
Note: This information is based on sources available as of February 2025. For personalised advice, consult with a qualified tax professional.
