NON-HABITUAL RESIDENCY

Changes to the the Non-Habitual Residency as of 2020
Until April 1st 2020, the scheme allowed for income from foreign pensions to be received tax-free in Portugal. Nonetheless the 2020 Portuguese Governmental Budget, introduced a new flat 10% tax rate on foreign pension income.

All individuals that applied for the scheme prior to the 1st of April 2020, are still eligible for tax exemption on pension income. Exceptions are applied to all foreign pension income on individuals who performed service professions, including local authority, army, police, teaching, fire service and national health service.


What is the Non-Habitual Residency Program?
Since its introduction, in 2009, many people moving to Portugal from other countries have been able to enjoy a 10 year long highly advantageous tax arrangement, under the Non-Habitual Residency Scheme. A Non-Habitual Resident can benefit from a flat 20% income tax rate, if/when employed in Portugal, instead of the hefty 45%+.

Nonetheless, an individual’s professional qualifications must fall within the specifications of the regime, further explained in the Portuguese Authorities Portal online. If eligible for the NHR scheme, most of an individual’s income from a foreign source is tax exempt in Portugal for 10 consecutive years. This means that expatriates can maximize any rental income outside of Portugal, capital gains on foreign real estate, interest and dividends.


What are the benefits of NHR?

• All Portuguese employment income, considered as qualified within the scheme is taxed at a flat rate of 20%;
• Almost all foreignly sourced income is tax exempt;
• Inheritance or gift tax are tax exempt on possessions outside of Portugal, given that these are transferred to spouse, descendants or ascendants. If transferred to other individuals these are taxed at a flat rate of 10%;
• Exemption from wealth tax, in Portugal or abroad as well as any tax on funds settlement;
• Dependant on the Double Taxation Treaties signed between Portugal and the respective country, owning a Portuguese company means the possibility to take advantage of EU rules and directives on mergers, dividends, interest and royalties;
• If an individual is interested in foreign investment, when owning a Portuguese company these can benefit from the participation exemption regime on dividend or capital gains obtained.

Who is eligible for Portugal's NHR status?
If an individual has not been a resident in Portugal in the previous 5 consecutive years, all nationalities (including non-EU/EEA citizens), can apply for the NHR scheme. For eligibility an individual must meet the Portuguese Residency rules, alongside spending 182 days a year or having a main home in Portugal.

Portugal’s Non-Habitual Residence scheme was specifically introduced to encourage wealthy foreigners to relocate to the country. More specifically, it targets two groups: 

• Retired people. The Non-Habitual Residence scheme benefits those receiving a pension income from outside Portugal. A French State Pension, for example, is tax-free under the NHR system. So whatever way you access your pension, NHR allows you to do so without paying any tax on it for ten consecutive years. 
• People with jobs of 'high added value'. Under the Non-Habitual Residence scheme, people with specific careers only pay a flat 20% tax rate on their earnings. Suitable professions are wide ranging, and include engineers, architects, doctors, artists, university teachers and business managers.

How do I apply for NHR status?
If you are considering moving to Portugal, you should seek advice regarding the Non-Habitual Residence scheme from tax specialists who can provide you with complete and accurate information.

Along with the stunning climate and lifestyle southern Portugal offers, the NHR tax regime has made the Algarve an even more attractive location for retirees, knowledge workers and high net worth individuals.

One Select Properties helps you find your perfect Portuguese property. Explore the wide range of luxury homes we offer and you could soon be enjoying the Algarve sun, wonderful amenities and soaking up the unique ambience of southern Portugal. All with the additional disposable income resulting from your tax savings under the NHR regime.

Please Note:
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should take personalised advice.