NHR - Non Habitual Resident

The NHR Regime - Non-Habitual Residents, provides exceptional tax treatment for qualifying income received from a Portuguese source by NHR and can also benefit from tax exemptions on income of foreign origin.

Taxation for a period of 10 years at a flat IRS rate of 20% on labour income earned in Portugal and the absence of double taxation in the case of pensions and dependent and independent work earned abroad are some of the advantages.

Who can be considered a NHR in Portugal?

Anyone who becomes a tax resident in Portugal and who has not been taxed as such in the last 5 years (before classifying as a Portuguese tax resident) will be considered a "Non-Habitual Resident". Individuals who meet the requirements listed below will therefore be eligible to register as NHRs, and will have the right to be taxed as such, for a period of 10 consecutive years, which may also be renewed.

How do I obtain NHR status in Portugal?

For the purposes of acquiring the status of "Non-Habitual Resident", the Portuguese Tax Authority recognises the presentation of additional documentation (certificate of tax residence in another country for the previous 5 years), which will only be necessary if there are well-founded doubts about the veracity of the information provided by the expatriate.
To obtain this status, you must fulfil the following requirements:

• Have resided outside of Portugal for the last 5 years
• Have become resident for tax purposes in Portugal, in accordance with the rules established in the IRS Code, in the year in which the regime is intended to be applied
• Apply for NHR status when you register as a tax resident in Portugal at the local tax office (to do so, you must have stayed in Portugal for more than 183 consecutive or interpolated days, or if you have stayed for less time, you have a home there on 31 December of that year in conditions that suggest you intend to keep and occupy it as your habitual residence).

What is the tax rate and incidence applicable to income earned in Portugal?

In the case of dependent or self-employed work, the applicable tax rate is 20% (plus a 3.5% surcharge since 2013). Taxation is levied on income from high value-added activities of a scientific, artistic or technical nature, including:

• Auditors
• Architects, engineers and the like
• Visual artists, actors and musicians
• Doctors, dentists, teachers and psychologists
• Liberal professions, technicians and asylees
• Senior management
• Investors, administrators and managers, when they are part of companies that have been covered by the contractual regime provided for in the Investment Tax Code

In which cases does the exemption from taxation apply to income earned abroad by NHRs in Portugal?

In the case of Pensioners and Retired Persons, when the income is taxed in the State of origin, in accordance with the convention to eliminate double taxation signed by Portugal with that State (according to the criteria set out in the IRS Code), and provided that the income is not considered to have been obtained from a Portuguese source.
In the case of income from dependent work, when such income is taxed in the state of origin, in accordance with the convention to eliminate double taxation signed by Portugal with that state. Provided that this income is taxed in another state with which Portugal has not signed a convention to eliminate double taxation, and provided that the income is not considered to be obtained in Portuguese territory by the criteria of article 18 of the IRS Code.

In the case of income from self-employment (from the provision of high value-added services of a scientific, artistic or technical nature, or from intellectual or industrial property, income from capital, income from property or income from capital gains and other increases in assets), when the income can be taxed in the country, territory or region of origin, in accordance with a convention to eliminate double taxation signed by Portugal with that State. Or when there is no double taxation treaty, the OECD Model Convention may apply (taking into account the comments and reservations made by Portugal) and provided that the country, territory or region of origin does not have a privileged taxation regime, and provided that the income is not considered to have been obtained in Portuguese territory by the criteria of article 18 of the IRS Code.

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