NHR

Created in 2009, the non-habitual resident (hereafter “NHR”) Portuguese tax regime provides a favourable personal income tax framework for those that qualify to benefit from it.

There are two key requirements, that of – type of income and eligibility criteria to qualify as a non-habitual resident in Portugal.

Firstly, regarding the types of personal income.

• Income obtained from another country (i.e. outside of Portugal):
• Employment Income will be tax exempt if effectively taxed abroad;
• Real Estate Income
• Dividends
• Interest 
• Royalties
• Capital gains
• Self-employment (from high added value activities) income are exempt in Portugal provided that under a Double Tax Agreement rules of OECD Model Convention rules can be potentially taxed in the country of source
• Pension Income is subject to a 10% fixed tax rate.
• Income obtained in Portugal – Employment and Self-employment income obtained from high added value activities (the Portuguese Tax Authorities have a list with such type of activities that are recognised as high added value activities) are taxed at a reduced fixed personal income tax rate of 20%.

Secondly, in order to benefit from the NHR regime, there are some specific requirements that must be met.

• You must not been a Portuguese tax resident for the five years prior to the one in which you intend to benefit from the NHR personal income tax regime
• You must qualify as a Portuguese resident, for tax purposes

Care must be taken with regard to spending time in Portugal prior to becoming tax resident, for example Portuguese tax law lays down different possibilities for an individual taxpayer to be considered a Portuguese tax resident (either by staying in Portuguese territory for more than 183 days, whether they are uninterrupted or spread out throughout a 12-month period, or even, if you stayed in Portugal for less than 183 days in a full calendar year, it is still possible to be considered a Portuguese tax resident, if, in any of the days of that 183-day period, you have a permanent address in Portugal that can indicate an intention of maintaining and occupying it as a permanent residence).

The NHR regime typically represents a tremendously beneficial personal income tax regime for foreigners that intent to relocate, either definitely or just temporarily, to Portugal, to live and work. 

Under the Portuguese NHR regime, it is possible to reach full tax exemption in both country of residence and country of source of the income, namely on passive income as dividends, interests and royalties.

NHR status eligibility depends exclusively on non-tax residency in Portugal during the previous 5 years prior to becoming tax resident, without any investment or additional requirements.

There have only been a couple of changes since it’s introduction which purely served to strengthen the protection to existing NHR holders and clarify its availability.