Non-Habitual Resident

The non-habitual resident (NHR) regime is available to legal residents in Portugal who have not been a tax resident of the country during the previous 5 years.

This is a very interesting fiscal optimisation tool and its financial saving allure has attracted many foreign workers to Portugal.

1. General Overview
   • In general terms, foreign-source self-employment or sole trader income – derived from an eligible occupation (as applicable), royalties, capital gains and investment, or rental income – may be exempt from Portuguese tax. This is if there is a possibility of being taxed in the source country under a double taxation agreement or under tax convention. Furthermore, the income must not be deemed as being Portugal-sourced under applicable Portuguese law nor from a blacklisted country (tax haven).Of note:
   • Employment income obtained outside the country may be exempt from Portugal, dependant on being taxed in the source country.
   • Pension income may be liable to a 10% flat tax in Portugal, conditional to it not being considered Portuguese sourced income.
   • If the occupation is eligible, Portugal-sourced employment, self-employment or sole trader income will be taxed at a flat rate of 20%. Other Portugal-sourced types of income will be taxed at the normal Portuguese rate (the calculation of the applicable marginal tax rate considering all income, including exempt income).In the case of inheritance or gifts received by a spouse, descendant, or ancestor, it is tax exempt. Income or gains received by other individuals may still be subject to a flat 10% stamp duty.
2. Stay Requirements
   • The applicant must be a legal resident when they submit the application to the Portuguese authorities. However, the applicant is not required to permanently reside in Portugal, and they may suspend the NHR regime (subject to communicating the same to the Tax Authority).
3. Eligibility Requirements
   • For tax purposes, a person may become a tax resident if they either spend more than 183 days in the country during a 12-month period or they reside in the country "in a way that may lead to the supposition of an intention to keep and occupy it as a habitual home".It is important to note that a person must register as a tax resident of Portugal if they have not been a resident in the country during the previous 5 years, at least.EU, EEA, and Swiss citizens are allowed to live and work in Portugal under Community regulation. Citizens of third countries must obtain a residence permit to become legal residents.The NHR status is not automatic and, if granted, may be in force for a period of 10 years.To apply, an applicant must submit a request and statement confirming that they were not a resident in Portugal for tax purposes during the 5 years preceding their arrival. They may be required to present a tax residency certificate from their country of origin, or other proof showing their centre of interest in another country.
4. Eligible Activities
   • The applicant’s activity must fall into one of the following categories of High Value-Added Professional Activities to become eligible for tax benefits. This is provided the professionals hold at least (a) a level 4 qualification under the European Qualifications Framework, or (b) level 35 of the International Standard Classification of Education, or (c) 5 years of duly proven professional experience, on the following occupations:
     • General Managers, Executive Managers
     • Administrative Managers, Commercial Managers
     • Production Managers, Specialised Services Managers
     • Hospitality, Restaurant, Retail and Other Services Managers
     • Specialist Physicists, Mathematicians, Engineers, and related Technologists
     • Medicine Doctors
     • Dentists and Stomatologists
     • University and Higher Education Teachers
     • ICT Technologists
     • University and Higher Education Teachers
     • Authors, Journalists and Linguists
     • Creative and Performance Artists
     • University and Higher Education Teachers
     • Intermediate level Science and Engineering Technicians and Professionals
     • ICT Technicians
     • Market-oriented Farmers and qualified Agriculture and Animal Husbandry workers
     • Market-oriented Forestry, Fisheries and Hunting qualified workers
     • Industry, Construction and Handicraft qualified workers
     • Plant and Machine Operators and Assembly Workers, namely operators of fixed installations and machinery
     • Moreover, Directors and Managers of businesses that promote productive investment in eligible projects may qualify for tax benefits under a concession agreement entered under the Investment Tax Code.

Find out more

This article was produced by Alexandra Almeida Mota, Team Leader of the Employment department at BAS – Sociedade de Advogados, Portugal, a CELIA Alliance member firm.

For further information or if you have any queries relating to the content of this communication, please contact us.

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