27/dec/2023 - NHR Update
act now to secure the NON-HABITUAL RESIDENT TAX REGIME(NHR)
guarantee non habitual resident tax regime for the next 10 years
last update - 27/dec/2023
We are delighted to announce an important extension to the Non-Habitual Resident (NHR) program. In specific cases, the deadline has now been extended to December 31, 2024. This extension presents a unique opportunity for individuals looking to benefit from Portugal’s favorable tax regime under the NHR program.
Who is Eligible?
The extension applies to taxpayers who fulfill one or more of the following criteria by the specified dates:
- Employment Contracts & Agreements: Have a promise or work contract, or a secondment agreement, signed by December 31, 2023, with the obligation of performing duties in Portugal.
- Property Agreements: Have signed a lease or other contract granting use or possession of property in Portuguese territory, entered into a reservation agreement or promise to purchase real estate in Portugal, or completed enrollment or registration for dependents in a Portuguese educational establishment, all by October 10, 2023.
- Residency Visas & Permits: Hold a residence visa or a valid residence permit until December 31, 2023.
- Initiation of Residency Procedures: Have initiated the procedure for obtaining a residence visa or permit by December 31, 2023, in accordance with current immigration laws.
How We Can Assist You
If you do not currently meet requirements 1, 2, or 3, you must act promptly to fulfill requirement 4. Our team of experts is ready to guide you through this process, ensuring that you meet the necessary criteria to apply for NHR status during 2024.
Contact Us Today
For personalized assistance and to make your transition to Portugal smooth and hassle-free, contact us today. Our expertise in Portuguese law and the NHR program will be your invaluable asset in this journey. Please send us an e-mail with your full name, full address, passport biographic page scan and proof of current address (bank statement or utility bill issued less than 06 months ago).
Where Can I Check This Exception?
Article 235.º of the final version of the National Budget for 2024, published in the webpage of the Portuguese Parliament, that you can access clicking here . This version is due to be published in the Official Journal of the Portuguese State ( Diário da República) by next Friday, the 29th. of December.
Who is Eligible for Non Habitual Resident Tax Scheme in 2023?
If you have not been a tax resident in Portugal for the last five years and plan to move, you are potentially eligible. The regime aims to attract professionals in high-value-added activities, pensioners, and high-net-worth individuals.
How to Become a Non Habitual Resident Tax Holder?
To obtain the NHR status, an application must be submitted to the Portuguese tax authorities. The application involves several steps including tax identification, demonstrating non-residency in the previous five years, and providing requisite documentation.
What are the Advantages of Becoming a Non Habitual Resident?
Once granted, the NHR status offers multiple tax benefits. For instance, it can lead to a tax exemption on most foreign-source income and a reduced 20% tax rate on certain Portuguese-source income. Furthermore, it offers a possibility to receive foreign pensions tax-free.
What are the Tax Implications for Foreign Income?
Nearly all foreign source income is exempt from taxation under the NHR, which significantly benefits individuals who have income from outside Portugal.
There’s a 10% flat tax rate on foreign-sourced pension income, which is beneficial for retirees from other countries residing in Portugal
Due to Portugal’s Double-Taxation Agreements (DTAs) with many countries, most categories of income are taxed in the country of the source of income.
Under the NHR tax regime, Portugal will not tax most foreign source income earned by NHR individuals because the income may be taxed abroad, allowing NHR residents to receive foreign income completely free of tax.
What are the Tax Implications for Foreign Income?
Algeria, Andorra, Angola, Argentina, Austria, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guatemala, Guinea-Bissau, Honduras, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kenya, Kuwait, Latvia, Lithuania, Luxembourg, Macau, Malaysia, Malta, Mexico, Monaco, Montenegro, Morocco, Mozambique, Netherlands, New Zealand, Nicaragua, Norway, Oman (Sultanate of), Pakistan, Panama, Paraguay, Peru, Poland, Portugal, Qatar, Republic of Moldova, Romania, Russia, San Marino, São Tomé and Príncipe, Saudi Arabia, Senegal, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Timor-Leste (East Timor), Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States of America, Venezuela, Vietnam.
What about Portuguese Sourced Income?
Portuguese-source income can be taxed at a reduced flat rate of 20%. However, traditional Portuguese tax rates may apply to other types of income. The scheme aims to be flexible, providing various options for different income streams.
Other advantages of the NHR
- The NHR status provides special personal income tax treatment over a ten-year period, which is a substantial period for tax benefits.
- There is no minimum stay requirement, making it flexible for individuals who might not want to reside in Portugal full-time.
- Individuals can benefit from tax exemptions on gifts or inheritance to direct family members, which is a significant advantage for family financial planning.
- There’s no wealth tax under the NHR regime, which is beneficial for wealth preservation.
- Free remittance of funds to Portugal is another financial advantage under the NHR regime2.
Why Trust Us for Your NHR Application?
Our firm’s extensive experience in International Tax & Business matters, including the NHR regime, enables us to provide a specialized service tailored to each client’s unique needs. If you want to learn more about securing your Non Habitual Resident Tax Regime for the next 10 years, leave us your details and you’ll hear from us in the next 24 hours:
US Citizens shall be aware that:
You may qualify to exclude your foreign earnings from income up to $112,000/year, if you comply with the IRS exceptions.
Who are we?
We are a Portuguese Law Firm focused on foreign clients and investment attraction to Portugal. Our leading partner, Dr. Jorge Ferraz, is a Lawyer enrolled in the Portuguese Bar Association for over 20 years and our team is composed by lawyers, solicitors and paralegals, responsible for thousands of Portuguese Visa and Citizenship applications, along with Tax Representations and NHR representation/assistance.
NIF Number (Portuguese TAX ID NUMBER)
We provide such services, as it is always recommended to have as your tax representative, a Portuguese Lawyer or Solicitor, due to the strict rules of professional behavior that are not ensured/binding by any other professional association and/or online companies.
With a Power of Attorney issued for this purpose, we usually can obtain your TIN (NIF) within three working days.
Opening a Portuguese Bank Account
It is very usual to assist our clients in this procedure, assuring that the bank account is open and activated in a matter of days.
FAQs
Portugal has a large network of double tax treaties aimed at preventing double taxation which have a direct impact on the private client (attorneys Portugal) sphere, providing tax relief for several categories of income. The double tax treaties concluded by Portugal in essence follow the Organisation for Economic Co-operation and Development Model Tax Treaty.
Portugal has also signed the Multilateral Instrument, which introduced some changes to most of the double tax treaties already in force, especially in relation to the concept of a permanent establishment and the tax framework and capital gains linked to real estate and has also entered into a considerable number of bilateral and multilateral treaties aimed at regulating social security issues in cross-border situations and has entered
Individuals residing in Portugal are subject to personal income tax (PIT) in Portugal. Individuals who are resident in Portugal for tax purposes are subject to tax on a worldwide basis, meaning that all their income is subject to tax in Portugal, even if foreign sourced (with some peculiarities).
According to the Portuguese law, there are two alternative criteria for obtaining and retaining tax residence in Portugal:
The first is to spend more than 183 days in Portugal in any given 12-month period.
The second is to have one’s main and habitual abode in Portugal. This means, in practice, acquiring a property as one’s main and permanent residence or having a registered rental agreement for permanent housing purposes.
Portugal also has partial residence rules in force which mean that, apart from some exceptions aimed at preventing potentially abusive situations:
if one of the requirements for qualification as a Portuguese tax resident is met, the individual becomes resident for tax purposes in Portugal from the first day of his or her stay in the Portuguese territory; and the loss of resident status generally occurs from the last day of the individual’s stay in the Portuguese territory.
Individuals who reside in Portugal for tax purposes must submit annual tax returns to the Portuguese Tax Authority reporting all their worldwide income (even if, due to some applicable exemption, no taxes are ultimately due), along with the international bank account number and bank identifier code of personally held bank accounts held abroad.
Tax returns are typically submitted between April and June following the end of the tax year. Once the tax return is submitted and where taxes are due, any tax payments are due by the end of August each year.
Under the non-habitual resident (NHR) regime, assuming that the income is from a foreign source in a jurisdiction which is not classed as a tax haven, dividends, interest, royalties, some distributions from funds, rental income and real estate capital gains are usually exempt from tax in Portugal. This is also the case for employment income which is effectively taxed at source and for self-employment income which derives from a high value-added activity and where the individual has a fixed base in the state of source.
This is the general NHR tax framework; each individual’s situation must be carefully analysed on a standalone basis for each type of income and asset.
Assets received through inheritance are subject to stamp duty in Portugal, as long as the territoriality principle is met – only assets deemed to be located in Portugal for stamp duty purposes are subject to this tax, such as immovable property located in Portugal; movable property registered or subject to registration in Portugal; equity in companies with their registered office, effective management or permanent establishment in Portugal (provided that, in this case, the heir is domiciled in Portugal) and monetary amounts deposited in institutions with their registered office, effective management or permanent establishment in Portugal.
The applicable rate is 10%; and when the asset inherited relates to real estate in the Portuguese territory, the applicable rate is 10.8%.
However, where the heirs are descendants or ascendants (eg, parents, children, grandchildren) or the spouse, an exemption from stamp duty applies.
With regard to real estate:
The acquisition of property in Portugal is subject to two distinct taxes: real estate transfer tax (RETT) and stamp duty. Both are based on the price or on the tax value of the property, whichever is higher.
Acquiring at least 75% of the shares in a company which owns real estate in Portugal may also trigger RETT, should the real estate in Portugal represent at least 50% of the assets of the company.
RETT rates range between 2% and 8%, depending on the acquisition value and the location/parish of the property.
Stamp duty is due at a rate of 0.8%.
If the buyer be directly or indirectly resident in a tax haven jurisdiction, the RETT rate is aggravated to 10%.
The ownership of property in Portugal establishes an obligation to pay real estate tax (RET) and, in certain situations, RET add-on.
Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.