Non-Habitual Resident

Non-Habitual Resident (NHR) Tax Regime

The Non-Habitual Resident (NHR) tax regime was introduced through Decree-Law No. 249/2009 of September 23, which amended several provisions of the Personal Income Tax Code (IRS), including Articles 16, 22, 72, and 81. This regime is available to individuals who become tax residents in Portugal after 2009 and who have not been considered tax residents in the country for the past five years. It sets out specific rules for the taxation of income under the IRS.

1. Purpose

The NHR regime is designed to attract non-residents to Portugal, particularly those with high-value professional activities or significant wealth. It offers substantial tax benefits, including exemptions on foreign-sourced income and a reduced 20% tax rate on certain income earned in Portugal.

2. Eligibility Criteria

To qualify as a non-habitual tax resident, the following conditions must be met:

• Tax Residency in Portugal: The individual must spend more than 183 days in Portugal in a calendar year or, if spending less time, have a permanent home in Portugal by December 31 of that year, indicating the intention to use it as their main residence.
• No Residency in Portugal for the Last 5 Years: The applicant must not have been a tax resident in Portugal in the five years prior to applying for the NHR regime. The applicant will need to declare that they did not meet the criteria for tax residency in Portugal during that period.

This regime can also apply to emigrants wishing to return to Portugal after being abroad for at least five years. Once granted, the NHR status allows individuals to benefit from the regime for 10 consecutive years, provided they maintain tax residency in Portugal during each of those years.

Applicants must request enrollment in the NHR regime with the Portuguese Tax Authority (Autoridade Tributária) either at the time of registering as a tax resident or by March 31 of the following year.

3. Who Can Benefit

The regime is open to individuals who are not currently tax residents in Portugal but wish to establish residency, either permanently or temporarily. This includes independent professionals, retirees, pensioners, employed workers, and board members. It also applies to emigrants who wish to return to Portugal after being absent for a minimum of five years.

4. Taxation of Income

• Portuguese-Sourced Income: Income from employment (category A) or self-employment (category B) in Portugal, deriving from high-value activities, can be taxed at a special reduced rate of 20%. High-value professions include engineers, architects, auditors, tax consultants, doctors, dentists, artists, and senior executives, as listed in Ordinance No. 12/2010 of January 7.

• Foreign-Sourced Income: Foreign-sourced income is generally exempt from taxation in Portugal, provided it is taxed in the country of origin and is not deemed to be earned in Portugal. For foreign pensions, the exemption applies if the income is taxed in the source country or if it is not considered to have originated in Portugal.

5. Additional Requirements

Applicants for the NHR regime must:

• Obtain a Portuguese Tax Identification Number (NIF) from the Tax Authority.
• Open a bank account in Portugal.
• Register with Social Security if they earn employment or self-employment income in Portugal. If Social Security registration is not required, they must have valid health insurance in Portugal. For EU citizens, a European Health Insurance Card is acceptable to ensure coverage in case of illness or accident while in Portugal.