The Portuguese Non-Habitual Resident (“NHR”) tax regime

last updated on September 3, 2019 | reading time approx. 3 minutes

The Portuguese Investment Tax Code (“Código Fiscal do Investimento”) was approved by Decree-Law no. 249/2009, of September 23. This diploma amended the Portuguese Individual Income Tax (“PIT”) Code establishing a favourable PIT regime for non-habitual resident individuals that qualify as resident for tax purposes in Portugal, and seeks to attract qualified expatriates to perform high added value activities, as well as other high net worth individual investors.

• Requirements

• Main Characteristics of the NHR tax regime

Requirements

The NHR Regime is granted to individuals that become Portuguese resident taxpayers provided they were not taxed as residents in Portugal in the previous five years (a tax residence certificate may be requested).

An individual is considered to be resident for tax purposes in Portugal if:

• Living more than 183 (consecutive or not) days in Portugal in any period of 12 months starting or ending in the relevant year;
• When herein living for an inferior period, having, in any day of the 12 months threshold, a house in such conditions that allow to presume the intention to hold and occupy it as his habitual place of residence;
• Is a crew member of a ship or aircraft on December 31, provided he is in the service of entities with residence, headquarters or effective direction in Portugal;
• Performs abroad functions or commissions of a public nature, at the service of the Portuguese State.

The individual that meets the residence and the five year period requirements must apply for the registration as NHR until 31 March of the year following that of registration as resident.

The NHR regime is granted for a 10 years period, as long as the individual continues to be deemed tax resident in Portugal in each of the 10 years.

Whenever the individual has not benefited from the NHR regime in one or more years of that 10 years period, he still may benefit afrom the regime in any of the remaining years of that period, starting from the year he becomes again tax resident in Portugal.

Main Characteristics of the NHR tax regime

I. Income from Portuguese Source

The non-habitual residents that obtain employment income (category A) and business or professional income (category B) in Portugal derived from high added value activities that are of a scientific, artistic, or technical nature are taxed at a flat rate of 20% applicable to the net amount of income earned. The taxpayers may exercise their option to subject this income to aggregation.

The Ministerial Dispatch no. 12/2010, of 7 January, defined what is to be understood by high added value activities of a scientific, artistic, or technical nature. As such, in the latter are included the activities developed by (i) architects, engineers and similar technicians; (ii) plastic artists, actors and musicians; (iii) auditors and tax consultants; (iv) doctors and dentists; (v) university professors; (vi) psychologists; (vii) liberal professionals, technicians and assimilated; and (viii) investors, administrators and company managers.

Remaining employment and business or professional income (not considered of high added value) and income of the remaining categories, shall be aggregated and taxed according to the PIT general rules.

II. Income from foreign source

• Category A income

  Exempt from taxation:

(i) If the same is taxed in the State of origin according to the Double Tax Treaty entered into between Portugal and that State; or
(ii) if Portugal has not entered into a Double Tax Treaty with that State of origin, the income will be taxed in that State as long as the income cannot be considered as obtained in Portugal according to domestic law.

• Category B income from high added value activities obtained abroad by non-habitual residents, or from intellectual or industrial property, as well as, from providing information regarding an experiment carried out in the commercial, industrial or scientific areas, capital income (category E), real estate income (category F) and capital gains (category G)

  Exempt from taxation:

  
(i) if the income may be taxed in the State of origin according to the Double Tax Treaty entered into between Portugal and the State concerned (for ease of reference we attach hereto the list of countries with whom Portugal has a Double Tax Treaty); or

(ii) in case Portugal has not entered into between a Double Tax Treaty with the State of origin, the income may be taxed in conformity with the OECD Model Tax Convention (in this case, this exemption shall only apply if the State of origin is not considered a black listed jurisdictions and as long as the income cannot be considered as obtained in Portugal according to domestic law.

Any other type of Category B income obtained and not comprised in the NHR regime abroad and not derived from high added value activities will be taxed in Portugal according to the PIT general rules.

• Pensions income (category H)

  Exempt from taxation:

(i) if the same is taxed in the State of origin according to the Double Tax Treaty entered into between Portugal and that State; or
(ii) provided the income cannot be considered as obtained in Portugal according to domestic law.