Non habitual resident Portugal

Non Habitual Resident Portugal (NHR): Ultimate 2022 Guide

Are you planning to move to Portugal and want to find out more about the exciting tax benefits available?

Our guide to the non habitual resident Portugal (NHR) tax scheme will explain you everything you need to know, including how to make sure you’re eligible, what sort of tax benefits you can expect, and a step-by-step walk-through on how to apply.

This guide is for information purposes only and does not constitute tax advice, We recommend you always seek advice on your specific situation from a qualified tax professional.

What is the NHR Non Habitual Resident Portugal Scheme?

Introduced in 2009 by the Portuguese government, the non habitual resident Portugal (NHR) scheme is a tax regime that grants preferential tax treatment to new residents of Portugal.

It mainly applies to foreigners, but Portuguese citizens can also access NHR, provided they haven’t lived in Portugal for the previous five years before applying. 

In a nutshell, the non habitual resident Portugal scheme grants eligible applicants a flat 20% tax rate on Portugal sourced income (instead of the usual Portuguese taxes with a top rate of 48%).

Non Habitual Resident Portugal status can also lead to exemption from Portuguese taxation on income sourced from outside of Portugal (subject to certain criteria including dual taxation agreements with other countries).

This includes retirees with pension income, but can also apply to those with other sources of income, such as dividends from a foreign company, investments, or even a salary from abroad.

This is a significant benefit, because Portugal is not a low tax jurisdiction otherwise. In fact, ordinary tax residents of Portugal are taxed on their worldwide income at rates that currently vary from 14.5% up to 48%.

The key objective of the Non Habitual Resident Portugal scheme is to attract high value-added residents into Portugal, either those with pension income or those working in skilled professions. It can also be a good fit for digital nomads.

The naming of the Non Habitual Resident Portugal scheme can be confusing.

Despite the term “non-habitual”, being eligible for the NHR actually requires you to live full time in Portugal and become a tax resident there.

Eligibility for Portugal NHR status

Being eligible for non habitual resident Portugal status hinges on several key factors.

First, you need to become legally resident in Portugal. For example, you could achieve this under EU freedom of movement rights (if you’re an EU citizen), or with a D7 visa or Golden Visa if you’re from outside the EU.

Next, you’ll need to become a tax resident of Portugal. You’re considered tax resident when you spend more than six months a year living in Portugal.

You also need to have a Portuguese tax number (NIF), and, importantly, make sure it’s linked to a Portuguese address. This last step is essential for successfully submitting your NHR application.

NHR benefits are available for a period of 10 years (non-renewable), starting from the date when you’re considered a tax resident of Portugal.

This is typically calculated from the date when you register your Portuguese address with the tax authorities. You can check this date on the Finanças portal.

Taxes for Non Habitual Resident Portugal

There’s a lot of confusion about exactly how income is taxed under the NHR scheme.

This guide doesn’t attempt to replace the advice of a professional tax advisor, but will give you an overview of what you can expect.

It’s always best to seek a consultation with a tax advisor to find out how NHR applies to your specific situation. Contact us for a recommendation.

One of the key criteria for evaluating income under NHR is whether the income is originates from within Portugal or from a foreign source.

Let’s first look at income from Portuguese sources.

Portuguese-source income

In terms of professional activities, the Portuguese tax authorities define two categories of income from Portuguese sources as eligible for the non-habitual residents scheme.

These are Category A (employment) and category B (freelancers and self-employed). 

If your income falls into either of these categories and comes from sources within Portugal, such as from a job or clients within Portugal, then you may be eligible for a flat rate of 20% tax.

If your profession qualifies, setting up as a Portuguese freelancer can be a simple and tax-efficient way to do business.

Importantly, getting NHR status for Portugal-sourced income depends on whether your profession is classed as a “high added value activity”.

This list was created especially for the non-habitual residents scheme. It includes activities of a scientific, artistic, or technical nature – which Portugal deems important to its economy.

Individuals may be asked to show proof of being suitably qualified in their profession, which could be any of the following:

  • Level 4 qualification under the European Qualifications Framework
  • Level 35 of the International Standard Classification of Education
  • 5 years of proven professional experience

This list changes from time to time, most recently in 2020. Here’s the most recent version. 

High value-added activities list for non habitual resident Portugal status

  1. General director and executive manager of a company;
  2. Directors of administrative and commercial services;
  3. Directors of production and specialized services;
  4. Directors of hotel, restaurant, commercial and other services;
  5. Specialists working in physical sciences, mathematics, engineering and similar technical fields;
  6. Physicians;
  7. Dentists and stomatologists;
  8. Teachers at universities and higher learning establishments;
  9. Specialists in information and communication technologies (ICT)
  10. Authors, journalists and linguists;
  11. Creative artists and performing artists;
  12. Intermediate level science and engineering technicians and professionals;
  13. Information and communication technologies technicians;
  14. Market oriented farmers and qualified agricultural and livestock workers;
  15. Market oriented qualified forestry, fisheries and hunting workers;
  16. Qualified industrial, construction workers and craftsmen, including qualified workers in the fields of metallurgy, metalworking, food processing, wood manufacturing, clothing production, handicrafts, printing, manufacture of precision instruments, jewellers, artisans, electricity and electronics workers;
  17. Operators of installations and machines and assembly workers, namely fixed installations and machine operators.

(Source: Newco).

Foreign source income

Thanks to the NHR program, Portugal is often thought of as a zero-tax jurisdiction – which isn’t the case at all.

But depending on the nature of your foreign source income, Portugal can still offer a number of benefits if you become a non habitual resident.

The following types of income can potentially be tax exempt in Portugal, as long as they are from outside the country: rental income, real estate gains, dividends, interest on savings, and royalties.

Foreign sourced pensions used to be taxed at 0% under NHR, but Portugal recently changed this to a flat rate of 10%.

To understand how foreign source income is taxed under NHR, the key factor to note is that any foreign source income should be taxable in the country of origin.

The EU doesn’t want Portugal to become a tax haven. Hence, people who live there with NHR have to pay tax somewhere in the world.

But, in practice, many countries don’t tax people who are no longer tax resident there. Much of the NHR scheme also depends on individual double tax treaties (DTAs) between Portugal and the country in question.

For example, let’s say you take your income as dividends from a UK limited company. The UK typically taxes dividends starting at 7.5%. So for Portugal, UK dividends count as a type of income that’s taxable in the country of origin. 

Hence, Portugal won’t tax UK dividends for an NHR holder, because the dividends are supposedly already being taxed in the UK (this is covered in the tax treaty between the UK and Portugal).

But, because you’re no longer UK tax resident, the UK no longer taxes the dividends. So the end result is 0% tax from either country on those dividends.  

Income from foreign-source dividends 

  • Tax exempt in Portugal if originating from a DTA country where the dividends are taxable at source (as long as the country isn’t a blacklisted tax haven).

Income from a foreign pension

  • Flat 10% tax rate for pensions paid from a DTA country (pensions used to be tax-free under NHR, until this recent change was introduced in the 2020 budget).

Income from real estate rentals and capital gains on property

  • Both of these are tax-exempt in Portugal under NHR, as long as they don’t originate from a blacklisted tax haven.

Income from cryptocurrency

  • Gains on crypto portfolios: tax exempt
  • Salary paid in cryptocurrency: tax exempt
  • Income from day-trading of crypto: taxed under ordinary Portuguese progressive tax rates (from 14.5% to 48%)

At present, cryptocurrency isn’t recognized as legal tender in Portugal.

If you’re a tax resident, you currently won’t be taxed on any gains in your portfolios. However, this is likely to change in the near future. Cryptocurrency is not included in the NHR scheme.

Portugal blacklisted tax havens

Portugal blacklists a number of jurisdictions around the world for the purposes of NHR.

So income from any of these countries wouldn’t qualify for NHR, unless the country has a double tax agreement with Portugal.

As a general example, if you draw your income as dividends from a jurisdiction that doesn’t tax dividends at all, such as Jersey, those dividends wouldn’t be eligible for tax exemption under the NHR.

Instead, you’d likely end up paying the standard Portuguese dividend tax of 28%.

Here’s the full list of Portugal’s blacklisted tax havens (as of 2021)

American SamoaLiechtenstein
AnguilhaMaldive Islands
Antigua and BarbudaMarshall Islands
ArubaMauritius
Ascension IslandMonaco
BahamasMonserrat
BahrainNauru
BarbadosNetherlands Antilles
BelizeNorthern Mariana Islands
BermudaNiue Island
BoliviaNorfolk Island
British Virgin IslandsPacific Islands (2)
BruneiPalau Islands
Cayman IslandsPanama
Channel Islands (1)Pitcairn Island
Christmas IslandPorto Rico
Cocos (Keeling)Qatar
Cook IslandsQueshm Island
Costa RicaSaint Helena
DjiboutiSaint Kitts and Nevis
DominicaSaint Lucia
Falkland Islands or MalvinasSaint Pierre and Miquelon
Fiji IslandsSamoa
French PolynesiaSan Marino
GambiaSeychelles
GibraltarSolomon Islands
GrenadaSt Vicente and the Grenadines
GuamSultanate of Oman
GuyanaSvalbard (3)
HondurasSwaziland
Hong KongTokelau
Isle of ManTrinidad and Tobago
JamaicaTristan da Cunha
JordanTurks and Caicos Islands
Kingdom of TongaTuvalu
KiribatiUnited Arab Emirates
KuwaitUnited States Virgin Islands
LabuanVanuatu
LebanonYemen Arab Republic
LiberiaUruguay
  1. Includes Alderney, Guernsey,Great Stark, Herm, Little Sark, Brechou, Jethou, Jersey and Lihou.
  2. Remaining Pacific Islands not included in this list.
  3. Spitsbergen Archipelago and Bjornoya Island.

(Source: PWC)

How to apply for NHR Portugal status

The first step in applying for NHR status is to make sure you’re registered as tax resident in Portugal. That means having a NIF (tax number), which is registered to your Portuguese address.

Also, you need ‘proof of habitual abode’. This can either be a tenancy for at least 12 months, if you’re renting in Portugal, or the deed for a property that you’ve purchased.

The deadline to make your NHR application is March 31 of the year following the year in which you become tax resident.

So if that happens in December 2021, your NHR deadline would be March 31, 2022.

If you become tax resident a month later, in January 2022, you’d have a much longer timeline with a deadline of March 31, 2023.

Be aware of this, because you don’t want to miss the NHR deadline!

Here are the steps to follow

  1. Register yourself as a Portugal resident. If you’re an EU citizen, you can do this by visiting your local town hall with your passport. If you’re a non-EU citizen, you’ll need to make an appointment with SEF to apply for your residency card (which you’ll usually do either via the D7 visa pathway or the Portugal Golden Visa program).
  2. Apply for a NIF at your local Finanças office. You can do this with proof of address from outside Portugal, for example a bank statement from your home in the UK. But you’ll need to change it to a Portuguese address before applying for NHR status. If you want to apply for the NIF with your address in Portugal, bring your rental contract or property deeds to the Finanças office as proof of address. A utility bill should also suffice. 
  3. Next, you’ll need to register with the online Finanças portal. They will send a password in the post to whichever address is registered on your NIF. If you used an overseas address to get your NIF, make sure somebody is there to receive the letter for you, and inform you of the password.
  4. Once you have access to the Finanças portal, it’s possible to apply for NHR by yourself.

Apply for NHR status via the Finanças Portal

  1. Log in with your NIF and password 
  2. Navigate to the following website location: Aceda aos Serviços Tributários > Entregar Pedido > Inscrição Residente Não Habitual. (You can search for these words in the search box if you get stuck)
  3. On that page, fill in the requested fields with your year of registration (e.g. 2020 if you arrived during that year) and your country of foreign residence (the country where you lived in the last year)
  4. Declare that you fulfil the conditions of having been non-resident in Portugal in the five years prior to the year of beginning your status as a non-habitual resident.

FAQs: Non Habitual Resident Portugal

Can I be resident in Portugal but not tax resident?

Yes. It’s possible to maintain your residency rights in Portugal by getting the Golden Visa. Under this scheme, you have the option to become a Portugal tax resident if you want to. Alternatively, you can keep your existing tax residency and simply visit Portugal a few times a year.

What are the benefits of NHR in Portugal?

The benefits of NHR include preferential tax treatment on most foreign source income, and some Portuguese sourced income, subject to certain criteria. Non Habitual Resident Portugal status is valid for a period of 10 years, offering enough time to acquire Portuguese citizenship.

How do I check my NHR status in Portugal?

You can check your NHR status on the Finanças portal. Log into the portal and navigate to the area called Dados Gerais de Identificação. You should find a page with your personal information on it. Scroll to the bottom of the page and look for a section entitled Residente Não Habitual. This will contain details of your NHR status.

What happens after 10 years of NHR in Portugal?

After 10 years of NHR in Portugal, you will lose the status. You will revert to being a regular Portuguese taxpayer.

Can a Portuguese citizen get NHR?

Yes, but only if they have been resident outside of Portugal for five years before applying.

How long does NHR last?

Non Habitual Resident Portugal status lasts for 10 years.

Do expats pay taxes in Portugal?

Yes, if they are considered a tax resident in Portugal. But there may be exceptions available under the NHR scheme.

What is Portuguese source income?

Portuguese source income comes from sources located within Portugal, such as a salary from a Portuguese employer, invoice payments from Portuguese clients (if you are self-employed), a Portuguese pension, or rental income from a property located in Portugal.

Can I lose NHR status by being out of Portugal too long?

You can only access NHR benefits if you are tax resident in Portugal during each fiscal year (the same as a calendar year). However, if you don’t meet these requirements for one or more of the years during the 10 year NHR period, you can still regain your NHR status until the end of the 10 years.

Conclusion

The non habitual resident Portugal tax scheme is an interesting benefit for those considering a move to Portugal.

NHR status can provide exemption from Portuguese taxes on many kinds of foreign source income.

Depending on your profession, NHR status can also give you access to 20% flat rate of tax on income sourced from within Portugal.

However, it’s important to remember that the Portugal NHR is not a magical zero tax situation.

The NHR scheme can be complicated, so we recommend you seek advice from a qualified tax advisor with good knowledge of the Portuguese system. Contact us for a recommendation.

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