Since 2012, many individuals have benefited from the Non-Habitual Residency (NHR) status which has afforded them substantial tax benefits over a period of 10 years.
At the end of 2023, the Portuguese government cancelled the NHR program in its current form, which came as a shock to all those hoping to apply for the status in 2024.
The new NHR scheme
The new NHR scheme came into effect on January 1, 2024, and is only applicable to:
- Professors and scientific researchers.
- Research and development activities.
- Job positions and members of the board of certified start-ups.
- Job positions or other activities carried out by tax residents in the Azores and Madeira.
These new NHRs will continue to enjoy exemption from tax on foreign-sourced income under the same conditions as before, i.e. conditional upon that income being taxed or subject to tax outside Portugal. Income from their employment in Portugal will be taxed at 20% flat rate.
The 10% tax rate applicable to pensions is removed and pension income will be now taxed as ordinary income at the progressive Portuguese rates of up to 48%.
How can I still apply for the ‘old’ NHR?
If you already have your residency card issued last year and have not yet updated the tax department for your tax residency, there is still time to apply for ‘old’ NHR status until the end of March 2024. Sovereign can do this for you.
Anyone who was planning on moving to Portugal in 2023 particularly to apply for the NHR status may still be able to do so if they can prove their intent to move here by meeting one of the following criteria:
- Have signed a lease agreement or other agreement granting the use or possession of real estate in Portugal signed by October 10, 2023.
- Have enrolled or registered their dependents in a Portuguese educational establishment by October 10, 2023.
- Have signed a reservation or promissory agreement to acquire real estate in Portugal signed by October 10, 2023.
- Obtained a residence visa or residence permit valid until at least December 31, 2023;
- Have initiated the procedure for granting a residence visa or residence permit by submitting the application and requesting an appointment to submit the application or the booking of an appointment by December 31, 2023.
- Have agreed an employment agreement before December 31, 2023, where the work is to be carried out in Portugal.
To apply for the NHR status, you first have to be registered as tax resident. Yet, despite the above, the tax department is reviewing each application on a case-by-case basis depending on what documentation each individual has to show intent to reside in Portugal in 2023. Whether the NHR will be backdated to 2023 or commence from 2024 remains to be seen.
Sovereign can submit your request to show your intent.
My 10 years NHR is ending. How will I be taxed in the future?
Those who currently have the NHR status will continue to enjoy the current benefits until the end of the prescribed 10-year period. After the 10 years, income is taxed at progressive tax rates.
Sovereign can provide you with a simulation to show the likely scenario on your taxation under the progressive tax rates and also guide you on alternative residency options.
I still want to move to Portugal even without NHR.
With careful planning, it can still be advantageous to live in Portugal and Sovereign have full concierge services for residency applications through a Golden visa by investment, D7 passive income visa or the Digital Nomad visa.
The application process can be arduous, and Sovereign’s team will support and guide you through the application process until you become tax resident. Afterwards, Sovereign will continue to provide you with full fiscal support.
Once residency has been established, it is necessary to also be registered as tax resident and individuals will be obliged to declare here, on a yearly tax return, any worldwide income. It is, therefore, imperative that, prior to beginning a residency application process, you have a full understanding of how you will be taxed in Portugal, and, for this, a consultation can be booked with our Sovereign’s Portugal office.
Our in-house experts have extensive financial and residency experience and can evaluate your income sources, explain how each is taxed in Portugal and guide you on any necessary cross-border planning to ensure that you obtain full advantage of your residency.
Sovereign have full accounts services to prepare and submit the tax returns for their clients and their accountants are highly experienced in the declaration of all types of foreign or Portuguese-sourced income.
Contact Sovereign on serviceinfo@sovereigngroup.com for more information.
The information provided in this document does not constitute advice to clients or any third party and no responsibility will be accepted for any loss occasioned directly or indirectly as a result of persons acting, or refraining from acting, wholly or partially in reliance upon it.
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