The Non-Habitual Resident Status is a special regime that establishes a more favourable tax regime, in the sense of reducing Personal Income Tax (IRS) for 10 years for new foreign residents (of any nationality) and for Portuguese citizens who have been emigrated for more than five years.
The aim of this measure is to attract qualified professionals in high value-added activities and beneficiaries of pensions obtained abroad.
To benefit from this scheme, the non-habitual resident must carry out a professional activity considered to have “high added value” or be a pensioner.
Taxation
The NHR regime allows an exemption from Personal Income Tax for various types of income, including, among others, dividends, interest, rental income, and capital gains, provided that, under the applicable Double Taxation Treaty or, when one does not exist, under the OECD Model Convention, taxation rights are attributed to the source State.
A Non-Habitual Resident who receives income from dependent work or self-employment is subject to taxation at a rate of 20%, compared to progressive taxation under the general regime, which can go up to 53%.
Pensions from a foreign source, when received by NHRs, are taxed at a flat rate of 10%, even if they are not taxed in the source State.
However, in October 2023, the Portuguese government considered that the scheme had already achieved the intended objective and announced its termination.
Transitional regime
Although the Non-Habitual Resident Statute has been revoked, there is a transitional provision in the 2024 State Budget Law, which came into force on January 1, 2024, that safeguards certain types of cases, namely to applicants that:
(a) On the date of entry into force of this law were already registered as non-habitual residents on the AT taxpayers’ register, as long as the 10-year benefit period has not expired;
(b) On December 31, 2023, met the conditions for registration as non-habitual residents;
(c) Become resident for tax purposes by December 31, 2024, and declare, for the purposes of their registration as a non-habitual resident, that they have one of the following:
(i) Promise or contract of employment, promise or secondment agreement signed until December 31, 2023, which must be pursued on the Portuguese territory;
(ii) Lease agreement or other agreement granting the use or possession of real estate on the Portuguese territory, signed until October 10, 2023;
(iii) Reservation contract or promissory contract for the acquisition of a right in rem over real estate on the Portuguese territory, signed before October 10, 2023;
(iv) Enrolment or registration of dependents in an educational establishment domiciled on the Portuguese territory, completed by October 10, 2023.
(v) Residence visa or residence permit valid until December 31, 2023;
(vi) Procedure, initiated until December 31, 2023, for granting a residence visa or residence permit, with the competent authorities, in accordance with the legislation in force applicable to immigration, namely through the request for an appointment or actual appointment to submit the application for the granting of a residence visa or residence permit, or by submitting the application for the granting of a residence visa or residence permit;
(d) And to the family members of the taxpayer referred to in the previous paragraphs.
Those eligible to apply for the abovementioned points c) and d) have until March 31, 2024, to register as a non-habitual resident via their tax portal.
This way, the legitimate expectations of the individuals who had already been granted the status of non-habitual residents, as well as those who were in the process of moving, are safeguarded.
However, it should also be noted that although the tax regime for non-habitual residents has been revoked, a regime has been created, although with much less scope, called the Tax Incentive for Scientific Research and Innovation, which is now provided for in Article 58-A of the Tax Benefits Statute (EBF), which ends up being the “successor” to the NHR.
By Dr Eduardo Serra Jorge
|| features@algarveresident.com
Dr Eduardo Serra Jorge is founding member, senior partner and CEO of lawyers firm Eduardo Serra Jorge & Maria José Garcia – Sociedade de Advogados, R.L., created in 1987.
In his column, he addresses legal issues affecting foreign residents in Portugal.
Faro office at Gaveto das Ruas Pedro Nunes e José de Matos, 5 R/C
289 829 326
