New table of activities of high added value
The tax regime for “non-habitual residents” was created with the aim of attracting qualified professionals, wealthy individuals and foreign pensioners to Portugal (the so-called “high net worth individuals”) and establishing the necessary tax incentives for the relocation of those individuals to the Portuguese territory.
Among several measures, Article 72 (10) of the IRS Code (CIRS) states that the net income of categories A and B earned on high value-added activities of a scientific, artistic or technical nature by non-habitual residents on the Portuguese territory are taxed at a rate of 20%.
The high added value activities foreseen in the benefits established by CIRS, namely for the purposes of applying the 20% flat income tax rate to taxpayers registered as Non-Habitual Residents (NHR) who have income from such activities, were established by Ordinance 12/2010, of January 7.
The economic situation in Portugal has changed significantly since the publication of that table of activities, with a significant change in the dynamics of job creation. In fact, employers from various sectors have shown difficulties in hiring workers with diverse skills and qualifications profiles, so, in this context, it is important to reinforce the attractive factors of workers who want to come to Portugal, increasing value in the national economy.
As a result, the activity table contained on the said Ordinance was amended by the Ordinance 230/2019, of July 23, in order to align the activities with the added value to the national labour market due to specialised skills or recruitment difficulties.
With this amendment, the table is now based on codes of the Portuguese Classification of Professions (PCP), which facilitates the more immediate clarification of interpretative doubts regarding the scope of each of the activities listed in the table, and, on the other hand, ensures better accuracy of statistical comparability at European and international levels in the various fields in which this classification is applied.
The new Ordinance states that workers of the professional activities mentioned on it must have, at least, the level 4 of qualification of the European Qualifications Framework or the level 35 of the International Classification Type of Education or have five years of duly proven professional experience. The terms of proof of these requirements will, however, only be detailed in the future.
Although the new rules will come into force on the day following their publication, they will only be producing effects from January 1, 2020 onwards.
However, the new table does not apply to: (i) taxpayers registered as NHR on January 1, 2020, but whose registration is suspended (upon request by leaving Portugal); (ii) taxpayers who have applications for registration as an NHR pending on January 1, 2020, or who apply for registration as an NHR by March 31, 2020, with reference to 2019.
However, the Ordinance states that the new Table may apply, by choice, to taxpayers previously registered as NHR.
The new table may cover a larger number of high value added activities whose income may benefit from the application of the reduced and special 20% IRS tax rate of the NHR scheme, provided that the other requirements of the same are met. However, it will still be necessary to await the terms of the practical application of the new Table by the Tax Administration.
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
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