Portugal Non-Habitual Resident Regime Update
On 10 October 2023, the Portuguese government proposed changes to the Non-Habitual Tax Resident (NHR) regime – ending NHR in its current form and introducing a new NHR regime.
When will the current NHR regime end?
Anyone who becomes a tax resident in Portugal (as an EU national or through a qualified visa), before 31 December 2023, from a high value-added activity or an activity of a scientific, artistic, or technical nature, who have not been tax resident in Portugal in the last five years, will be able to apply for the NHR. They will have until 31 March 2024 to register for their NHR status.
How do I apply for the current NHR regime?
It is important to move to Portugal as soon as possible, before 31 December 2023 (non-EU nationals will need to secure a visa before doing so), and obtain a lease or house purchase, to register as a Portuguese tax resident. This will entitle the tax benefit of NHR status in Portugal up to the end of 2032.
I am currently an NHR – does this affect me?
As the current NHR regime will be grandfathered, there is very little impact for individuals already enjoying NHR status. The regime will continue to exist until the 10-year NHR period is reached, from when individuals registered for NHR.
When will the new NHR regime take effect?
The new regime is effective from 1 January 2024 and offers a narrower scope of eligible professions, than the current NHR regime, but will potentially offer greater advantages than the previous NHR regime. Those who register under the new regime will be able to benefit from the tax advantages for a 10-year period.
Who will be eligible for the new NHR regime?
Only three groups of people will be eligible for the NHR regime, and each of these groups will be registered under specific eligible bodies in Portugal.
- People who work in higher education and scientific research, including; scientific employment in entities, structures and networks dedicated to the production, dissemination and transmission of knowledge, integrated in the science and technology national Portuguese system.
- People who have qualified jobs under the scope of ‘contractual benefits to productive investment’. Examples include jobs in; the Extraction of raw materials industry; Manufacturing industry; Publishing activities; Film, video and television production activities; Computer programming and consultancy and related activities; Data processing, information domiciliation and related activities and web portals; Scientific research and development activities, amongst others.
- People who have research and development jobs. These will be individuals with a Doctorate Degree, and whose costs are eligible to benefit from system of tax incentives in research and business development.
What are the tax consequences of the new NHR regime?
The new NHR regime may be more advantageous for the three eligible groups of people detailed above.
It may exempt foreign income from taxation. This exemption extends to; employment income earned abroad, self-employment income earned abroad, foreign rental income, and capital gains on foreign assets.
The only exception is pension income that will be taxed at the progressive tax rates (previously up to 10%). Portuguese sourced employment or self-employment income will be taxed at the fixed rate of 20% (with the option of utilising the marginal rates, if lower).
What other tax benefits exist other than those already mentioned above for Portuguese tax residents from 1 January 2024?
Individuals becoming tax resident in Portugal, as long as they have been Portuguese non-tax resident during the past five years, will enjoy a 50% exemption from personal tax. This relates to income, under the marginal tax rate, for the first €250,000 of taxable income from employment and independent business income. Income above this threshold will be taxed at the standard rate.
This exemption is valid for five years and is available for new tax residents from 1 January 2024 to 31 December 2026. Any individual, regardless of their expertise is eligible to benefit, high value-added criteria is not required.
To Conclude
It is important to note that the above are proposed changes, with confirmation due to take place in November.
If you are considering moving to Portugal, it is important to consult with a tax advisor to determine which tax regime is best for your individual circumstances. Reach out to Dixcart for more information: advice.portugal@dixcart.com.
