The non-habitual tax resident (NHR) regime is a scheme established under Portuguese tax law that offers relevant tax benefits to those wishing to set residency in Portugal, since it allows individuals to benefit from a special tax status for a period of 10 years.
For Portuguese sourced income
A special tax rate of 20% would be applicable to employment and self-employment income derived from a “high value-added activities” exercised in Portuguese territory.
For foreign sourced income
Foreign source employment income can be exempt from Personal Income Tax (PIT) provided certain requirements are met:
• It is taxed in the source State according to the applicable Tax Treaty; or
• If no Treaty is applicable, the income is not deemed as derived in Portugal
Foreign source dividends, interest, capital gains and rental income, together with self-employment and professional income (in this case, only if derived from high value added activities), can be exempt from PIT if:
• The income can be liable to tax in the country of source, according to the applicable Tax Treaty or to the OECD Model Tax Convention; and
• It is not deemed derived in Portugal; and
• It is not deemed obtained in a tax haven.
For foreign sourced pensions
The legislation provides exemption on foreign pension income, if:
• The income is taxed in the other country in accordance with the Double Tax Treaty (DTT) between Portugal and that country; or
• The income may not be regarded as Portuguese-source in accordance with domestic legislation.
As most DTT’s grant exclusive taxation rights on pension income to the country of residence, in practice, foreign pension income may be excluded from taxation both in Portugal and in the country of source.
What are the requirements to benefit from the NHR?
• You must have not been a tax resident in Portugal in the last 5 years;
• You must become tax resident in Portugal, which implies:
• Staying in Portugal more than 183 days during a 12-month period, beginning or ending in a given year; or
• If you stay in Portugal for a shorter period, you must buy or rent property showing the intent to occupy it as an habitual abode in any day of the referred period