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Tax Benefits of the Non-Habitual Resident Status

Over the past few years’ Portugal has developed a reputation as the new tax haven for affluent and high net worth individuals, all of whom wish to achieve tax optimization by relocating to a friendly, discreet and safe EU country. With Portuguese residency they are able to acquire a special tax regime, with many attractive fiscal benefits, the Non-Habitual Resident (NHR).

The NHR regime first appeared in 2009 and it was one of the Portuguese government’s many measures to:

  • Attract high net worth individuals;
  • Raise Portugal attractiveness and competitiveness;
  • Increase demand in the domestic market;
  • Encourage the return of highly qualified Portuguese nationals domiciled abroad and fostering increased fiscal revenue, namely in regard of real estate and consumption tax, from individuals that otherwise would not be taxpayers in Portugal. 

This tax program has been hugely successful, however, there are certain conditions that need to be fulfilled to be eligible to apply, I would like to mention the 3 main ones:

  • You can not have been a Portuguese Tax Resident for the previous 5 years;
  • You have to be able to spend 183 days in every fiscal year;
  • You need to have enough passive income to cover your lifestyle.

Should you be granted residency in 2022, you will have until the end of March 2023 to apply for the NHR scheme, otherwise you will have lost out and forfeited this privilege.

Please see below a general overview of what some of these tax benefits are:

Applicable TaxTax Resident in Portugal w/o NHRTax Resident in Portugal w/ NHR
Employment and Business (PIT)Up to 48%20%
Company Dividends*28%0%
Pensions*Up to 48%10%
Royalties*Up to 48%0%

* As long as this income does not arise from a Portuguese source or from a source state, region or territory that is included in the Portuguese Government’s tax haven blacklist.

Besides the benefits under the NHR regime, the tax system in Portugal is generally very favourable, here are some highlights: 

  • No gift and inheritance tax for assets outside of Portugal. Inheritances or gifts of Portuguese assets to spouse, descendants or ascendants are also tax exempt. 
  • Gifts to other individuals are subject to a flat 10% stamp tax rate.
  • No wealth tax and free remittance of funds either to Portugal or abroad.
  • Beneficial treatment for pensions and other life insurance products may also significantly reduce the effective tax burden on capital invested.
  • Portuguese companies may take advantage of EU non-discrimination rules and EU directives on mergers, dividends, interest and royalties, as well as Double Taxation Treaties (DTT) signed by Portugal.
  • Dividends and capital gains obtained by Portuguese companies can benefit from a participation exemption regime, thus making Portugal an interesting location for investments abroad.

Disclaimer – This communication is for informational purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, investment advice, recommendations or research. You should seek advice from a professional adviser before embarking on any financial planning activity.

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