Non-habitual resident (NHR) is a special status aiming to attract professionals who carry out activities with high added value or intellectual property, who are not residents of Portugal as well as individuals benefiting from pensions earned abroad. This statute was approved in 2009 and in order to be eligible to enjoy it for 10 consecutive years, applicants must be legally considered as residents in Portugal and have not been taxed as a tax resident in Portugal in the five years preceding the application for the statute.
NHR status applies both to foreign and to nationals' citizens living outside the country and who wish to return to Portugal.
Following the 10 years regime validity timeline individuals will be taxed according to the general taxation rules in force at such moment.
Generally speaking, under NHR regime, income earned by taxable individuals pursuing inland dependent and / or independent professional activities, with high added value with a scientific, artistic or technical character (an official list of eligible professions has been published by Portuguese Government), will be taxed, under IRS, at a fixed (special) rate of 20% (vs. the progressive general rates from 14.5% to 48% applicable under the general income taxation regime).
With regard to other foreign income sources, namely, income from dependent and self-employed work, property, capital gains, interest, dividends, as well as other capital income, those amounts, if any, may benefit from certain tax exemptions, provided that established conditions are met (i.e. double non-tax situation not admissible).
Pensions (and other similar income) from foreign sources shall also be subject to IRS taxation in the country at a fixed rate of 10%.
Alternatively, individuals subject to taxation in Portugal, not comply with the above mentioned requirement of non-tax residence in Portugal in the last 5 years preventing them to be eligible for the NHR statute, may have yet another special taxation regime, called "Ex-Resident" or "Return" programs .
This special taxation regime shall be in force for a period of 5 years, including the year the applicant have returned to Portugal. Any person becoming tax residents in Portugal on or before December 31, 2020, shall be eligible, provided that:
- were not tax residents in any of the previous 3 years;
- have been resident in Portuguese territory before December 31, 2015;
- have their tax status regularized;
- have not applied for enrollment in the NHR statute.
One of the benefits of this regime is that it establishes the exclusion of taxation of 50% of income from dependent work, business and independent professionals incomes, allowing taxpayers to be taxed by applying progressive tax rates lower than those actually due for the total income earned.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.