The Non-Habitual Residents Scheme
With its capital named the 6th best city in the world for expats and crowned the best country in the world for retiring abroad in 2020, there are a lot of reasons why international residents choose to call Portugal home.
Whilst lifestyle is undeniably one of Portugal’s main allures, there are also a number of financial reasons why so many people move to Portugal every year: one of these is Portugal’s Non-Habitual Resident scheme (often abbreviated as the NHR programme). Our Non-Habitual Resident, Portugal 2020 guide explores who is eligible for this programme and the many benefits of this scheme.
What is the Non-Habitual Resident programme in Portugal?
Created by the Portuguese government, the Non-Habitual Resident programme offers attractive taxes in Portugal for foreigners who decide to become citizens. The tax scheme was approved back in 2009 to improve the competitiveness of Portugal by attracting high net worth individuals.
The three main tax benefits of the Non-Habitual Resident programme:
- Employment income and self-employed income from high-added-value activities of a Portuguese source will benefit from a reduced personal income tax (PIT) rate of 20%.
- A reduced PIT rate of 10% is applied to foreign pension income from overseas.
- Income from a foreign source may be exempt from tax, providing that certain conditions are met.
These benefits can be enjoyed by individuals for 10 consecutive years from the date of approval providing certain conditions are met.
Who can apply for the Non-Habitual Resident programme?
The Non-Habitual Resident tax programme is open to any non-residents who wish to become tax residents in Portugal, provided that they have not been taxed as Portuguese resident taxpayers in the past five years.
To be eligible for the Non-Habitual Resident programme, individuals need to become a tax resident in Portugal. The Portugal tax residency rules state that this can be achieved by spending at least 183 days a year in Portugal or, if they do not wish to spend this much time in Portugal, they need to have a property in Portugal which is considered to be their permanent and personal address.
Anyone wishing to benefit from the Non-Habitual Residents scheme will need to have proof of abode by 31st of December and will need to submit their Non-Habitual Resident application by the 31st of March of the following year.
Non-Habitual Resident Portugal Changes 2020
The benefits of the Portuguese NHR programme changed somewhat back in April 2020: a slightly higher tax rate of 10% instead of 0% will be applied to foreign pension income. However, individuals who applied to the scheme before the announcement will not be affected by the new regulations and will enjoy a 0% tax rate for 10 years. Nevertheless, this scheme still remains competitive internationally as well as nationally. Indeed, Portuguese nationals are taxed at up to 48% on their income.
What is a high-added-value activity?
In order to benefit from the Portuguese Non-Habitual Resident programme, high-added-value activities need to be of a scientific, artistic or technical nature. This expansive list encompasses a whole variety of professions ranging from healthcare professionals (like doctors, surgeons and dentists) and managers through to senior members of a business, administrators and investors.
What tax applies to employment income from a low-added-value activity in Portugal?
Income from domestic sources which aren’t deemed ‘high-added-value’ is liable to the general progressive tax rates of up to 48%. Plus, there will also be a surcharge of up to 5%.
How much tax will I pay on capital gains in Portugal?
Domestic capital gains tax in Portugal for Non-Habitual Residents on the sale of securities are taxed at 28%. Individuals can also choose to pay tax on capital gains at a progressive rate.
How much tax will I pay on dividends and interest in Portugal?
Dividends and interest of a Portuguese source are liable to a final withholding tax rate of 28%. Individuals can also choose to pay this tax at the progressive rate, but do note that only 50% of the income from dividends can be taxed this way.
Can US citizens apply for the Portugal Non-Habitual Resident scheme?
Portugal NHR for US citizens is possible as the USA has a double taxation agreement with Portugal.
Is international employment income exempt from tax in Portugal?
Those benefiting from the Non-Habitual Resident programme will not need to pay tax on any international employment income which is paid in a country with a double taxation agreement with Portugal. The tax will be liable to the source country.
However, it is important to check that income from tax havens blacklisted by Portugal will not be eligible. Source destinations blacklisted from Portugal’s Non-Habitual Resident scheme include the Bahamas, the Maldives and Monaco.
What is a non-habitual resident?
This is a special tax status given to non-residents who chose to become tax residents in Portugal. This grants them a number of tax benefits, such as reduced taxation on foreign pension income as well as a flat tax rate of 28% on domestic income from a high-added-value activity.
Do I need a visa to live in Portugal?
EU/EEA/Swiss nationals can reside in Portugal without a visa. However, other nationals will need to apply for a visa. There are a number of ways by which to do this and one of the most popular methods is through investing in real estate to obtain a Golden Visa. Portugal’s Golden Visa Programme grants residency to international individuals and their immediate family whilst paving the way to Portuguese citizenship.
How much tax do I pay on my pension as a non-habitual resident in Portugal?
In accordance with the Non-Habitual Resident changes made in April 2020, those who apply for the programme after this date will need to pay a flat rate of just 10% on their foreign pension income.
How much gift tax do non-habitual residents pay?
Like citizens, for Non-habitual residents, gift tax in Portugal is paid via Stamp Duty a 10% rate. However, spouses, descendants and ascendants, do not need to pay gift tax. In addition, gifts of property will incur an additional rate of 0.8%.
Begin your Portugal property search
As well as offering a varied portfolio of properties for sale in Lisbon, Athena Advisers has strong relationships with lawyers in Portugal who can help you with both the Non-Habitual Resident programme and Golden Visa programme, should you need to obtain a visa. Get in touch to begin your Portuguese property search.