Europe’s best kept tax secret: Portugal’s NHR
24.07.20 By [email protected] In Investment Business

Europe’s best kept tax secret: Portugal’s NHR

Clever tax incentives underpin Portugal’s property boom, but how can they work for you?

What is it? 

An alternative to offshore bank accounts, Portugal’s Non-Habitual Residence scheme (or NHR) launched in 2009 and has proved to be an attractive prospect for European Citizens looking for ways to save on tax and make their money go further. Yet, it’s not just the uber-wealthy with assets to protect, or retirees looking after their pensions who are attracted to the programme. According to Patrick Dewerbe, head tax adviser at leading global law firm CMS, the demographic is different than what you might expect. “We assist a range of middle-to-upper class Europeans, everyone from entrepreneurs to young families aged between 35-65, moving to Portugal to take advantage of the programme.” 

An added draw is that income tax is set at a flat-rate of 20% for foreign professionals earning in Portugal. “When you compare this to a 50% income tax in the UK and up to 75% in France, it really makes the difference. Twenty-five thousand French people alone have applied for the NHR programme in the past year.”

Portugal's Non-Habitual Residence scheme - Athena Advisers

Who does it benefit?

The scheme differs depending on your work status. Read on if you are a…

A retired professional:
Expect to pay 0% tax on your foreign pension. 

A professional:
If you perform a value-added service to the economy, such as a doctor, engineer or creative. You are granted a set rate tax of 20% on national-earned income and exemption on foreign-earned income (provided it is covered by the double-taxation treaty with the home-country).

A landlord or property owner:
Expect tax exemption on rental dividends.

An investor or company director:
Expect tax exemption on dividends and bonds.

Portugal's Non-Habitual Residence scheme - Athena Advisers

How long will it last? 

At present, the scheme is fixed for a 10 year period. Talk is afoot of changing the policy after complaints from European countries like Finland and Sweden, so 2018 is the time to make the most of it.

What do I need to do? 

To qualify, applicants need to register as a non-resident in their previous country of residence and prove that Portugal is their primary residence, usually done through property purchase or rental. While they don’t need to prove they reside 183 days in Portugal, they cannot spend this amount of time in another country.

Portugal's Non-Habitual Residence scheme - Athena Advisers

Who can help? 

A full-service application with CMS’s experts costs from approximately €3,000 and includes declaration of non-residency in your previous country, appraisal of income sources to ensure they meet the criteria and full document completion and submission. For further details, contact Patrick Dewerbe at CMS.


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