Non-Habitual Residency (NHR) tax benefits in Portugal
Portugal's Non-Habitual Residency (NHR) program has been a key factor in attracting expats from around the world.
The NHR program offers significant tax benefits for a period of ten years to individuals who become tax residents in Portugal, while not having been tax residents in the country in the previous five years.
Eligibility Criteria
To be eligible for the NHR status, individuals must:
- Become a tax resident in Portugal.
- Not have been a tax resident in Portugal for the five years preceding their application.
Tax Benefits of NHR
The NHR program provides attractive tax benefits for both foreign-sourced income and Portuguese-sourced income. The specifics include:
- Non Portugal derived income: This includes, rental income, capital gains, royalties, interest, dividends. As a general rule, NHR holders can receive this income at 0% tax rate, and 10% on pension income. Income from jobs in Portugal is taxed at a flat 20%.
There are also tax incentives for highly sought after professions based on income derived from Portugal.
Application Process
The application process for NHR status is relatively straightforward:
- Register as a tax resident in Portugal.
- Apply for NHR status via Portugal's Tax Authority website or with the help of a local tax advisor.
- Once your application is approved, you'll have NHR status for a period of 10 years.
Key Considerations
While the NHR program offers significant benefits, it's important to understand the implications of becoming a tax resident in Portugal and how this affects your overall tax situation. Each individual's situation is unique, and what works for one person may not work for another.
Therefore, it's crucial to seek professional advice before making any decisions.
The Non-Habitual Residency program is an excellent opportunity for those considering moving to Portugal to benefit from a favourable tax regime, all while enjoying the incredible lifestyle, culture, and climate that Portugal has to offer.
Potential end to the NHR tax regime
On October 3rd, during an interview with CNN Portugal, Prime Minister Antonio Costa alluded to the potential discontinuation of the Non-Habitual Residency (NHR) tax scheme. He mentioned that it "may be phased out by 2024."
Disclaimer: The guidance above should not be fully relied upon and does not constitute formal instructed professional advice. In relation to tax advice in Portugal, please engage and instruct a regulated professional for all tax advice and structured financial planning. Please contact Portugal Pathways if you would like an introduction to one of our professional advisors.
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