Attention existing NHR tax holders - plan now and mitigate future tax burden

Optimising your tax and financial planning structure long before your NHR status ends

While many have successfully secured Portugal's Non-Habitual Residency (NHR) tax status, enjoying a decade of attractive tax benefits, few have proactively planned in the first 7 years of NHR to mitigate future progressive tax rates of 28% to 48%.

However, with expert tax and financial planning early in the NHR 10-year period, this burden can be substantially mitigated for a further 10 years, if you plan early enough ensuring continued financial well-being in Portugal for the long term through structured professional advice.

Alarmingly, according to a new independent 'Wealthy Expats in Portugal Survey Report 2023' just 27% of current NHR tax status holders have properly structured their tax and financial planning in time for when NHR ends.

NHR to close to new entrants

Following recent updates by the Portuguese government, as of December 31st, 2023 the NHR tax regime will no longer be available to new entrants. If you have not already applied for NIF as well as opening a Portuguese bank account along with being able to provide a Portuguese proof of address or rental contract and private medical insurance.

These recent proposed changes have caused an influx of wealthy expats racing to complete their  NHR tax status before the deadline. Many future expats will move on to the new Incentivised Tax Scheme (ITS) in 2024 which the government has indicated will replace NHR in its recently published draft bill.

The professional supply chain is under unprecedented demand and this will impact potentially the number of people who will be able to complete this in time before the end of the year. It is expected that many professional advisors will not take on further instructions for NHR beyond the next week or so unless the Portuguese government decides to extend any deadlines.

Seeking the right advice from industry experts

This Portugal Pathways webinar featured a panel of experts who brought a wealth of experience in structuring tax and financial planning for wealthy expat families in Portugal.

These leading professionals had a proven track record of guiding high-net-worth individuals through the complexities of Portugal's tax regime, optimizing their financial and tax well-being during and beyond the 10-year NHR tax status period.  

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Answers to key webinar questions from attendees

Disclaimer: The guidance below and Q&As 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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I'm a Belgian citizen and have permanent residency in NZ, but I'm looking to relocate to Portugal under the NHR regime. Will it be still possible to get the NHR regime on time.

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Due to the recent news regarding the Portuguese Prime Ministers resignation and the the fact that the government collapsed, means the proposed state budget has been rendered invalid. This also means that the previously stated date of 31st of December is likely no longer valid and as such there is a small window of opportunity for expats to apply and receive NHR tax status before a new government is formed and they decide the fate of NHR.

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Is it still worth applying for NHR tax status, if I already have a EU passport, so I don’t have the visa delay issue. Do I need to set up a Portuguese bank account and have a proof of address alongside the NIF ID number which I already have?

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It is not strictly necessary to set up a Portuguese bank account in order to apply for NHR status. However, it is recommended, as it will make it easier to manage your finances in Portugal. You will also need to provide proof of address in Portugal.

Furthermore, it may still be worth applying for NHR tax status as the recent news regarding the Portuguese Prime Ministers resignation and the the fact that the government collapsed, means the proposed state budget has been rendered invalid.

This also means that the previously stated date of 31st of December is likely no longer valid and as such there is a small window of opportunity for expats to apply and receive NHR tax status before a new government is formed and they decide the fate of NHR.

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Buying a property in Portugal , any advantage buying as a  couple (both under NHR tax regime)?

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Yes, there are several advantages to buying a property in Portugal as a couple, especially if you are both under the Non-Habitual Residency (NHR) tax regime. Here are some of the key benefits:

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Increased affordability: Buying a property with a partner can significantly increase your purchasing power. You can split the cost of the property, which can make it more affordable to buy a larger or more luxurious property than you could on your own.

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Greater flexibility: If you are both under the NHR tax regime, you can split the time you spend in Portugal between your two homes. This can give you more flexibility to live in Portugal for part of the year and in another country for the rest of the year.

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What if I stop being a Belgian tax resident and become a Portuguese tax resident but my NHR is declined? Would it have any consequences on my Portuguese taxes?

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Yes, if your NHR application is declined, you will be considered a Portuguese tax resident from the date on which you ceased to be a Belgian tax resident. This means that you will be liable to pay Portuguese taxes on your worldwide income.

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Is there an exemption for gift tax between siblings in Portugal

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Yes, there is an exemption for gift tax between siblings in Portugal. Siblings are considered direct line relatives, and transfers of assets between direct line relatives are exempt from stamp duty, which is the Portuguese equivalent of gift tax. This means that you will not have to pay any taxes when you give a gift to your sibling, regardless of the value of the gift.

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There are a few exceptions to this rule. For example, if the gift is a house or other real estate, there may be a small amount of stamp duty due. Additionally, if the gift is a business, there may be other taxes that apply. However, in general, siblings can give each other gifts without having to worry about taxes

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I am a UK national with a European passport looking to move to Portugal for 12 months minimum from Q2 next year, what are my options as I miss out on NHR?

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Due to the recent news regarding the Portuguese Prime Ministers resignation and the the fact that the government collapsed, means the proposed state budget has been rendered invalid. This also means that the previously stated date of 31st of December is likely no longer valid and as such there is a small window of opportunity for expats to apply and receive NHR tax status before a new government is formed and they decide the fate of NHR.

However, there is also the option of Incentivised Tax Scheme (ITS) which was proposed by the government, however, again due to the current issues regarding the resignation and annulment of the proposed bill, this may not be valid anymore.

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Hello ,I’m already on the program for 5 years now . I used to live in Brazil. When the program gets its end what should I should be care about? Everything will start to be taxed ?

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If you already are on the NHR tax regime, it is advised to start planning as early as possible for beyond the initial 10-year period to reduce your tax burden for up to 20 years.

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Please contact our experts to further discuss this and help you plan accordingly.

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My wife is 47, American, and has a US 401k.Would it be advisable to cash this out at a 10% penalty in order to invest it in an insurance investment scheme which would provide a lower tax bracket for withdrawals after 8 years? We have 5 yrs left with NHR.

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If you have any questions or concerns about cashing out your 401(k) and investing in an insurance investment scheme, please contact our expert team and schedule a call with us.

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We come from the US and have most of our funds in tax-deferred IRA accounts. We have our PT temporary residency as well as approved NHR.  I believe that we need to effectively deplete our IRAs over the next 9 years, so that it does not become taxable income after NHR expires for us

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The best option for you will depend on your individual circumstances and it's important to talk to one of our tax advisors before making any decisions. Schedule a consultation with our expert team to see how we can help you.

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