NHR tax regime is set to be replaced to new entrants after the budget is finalised this month

The NHR tax regime is still expected to be replaced to new entrants by the Incentivised Tax Scheme (ITS), starting in 2024. This is despite Portugal's recent political turmoil, in which President Marcelo Rebelo de Sousa has taken the decisive step of dissolving parliament and calling for early elections on the 10th of March 2024.

The final approval of the 2024 Portuguese State Budget, which includes changes to the NHR tax regime, is expected to be finalised on the 29th of November in the Portuguese parliament. This should mean that the NHR tax regime will end as planned for new entrants on the 31st of December 2023, unless there are any last-minute amendments.

What options exist for those still wishing to apply for NHR tax status before it transitions to the new Incentivised Tax Scheme (ITS)?

For those committed to relocating and receiving tax status in Portugal, there are a number of things that can be done:

As an EU citizen or EU passport holder, you can expedite your Portuguese residency in between 6 and 8 weeks. To do so, you must obtain the CRUE (Certificado do Registo de Cidadão da União Europeia), gather required documents such as Portuguese NIF, EU ID, proof of address in Portugal for residency, and submit the application.

If you are a non-EU citizen with a residency card or SEF/AIMA appointments, you can still apply for NHR tax status if you act early by providing required documents and submitting them for NHR tax status application, but this window of opportunity will close very shortly.

An alternative last resort route for non-EU citizens to obtain tax residency before NHR tax status ends to new entrants is registering an ‘Expression of Interest’ application at the visa emigration office . While this is a longer residency process, it will result in potentially a visa being issued in time and avoid any future imposed deadline for new entrants to the NHR tax regime. However, this is a last resort and may not work for everyone.

Click here for our updated guidance and process for NHR tax status applications, depending on whether you are an EU or non-EU passport holder who requires a separate visa exemption to expedite your tax status in Portugal.

What implications are there for current NHR tax status holders who haven’t structured or planned their income, assets, and tax early enough in their 10-year tax incentive period to mitigate progressive tax rates in the future?

Each year that this is delayed can increase the potential risk of higher taxes moving forward.

A recently published ‘Wealthy Expats in Portugal Survey Report 2023-2025’ highlighted that out of an estimated 53,000 existing NHR tax holders in Portugal, only 27% had structured and planned their income, assets, and taxes for the long term to mitigate future tax burdens.

It is crucial for all existing NHR tax status holders to carefully consider their future financial position and take proactive measures early enough to safeguard their income and investments whilst mitigating progressive tax rates of between 28% and 48%.

The key to navigating this transition lies in early planning. By acting within the first seven years of your NHR tax status, you can maximise your tax and financial position for up to 20 years.

As existing NHR tax status holders, it is essential to recognise the temporary nature of the NHR tax benefits and take proactive steps to secure your financial and tax future.

By adopting a forward-thinking structured approach and seeking professional guidance early enough, you can effectively manage the transition beyond the NHR tax incentive period and continue enjoying the benefits of living in Portugal for years to come.

Contact us for a no-obligation meeting and talk to one of our specialist professional advisors about your income, assets, tax, and wealth management, as structuring your unique circumstances is vital to your ongoing life and finances in Portugal.