Portugal NHR Tax Regime – Best Tax Regime in Europe for individuals

This Information intends to present the Portuguese Non-Habitual Tax Regime (“NHR”) program, currently one of Europe’s best tax regime for HNWI and UHNWI providing a very favourable tax treatment for the first 10 years of residence.

This Information contains information about the Portuguese Tax Regime, but under no circumstances does it represent legal advice, and should not be treated as such. We give no warranties or representations concerning free information documents, and accept no liability in relation to the use of said documents.

If you are considering working in Portugal under this regime, and provided your employment or self-employment income arises from a “high value-added activity of a scientific, artistic or technical nature”, comprised of a list of activities, you will be taxed at 20% – compared to Portugal’s current top rate of income tax of 48% (53% including solidarity tax).

The list of high value-added roles is subject to change but currently includes: General Managers, Executive Managers; Administrative Managers, Commercial Managers; Production Managers, Specialised Services Managers; Hospitality, Restaurant, Retail and Other Services Managers; Specialist Physicists, Mathematicians, Engineers and related Technologists; Medicine Doctors; Dentists and Stomatologists; University and Higher Education Teachers; ICT Technologists; Authors, Journalists and Linguists; Creative and Performance Artists; Intermediate level Science and Engineering Technicians and Professionals; ICT Technicians; Market-oriented Farmers and qualified Agriculture and Animal Husbandry workers; Market-oriented Forestry, Fisheries and Hunting qualified workers; Industry, Construction and Handicraft qualified workers; Plant and Machine Operators and Assembly Workers, namely operators of fixed installations and machinery.

The above listed professionals need to hold at least (a) a level 4 qualification under the European Qualifications Framework, or (b) level 35 of the International Standard Classification of Education, or (c) 5 years of duly proven professional experience.

What about my foreign source income?

In general, if the person coming to Portugal registers as a NHR, income from a foreign source such as dividends, interest, or capital gains will be exempt from tax in Portugal provided: 

– It may be taxed in the source state under double taxation treaty rules, or

– It may be taxed in the source state under the terms of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention, if no double tax treaty exists, and is not regarded as arising in Portugal.

This can originate real tax saving opportunities that should be taken into consideration when structuring your income and assets.

In some cases, there is the real possibility of securing a non-double international taxation of your income, thus avoiding tax leakage of your income and assets.

The specific case of pensions:

Under this regime it is possible to move to Portugal that will tax your foreign pension at a reduced 10% flat tax rate.

Inheritance Tax:

Portugal does not levy inheritance tax, and the Portuguese equivalent – “Stamp Duty” – only applies to assets in Portugal.

Assets and bank accounts balances located outside Portugal are simply not taxed.

On the other hand, there is a tax exemption from Stamp Duty for gifts or inheritances to spouse, descendants or ascendants regarding Portuguese assets.

Wealth Tax:

There is no wealth tax in Portugal. 

Best existing tax regime in Europe for individuals?

Yes. We believe that the Portuguese NHR is a real alternative, in a favorable tax environment. By becoming a Portuguese non habitual tax resident, an individual will be able to accrue their wealth in a white listed friendly tax environment, to dispose of their assets benefiting from tax exemptions, to pass on their wealth or estate without inheritance or gift taxes and/or to enjoy their retirement benefiting from a low tax rate on their pensions.

Is it easy to apply?

Yes. To apply for it: 

 – You must not have been tax resident in Portugal for any of the previous five tax (calendar) years;

– You must meet the criteria to be tax resident in Portugal[1] in the year you apply, as well as every other year for the 10-year period;

– Your application has to be approved by the Portuguese tax authorities, but it is a straightforward process, currently electronically, and it has no costs, as Portugal does not levy any fee for the application.

Provided all the documentation is in order an approval should be secured within 48 hours from the date of filing of the application.

Who we are:

Horizon Consulting is a Portuguese top tax and immigration advisory firm. There are several factors that set us apart from our competitors, including:

  • A highly-focused approach – we are able to assist foreign investors and people moving to Portugal, having an unrivalled experienced in this specialized field.
  • Our services are provided by seasoned professionals.

Visit our website at www.horizonconsulting.pt for more information and download our free guides.

Contact us at info@horizonconsulting.pt

[1] An individual is tax resident in Portugal for any year in which: (i) He stays in Portugal for more than 183 days (continuously or not) during a 12 month period, which begins or ends in that tax year; or (ii) He has a residential accommodation available in Portugal in any day of that 12 month period, used as the individual’s habitual abode.

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