You would think the incentive to become a resident in Portugal would be the low cost of living and all-around high quality of life, but it gets better. The Non-Habitual Resident (NHR) tax regime in Portugal attracts thousands of residents by offering reduced tax rates and even full tax exemptions for the first ten years of residence. NHRs are taxed at a flat rate of 20% on their income and are exempt from paying taxes on global income. Take a look at our guide to visas in Portugal to obtain long-term residency and be able to enjoy this attractive tax regime.
What is the Non-Habitual Resident (NHR) Tax Regime in Portugal?
The attractive tax regime for non-habitual residents was introduced in 2009 in order to attract “high-value” talent and wealth to Portugal. The NHR tax regime is available to all new tax residents in Portugal that were not Portuguese tax residents for the 5 years prior. The NHR status is granted for 10 years and cannot be renewed. Let’s go through the benefits of the NHR tax regime.
Benefits of the Non-Habitual Resident (NHR) Tax Regime in Portugal
Bear in mind that the following benefits only last for 10 years. After that, you will become a regular tax resident like other citizens and will have to abide by the traditional fiscal regime.
Personal Income Tax (IRS): 20% Flat Tax
The Portuguese government start this program to increase the number of highly qualified professionals in the country. Those who work in Portugal (freelance or regular employment) under the NHR tax regime only pay a 20% flat rate on personal income tax (IRS). To be considered “high value”, the job must be related to activities of scientific, artistic, or technical character.
You will also not pay any tax on dividends, interest, royalties, capital gains, rental income from real estate outside Portugal, and income from employment in another country. These will be paid in the source country if your country has a Double Taxation Agreement (DTA) with the country. The UK, USA, and many more countries have a DTA with Portugal where this is the case. Therefore, you could be working for an American or English company and not pay any income tax in Portugal under the DTA. Rather, you would pay taxes in the US. You could also just choose to pay the flat tax rate of 20% if you fall under a “highly qualified professional” or if the latter is the case and you are paid by a Portuguese source.
If your pension income happens to be taxed in Portugal as you are not eligible under a DTA, it will only be taxed at a flat rate of 10% which includes retirement savings and insurance. Those with non-habitual residency status pay pension tax like income tax, which can go up to 48%. You will also not pay any inheritance or wealth tax.
Eligibility & Requirements: Who Qualifies for Non-Habitual Resident (NHR) Status in Portugal
There are a couple of eligibility requirements to become a non-habitual resident. The three main ones are that:
- You cannot have been taxed in Portugal during the five years before the application.
- You must request a tax residence certificate which means you must live in Portugal for more than 183 days (doesn’t need to be consecutive) for 12 months, lived in Portugal for less than 183 days but has bought property in Portugal during those 12 months, or performs public functions in the name of the Portuguese state for the last 12 months.
- You must have the right to be in Portugal through a long residency visa such as the Portugal Golden Visa, the Portugal D7 Visa, or the Portugal D2 Visa. Take a look at our full guide to visas in Portugal here.
If you are looking to pay the 20% flat rate on personal income tax (IRS), your job must be related to “high-quality activities” of scientific, artistic, or technical character. Here is the updated list of high value-added jobs for NHR status:
- Plastic artists, psychologists, actors, and musicians
- Auditors and tax consultants
- Dentists, doctors, and physicians
- University professors
- Biologists and life scientists
- Computer programmers, computer consulting activities, computer equipment management
- Data programming and data processing
- Activities in the field of websites
- Scientific investigation and development activities
- Investigators, directors, and managers of investing promoting companies
- Senior business executives
How to Apply for Non-Habitual Residency in Portugal
How to Obtain Residency in Portugal
In order to become a non-habitual resident, you must have lived in Portugal for more than 183 days in the space of 12 months. You can also have lived in the country for less than 183 days but have bought property in Portugal during those 12 months or performed public functions in the name of the Portuguese state for the last 12 months. If the last two options were not the case for you, you will need to obtain residency in order to be eligible for the non-habitual tax regime. Portugal has some attractive long-stay national visas, also known as residency visas, that allow you to make use of the 10 years of tax incentives of the NHR status. Let’s go through our favorites: the Portugal Golden Visa, the Portugal D7 Visa & the Portugal D2 Visa.
The Portugal Golden Visa was launched in 2012 to increase foreign investment in Portugal and boost the economy as it requires an investment of at least €350,000. With the Golden Visa, non-EU/EEA/Swiss citizens can live and work in Portugal, as well as travel freely within the Schengen area. The visa leads to permanent residence after 5 years and citizenship after 6 years. However, you do not need to live in Portugal to obtain this visa. You must stay in Portugal for at least 7 days in the first year and 14 days in the subsequent years. The most important thing is that you make an investment with funds from outside of Portugal.
There are five types of investments you can make to qualify for a Portugal Golden Visa: a real estate acquisition, an investment fund, a capital transfer, job creation, or making a donation. Let’s look through the minimum investment value of each:
- Property investment: Purchase property in a low-density area of Portugal for at least €400,000 or purchase real estate that is over 30 years old in an urban rehabilitation area and renovate it for at least €350,000 or purchase property for €500,000. You can longer buy property in Lisbon, Porto, and coastal towns.
- Investment fund: Spend a minimum of €500,000 in a qualifying investment fund to support a Portuguese business.
- Capital transfer: Engage in a 1.5 million capital transfer, showing proof of bank transfer deposits to Portugal from a foreign bank account that adds up to this figure.
- Job creation: Create a minimum of ten new full-time jobs in a Portuguese business that you own or invest a minimum of €500,000 in an already existing Portuguese business and create a minimum of 5 new jobs in that business within three years.
- Donation: Invest a minimum of €250,000 in preserving national heritage in Portugal or invest a minimum of €500,000 in a research and development activity in Portugal.
Take a look at our full guide to the Portugal Golden Visa here.
Portugal D7 Visa
The Portugal D7 Visa is suitable for retirees, digital nomads, and remote workers with proof of a stable income. The D7 Visa was introduced in 2007 and allows non-EU/EEA/Swiss citizens to obtain permanent residency in Portugal after 5 years and citizenship after 6 years. This might sound similar to the Golden Visa, but unlike it, it does not require an investment. All you need is to prove that you have a solid passive income that can come from a retirement pension, a financial investment, real estate income, or salary.
The minimum income required is €8,460 per year for the main applicant. For a spouse, you must add 50% to this (€4,230) and for a dependent child, you must add 30% to this (€2,538). Therefore, for a couple with one child, you would need around €15,300 a year to be eligible for the D7 Visa.
You must also spend at least 16 months in Portugal during the first 2 years of the visa, as well as have a clean criminal record and show proof of residence address in Portugal (rental or purchase).
Take a look at our full guide to the Portugal D7 Visa here.
Portugal D2 Visa
The Portugal D2 Visa caters to entrepreneurs, freelancers, and independent service providers who wish to reside in Portugal. Non-EU/EEA/Swiss citizens who want to start a business in Portugal or relocate their existing business to the country can make use of this visa. Another option is choosing to invest in a Portuguese business. Like the Golden Visa and D7 Visa, the D2 visa allows for permanent resident status after 5 years and citizenship after 6 years.
To be eligible, you must prove that you have the financial resources to sustain your business. Although there is no number set in stone, the recommended minimum is at least €5,000. You will also have to show that you can financially sustain yourself
You will also have to present a business plan that demonstrates your business is economically viable and that will be reviewed for its social, economic, and cultural impact.
Keep in mind that the non-habitual resident tax regime applies to your personal income tax, personal capital gains, pension allowance, etc, but your company will still have to pay the normal corporate tax (21% in mainland Portugal) and social security fees (23.75% on top of each employee monthly wage).
Take a look at our full guide to the Portugal D2 Visa here.
UK Citizens: Portugal Non-Habitual Resident After Brexit
UK citizens can still become non-habitual residents and enjoy its attractive tax regime after Brexit. However, unlike EU/EEA/Swiss citizens, UK nationals must first apply for a residence visa such as the Golden Visa, D3 Visa, or D2 Visa. You must not have been registered as a tax resident in Portugal for the last 5 years. After obtaining legal residence, you can register as a tax resident with their tax identification number (NIF). Then you must apply for NHR status in the financial portal online by submitting the following: a declaration stating you have not been a tax resident in Portugal for the past 5 years, your tax returns for the last 5 years, and proof of rental or property purchase.