Life After NHR: Latest 2024 Update

Written By Sam Daynes (Holborn Asset Management)

Well, there is no doubt that 2023 was a rocky year in Portugal’s rich political history. The year saw changes to the very popular Golden Visa program, the withdrawal of the fantastically popular NHR (non-habitual residency scheme), and the eventual resignation of Prime Minister Antonio Costa.

As we now settle into a new year and a fresh start, it is time to start thinking about life after NHR. For people who are already registered on the scheme, the benefits will continue. For those who made it into the grandfathering period, the same luxury will apply.

The government-approved budget for 2024 saw no significant changes to the tax regime. Income tax bands increased with inflation and the tax bands for the first five income bands were reduced, to help lower to middle-income earners.

That aside, a new regime will be introduced to replace NHR but will be focusing mainly on employment with no benefit to those retiring in Portugal. Those who qualify will benefit from a flat 20% rate on employment and self-employment income.

NHR was introduced back in 2009 to enable qualifying professionals to enjoy beneficial tax planning for a period of 10 years. Portugal will now be divided by those who are on NHR and those who are not. One thing as sure as death and taxes is that the number of people on NHR will reduce year on year until around the year 2035 when there will be no beneficiaries left.

Want to become part of the large community of US expats in Portugal? Sign up for Holborn Assets’ live webinar on the challenges facing US connected clients moving or living in Portugal. Find out all about the financial perks of moving to Portugal and have all your burning questions answered. The event is scheduled for May 16 at 5 pm (Lisbon Time) / 12 pm EST. If you would like to schedule a one-on-one call instead, you can book one here.

Register Your Spot

There are more than 11,000 NHRs in Portugal but whether you are lucky enough to be one of them, or missed the boat in applying, there will be a point where NHR will end for everyone. For those who are finishing their 10-year period, the decision will then be made as to whether to stay or go.

Portugal still offers many hidden gems, not just in its beautiful scenery but also in its financial structure. There are investment wrappers designed to dovetail with NHR (or standalone) that can provide an increasing tax benefit the longer they are held. This investment can reduce tax liabilities by up to 60%, providing a significant reduction in tax on investment or pension income.

People who are benefiting from NHR need to be looking at these long-term strategies. By putting plans in place now, you can reduce the tax you will need to pay after NHR ends. Significantly reducing the impact and making the transition far smoother.

For those who do not qualify for NHR, it is important to structure your finances in a way that protects you long-term. There are many benefits to be had in Portugal, it’s just essential that you identify these early to reap the rewards.

Portugal will always be a popular destination for people seeking a life in the sunshine. There are few other countries that can offer the same climate, scenery, and relaxed pace of life. The changes over the last year should not detract from this, but instead should just act as a further incentive to do your planning and make sure that you position yourself in the best possible way to live the life you always dreamed of.

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