Portugalโs Non-Habitual Resident (NHR) program was a popular choice for foreign nationals who wanted to reduce their tax responsibilities in Portugal. Launched in 2009, the tax regime offered significant benefits, including reduced tax rates and exemptions for eligible residents.
Over the years, thousands have taken advantage of the NHR program, enjoying a flat tax rate of 20 percent on certain income and exemptions on global income.
However, the original NHR scheme ended in 2023 and has been replaced by the new Tax Incentive for Scientific Research and Innovation (IFICI), also known as the NHR 2.0 tax regime.
NHR Portugal Tax Regime: Key Takeaways
What is the NHR Portugal tax regime?
Portugalโs Non-Habitual Resident (NHR) regime provided reduced tax rates and exemptions on foreign income for new residents for up to ten years. It was designed to attract entrepreneurs, remote workers, and retirees looking for a stable European base with a competitive tax environment and a high quality of life.
Introduced by the Portuguese government in 2009, NHR status allowed qualifying individuals to enjoy significant benefits, such as special personal income tax treatment over a period of ten years.
Current NHR holders are not subject to specific minimum or maximum residency requirements.
Is the NHR Portugal tax regime still available?
No, the NHR Portugal tax regime is no longer available as the transitional phase after the regimeโs official discontinuation has ended. It was still possible to apply for NHR before the 31 March 2025 cut-off, but only if you met specific requirements.
To qualify for NHR status, applicants were required to meet at least one of the following conditions: Residing in Portugal for at least 183 days per year, purchasing residential property in Portugal, serving as a crew member on a Portuguese-registered vessel or aircraft as of 31 December of the relevant tax year.
You had to meet at least one of the following to qualify:
- Lease agreement or other contract for the use/possession of property signed by October 10, 2023
- Contract to buy property in Portugal signed by October 10, 2023
- Children enrolled or registered in a school in Portugal by October 10, 2023
- Employment contract signed by December 31, 2023
- Temporary or permanent residence permit or visa valid from or before December 31, 2023
- Application for a residence permit or visa initiated by December 31, 2023
However, if you meet the Portuguese governmentโs new requirements, you can apply for theย new NHRย scheme, called theย Tax Incentive for Scientific Research and Innovationย (IFICI).
Those who qualify for this scheme will benefit from a flat tax rate of 20 percent on eligible professional income from Portugal and an exemption on professional foreign-sourced income, including remote workers, passive income, such as dividends, interest, capital gains tax, and real estate rent outside Portugal.
Unlike under the previous NHR program, pensions are not tax-exempt or qualify for tax relief.
Benefits of Portugal NHR
Some of the significant advantages of applying for NHR status included:
- Special personal income tax treatment over ten years
- Exemption on almost all foreign-source income
- 20 percent flat rate for certain Portuguese source incomes
- Become part of a white-listed tax environment
- Tax exemption for gifts or inheritance to direct family members
- No wealth tax
- Tax exemption on passive income from outside Portugal
- Free remittance of funds to Portugal
Portugal NHR and double taxation agreements
A key benefit of Portugalโs NHR tax regime lay in Double-Taxation Agreements (DTAs).
A DTA allowed for most categories of income to be taxed in the country from which the source of income is derived. Most countries, however, choose not to apply income tax to any income earned by non-residents as they want to be seen as jurisdictions open to foreign investment.
In turn, under the NHR tax regime, Portugal would not tax most foreign-sourced income earned by NHR individuals. This allowed NHR residents to receive foreign income tax-free.
Portugalย has signedย Double-Taxation Agreements with 81 countries, and the OECD model tax convention may be used withoutย a DTA.
Who can apply for the NHR Portugal tax regime?
Since the NHR scheme is closed to new applicants, you could have qualified if you met the transitional rules and submitted your application before 31 March 2024.
- Registered tax residency in Portugal by 31 December 2023, but did not apply for NHR yet.
- Signed a work or business contract before 31 December 2023 but moved to Portugal in 2024.
- Concluded a property purchase agreement before 31 December 2023.
- Conducted public functions or commissions for the Portuguese government abroad in the past 12 months.
- A crew member of a ship or aircraft registered in Portugal on 31 December 2023.
To apply for IFICI, you must fulfill the following conditions:
- Become taxable residents in Portugal
- Have not been taxable residents in the previous five years
- Earn income in certain professional categories, such as:
- Teachers and scientists
- People with qualified jobs according to the tax code and members of corporate bodies within the scope of contractual benefits for productive investment
- Highly qualified professionals, who will be anyone performing one or more of the above activities and carrying them out in a qualifying entity
- People working for companies recognized by relevant government agencies โ AICEP, EPE, IAPMEI, IP โ or relevant to the national economy, working with investment etc.
- Research and development personnel who meet the definitions of the tax code
- People working for startups, certified by law as such
- People working in Madeira and the Azores who meet the terms set by these regions
Tax Under the Non-Habitual Resident Regime in Portugal
Which professions were considered highly valuable under the NHR tax regime?
Professions of high cultural and economic worth were given generous tax exemptions and tax benefits under the NHR regime.
The following professions were considered to have high added value:
- General director and executive manager of companies
- Directors of administrative and commercial services
- Directors of production and specialized services
- Directors of hotels, restaurants, commerce and other services
- Specialists in physical, mathematical sciences, engineering and related techniques
- Professor of university and higher education
- Specialists in information and communication technologies (ICT)
- Authors, journalists and linguists
- Creative and performing arts artists
- Technicians and professions in science and engineering, at intermediate level
- Information and communication technology technicians
- Market-oriented farmers and skilled workers in agriculture and animal production
- Skilled forestry, fishing and hunting workers, market-oriented
- Skilled workers in industry, construction and craftsmen, including in particular skilled workers in metallurgy, metalworking, food processing, wood, clothing, handicrafts, printing, the manufacture of precision instruments, jewelers, craftsmen, workers in electricity and electronics.
- Installation and machine operators and assembly workers, namely operators of fixed installations and machines
- Workers involved in the professional activities referred to above must have at least qualification level 4 of the European Qualifications Framework or level 35 of the International Standard Classification of Education or have five years of duly proven professional experience.
- And other professional activities, including administrators and managers of companies promoting productive investment, as long as they are allocated to eligible projects and with contracts granting tax benefits
Tax treatment of foreign-sourced income under NHR
Beneficiaries of the NHR regime in Portugal with foreign income were largely exempt from Portuguese taxation under DTAs. If income was sourced in a country with a double taxation treaty with Portugal, the income will not be taxed in Portugal.
Employment income
- Foreign source income is taxed at a flat rate of 20 percent if it falls under the list of eligible professions.
Self-employment:
- Foreign source income is taxed at a flat rate of 20 percent if it falls under the list of eligible professions.
- This income is also subject to social security contributions (after one year of social security contribution exemptions) unless the individual in question already pays social security contributions into another system.
- Royalties, dividends and interests
- Typically exempt between countries that have DTAs between them
- In the absence of DTA, the OECD model convention must still be used
- If they are not exempt, they will be taxed at 28% in Portugal
- Otherwise taxed at 35 percent if the origin country is a blacklisted tax haven
Real estate income and capital gainsย
Real estateย income is typically taxed at source, meaning it should be taxed in the country where it is earned.
Capital gainsย from the disposal of securities (shares, bonds, etc.) will be subject to aย rate of 28 percent.
Pension income:ย Taxed at a flat rate of 10 percent (since March 2020). Typically, pension income is subject to withholding tax in the country of origin. After paying tax in Portugal, it is necessary to recover the tax withheld in the country of origin. You would typically need to apply for a tax refund or credit in the country where the pension income was originally taxed.
Tax treatment of Portugal-sourced income under the NHR regime
Employment and self-employment income
- Usual progressive tax rates apply if employment does not fall under the list of eligible professions.
- If employment falls under eligible NHR professions or the income comes from a high-value-added activity, a flat tax rate of 20 percent applies.
Real estate income and capital gainsย
- Rental income is taxed at an optional rate of 28 percent or otherwise at standard progressive rates.
- Net capital gains are taxed at 50 percent at standard progressive rates.
Pension income
- Under the NHR, pensions are taxed at the usual rates (10 percent)
| Portuguese income tax bands | Portuguese tax rate |
|---|---|
| up to โฌ7,703 | 13.25% |
| โฌ7,703โโฌ11,623 | 18% |
| โฌ11,624-โฌ16,472 | 23% |
| โฌ16,473-โฌ21,321 | 26% |
| โฌ21,322-โฌ27,146 | 32.75% |
| โฌ27,147-โฌ39,791 | 37% |
| โฌ39,792-โฌ51,997 | 43.5% |
| โฌ51,998-โฌ81,199 | 45% |
| โฌ81,200+ | 48% |
How to Apply for IFICI
You can no longer apply for NHR, but if you want to benefit from Portugalโs IFICI scheme, the application process is similar.
Step 1: Become a Portuguese tax resident by spending more than 183 days in Portugal within a 12-month period, or maintain a habitual residence in Portugal that shows intent to stay long-term.
Step 2: Register with the Portuguese Tax Authorities (AT).
Step 3: Obtain a tax identification number in Portugal (NIF).
Step 4: Update your tax address to your Portuguese residence
Step 5: Once youโre a resident, registered, and have an NIF, submit a formal request through the Portal das Finanรงas (Portugalโs tax portal).
Required documents
- Provide documentation of eligibility
- Proof that you have not been a tax resident in Portugal for the previous five years.
- Documentation proving academic qualifications or at least 3 years of professional experience
- Proof of employment or self-employment in a qualifying activity (e.g, employment contract, startup registration, academic appointment).
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