Structured correctly, under the scheme, it is possible to secure significant tax benefits for up to ten years.
However, at the beginning of October 2023, the Portuguese Prime Minister announced his intention to eliminate the NHR regime beginning in 2024.
In relation to this, the Government has submitted the State Budget Proposal for 2024, which includes changes that determine the end of the NHR regime. This is the initial version, which will still be subject to debates and votes, but which, given the majority that the Government party holds in the Assembly, cannot and should not be ignored.
Background of the Portugal NHR Regime
Non-Habitual Residence (NHR) status in Portugal refers to the process whereby individuals can establish their tax residency in the country, granting them significant tax advantages for a period of ten years. The NHR status offers substantial tax benefits and was first introduced by the Portuguese government in 2009 with the aim of enhancing the country’s global competitiveness by attracting individuals of high cultural and economic worth.
The scheme is open to new residents in Portugal who have not been tax residents in the previous five years. Plus, to maintain a resident status in Portugal, they will need to have an abode in Portugal on 31 December of that year, with the supposition that they intend to keep and occupy it as the habitual home. It’s important to note that NHR holders are not bound by specific minimum or maximum residency requirements.
Benefits of the Program
The primary goal of Portugal’s NHR program is to attract investors and professionals who can make valuable contributions to the nation’s economy and cultural landscape. This special tax status for new residents in Portugal can result in exemptions from taxes on global income and a flat 20 percent tax rate on income earned within Portugal.
Some of the benefits from the NHR regime in Portugal are shown below.
Tax residency in white-listed EU country
Special tax treatment for ten years
No wealth tax
Free remittance of funds to Portugal
Exemption on all foreign income
20 percent flat rate on some Portuguese income
Tax exemption on gifts for family members
No minimum stay requirement
NHR ELIGIBILITY TEST
What does the future hold for the NHR regime?
The Portuguese Government submitted the State Budget Proposal for 2024, which includes changes that determine the end of the non-habitual resident regime.
This is the initial version, which will undergo rounds of debates and discussions. However, given the majority that the Government party holds in the Assembly, the potential ending of the NHR regime cannot and should not be ignored. The final vote on the budget law will take place on 29 November 2023. We can only be certain about the future of the NHR after the state budget law discussions have taken place.
Statement from the Portuguese Prime Minister
The State Budget Proposal was unveiled shortly after the informal statement by Prime Minister Antonio Costa on the potential ending of the NHR program. The Socialist government has a majority in Parliament, and if past instances are anything to go by, an informal announcement followed by a change in legislation has been a common way in the way Costa has acted in the past.
In an interview with CNN Portugal, Costa stated that the NHR program “no longer made sense” and will “end in 2024”, further adding that the program “is a biased way of inflating the housing market, which has reached unsustainable prices.” Costa did, however, state that 59 percent of those who benefited from the NHR regime have chosen to remain living in Portugal.
The termination of the NHR program is regarded as a concession to the Portuguese Communist Party and the Left Bloc. As mentioned, to gauge the potential impact of this change, it will be formally discussed and included in the upcoming state budget law, scheduled for a vote and approval on 29 November. Therefore, we can only be certain about the future of the NHR after this date.
What does this mean for you?
- Anyone who already has the NHR at the time of entry into force maintains the regime under the same terms until completing ten years of benefiting from the status.
- Anyone who meets the conditions for registration as non-habitual residents in Portugal on 31 December 2023, as well as holders of a residence visa valid on that date, will be able to register within the deadline available (until 31 March 2024) and benefit from the scheme.
- Those who intend to relocate to Portugal from 2024 onwards can continue planning, but they should be aware that the final decision regarding the continuity of the NHR will only be made at the end of November.
It’s important to note that the NHR process is known for its simplicity and speed. If clients meet the necessary conditions, it can be relatively straightforward to establish tax residency through the NHR, making it an attractive option if it remains available.
Is the Portugal Non-Habitual Resident ending?
Portugal’s NHR program has been a major advantage for expats looking to unlock significant tax benefits in the country. However, there is a real possibility that the regime will come to an end in 2024.
The Portuguese Government has presented the State Budget Proposal for 2024, and it features modifications that signify the end of the non-habitual resident regime. While this is the preliminary version, and it will undergo further discussions and voting, considering the government’s dominant position in the Assembly, it’s a development that demands attention. The ultimate vote on the budget legislation is scheduled for 29 November 2023.
Individuals looking to take advantage of the program should remain informed and prepared for any shifts in the coming months. By the end of November, we should have a clearer picture concerning the future of the NHR program.
Why Work with Us on Your Residence Visa Application
Operating from the heart of Portugal with a diverse international team in Lisbon, Porto, and the Algarve, we offer unparalleled assistance in your journey to secure a Portugal residence permit.
Our dedicated team, comprised of knowledgeable case executives, experienced immigration lawyers, and proficient investment specialists, brings over five decades of combined experience to every case. Our success rate in applications is a testament to our skill and diligence, offering reassurance to applicants on their residency journey.
We take pride in our global reach, having facilitated residency for clients from over 35 different countries. Our proactive onboarding team will conduct a thorough analysis of your situation and will identify the best strategies for setting up your bank account or obtaining your NIF issuance even before your arrival in Portugal.
Contact us today to set up a free consultation with one of our immigration experts to start your residence visa journey.
Frequently Asked Questions about the Non-Habitual Residence Program
Is the Portugal NHR program going to end?
The Portuguese Government has submitted the State Budget Proposal for 2024, which includes changes that determine the end of the NHR regime. This is the initial version, which will still be subject to debates and votes, but which, given the majority that the Government party holds in the Assembly, cannot and should not be ignored. The Socialist government, with its parliamentary majority, has historically demonstrated a pattern where informal announcements from Costa have often led to subsequent changes in legislation.
There is the possibility that the NHR might undergo potential modifications, especially concerning tax breaks for pension incomes.
When will the Portugal NHR end?
There has been no change in legislation. To gauge the potential impact of this change, it will be formally discussed in the upcoming state budget law, scheduled for a vote and approval on November 29th. We can only be certain about the future of the NHR after the state budget law discussions have taken place.
What if I already have Portugal NHR status?
Anyone who already has the NHR at the time of entry into force maintains the regime under the same terms until completing ten years of benefiting from the status.
If I am already in Portugal, can I apply for the NHR program?
Those who are already residing in Portugal, including people who only hold a visa, can still establish tax residency and potentially benefit from the NHR until its potential elimination. If you are a legal resident in Portugal without NHR status, we recommend that you apply soon, given the uncertainty regarding the future of the program.
What is the Non Habitual Resident NHR scheme?
Non-Habitual Residence (NHR) status in Portugal refers to the process whereby individuals can establish themselves as tax residents in the country, granting them significant tax advantages for a period of ten years. The NHR status offers substantial tax benefits and was first introduced by the Portuguese government in 2009 with the aim of enhancing the country’s global competitiveness by attracting individuals of high cultural and economic worth.
The scheme is open to new residents in Portugal who have not been tax residents in the previous five years.
What are the benefits of the NHR program?
Some of the benefits from the NHR regime in Portugal include tax-free transactions and low taxes on pension income or wealth. This program is a key reason why expats move to Portugal.
