Is the Portugal NHR Ending? Here’s All You Need To Know

Portugal’s Non-Habitual Resident (NHR) regime has been a major attraction for tax residents and investors. Since its launch in 2009, the regime has been providing several benefits for foreigners, such as tax-free transactions and low taxes on pension income or wealth. Structured correctly, under the NHR tax status, 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, and the scheme ended for new applicants in January 2024, although individuals who meet certain criteria will still be able to apply.

This article will cover everything you need to know about the NHR ending in Portugal, including the most recent updates on the scheme and crucial information for those who have already applied.

What is the Portugal NHR Tax 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 advantages for tax residents 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 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 foreign-sourced income and a flat 20 percent tax rate on income earned within Portugal.

Some of the benefits of the NHR scheme in Portugal are shown below.

Is the Portugal Non-Habitual Resident ending?

Yes, the NHR came to an end in January 2024. The Portuguese government’s State Budget Proposal for 2024 included modifications that determine the end of the non-habitual resident regime.

The ultimate vote on the budget legislation happened on 29 November 2023, introducing the transitional regime before the end of the NHR tax regime in 2025.

Anyone who registered as a tax resident in the country in 2023 and had not been taxed in Portugal in the previous five years can still apply by March 31, 2024.

It’s also possible for some individuals to apply up until March 31, 2025, but the eligibility requirements for this deadline are more stringent. To qualify, it’s necessary to meet at least one of the following criteria:

• Having an employment contract signed/to be signed by December 31, 2023
• Having a lease agreement or other contract for the use/possession of property signed by October 10, 2023
• Having a contract to buy property in Portugal signed by October 10, 2023
• Having children enrolled or registered in a school in Portugal by October 10, 2023
• Having a residence visa or a residence permit valid from December 31, 2023
• Having an application for a residence visa or residence permit initiated by December 31, 2023
• Being a member of the household of anyone who meets the above criteria

Anyone who qualifies under these conditions will have NHR status from the date that they become a tax resident — whether that’s in 2024 or in the first quarter of 2025 — until December 31, 2033.

What does this mean for you?

On 29 November 2023, the Portuguese Parliament approved the State Budget for 2024 and, within the same act, implemented the transitional regime to end the Non-Habitual Resident Regime (NHR).

The transitional regime is a set of situations that allows individuals to still apply for the NHR. For this to happen, at least one of these situations must occur within the specified deadlines in 2023. Meeting the other regime requirements in 2024 would then allow for the possibility of registering with the NHR up until 31st March, 2025.

In effect, the proposed change has the following consequences from 01/01/2024:

1. 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.

2. 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 in 2024 and benefit from the NHR tax scheme.

The conditions for foreign residents to be eligible for the NHR in 2024 are the following:

• Have a promissory contract or employment contract, signed/to be signed by December 31, 2023, whose duties must take place within the national territory;
• Have a lease agreement or other contract granting the use or possession of property in Portuguese territory signed by October 10, 2023;
• Have a reservation contract or promissory contract for the acquisition of property in Portuguese territory signed by October 10, 2023;
• Have enrollment or registration for dependents at an educational establishment domiciled in Portuguese territory completed by October 10, 2023;
• Have a residence visa or residence permit valid until December 31, 2023;
• Have a procedure initiated by December 31, 2023, for granting a residence visa or residence permit;
• Being a member of the household of someone who meets any of the criteria in this list

3. To apply up until March 31, 2025, you will need to meet at least one of the following criteria:

• Having an employment contract signed/to be signed by December 31, 2023
• Having a lease agreement or other contract for the use/possession of property signed by October 10, 2023
• Having a contract to buy property in Portugal signed by October 10, 2023
• Having children enrolled or registered in a school in Portugal by October 10, 2023
• Having a residence visa or a residence permit valid from December 31, 2023
• Having an application for a residence visa or residence permit initiated by December 31, 2023
• Being a member of the household of anyone who meets the above criteria

Anyone who qualifies under these conditions will have NHR status from the date that they become a tax resident — whether that’s in 2024 or in the first quarter of 2025 — until December 31, 2033.

4. Those who fail to meet either list of requirements will no longer be eligible for the NHR benefits.

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 while it remains available.

If you are unable to apply for NHR status please note that Portugal’s tax landscape has several attractive benefits and opportunities. To learn more, please refer to our article: Guide To The Tax System In Portugal

Foreigners Living in Portugal With NHR Tax Status

Foreigner residents in Portugal who hold the NHR tax status will experience no immediate consequences. As long as their NHR approval was verified by December 31, 2023, they will retain the advantages of reduced tax responsibilities for the entire ten-year period.

Portugal NHR Replacement

The State Budget proposal has introduced a new program known as the Incentivised Tax Status Program (ITS) or the Tax Incentive for Scientific Research and Innovation, which is replacing the existing NHR tax regime.

Those who qualify will benefit from a flat tax rate of 20 percent on eligible professional income arising from Portugal and possibly an exemption on professional foreign-sourced income. They will also have an exemption on the majority of foreign-sourced income, such as dividends, interest, capital gains, and rents. However, unlike under the existing NHR program, this excludes pensions. These benefits will last for a 10-year period.

To qualify, individuals must fulfill the following conditions: 

• They become tax residents in Portugal 
• They have not been tax residents in the previous five years 
• They earn income in certain professional categories 

Individuals in the following categories will be eligible for the Tax Incentive for Scientific Research and Innovation program: 

• 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, such as:  
  • Activities carried out within the scope of the extractive industry and manufacturing industries  
  • Tourism, including activities of interest to tourism 
  • IT and related activities and services 
  • Agricultural, aquaculture, fish farming, farming and forestry activities 
  • Research and development and high technological intensity activities 
  • Information technologies and audiovisual and multimedia production 
  • Defense, environment, energy and telecommunication 
  • Activities of shared service centers 
• Highly qualified professionals, which 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 — AICEP, EPE, IAPMEI, IP — 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 Azores who meet the terms set by these regions 

Beneficiaries of the NHR program or the Regressar Program will not be able to apply. 

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 Portugal NHR Ending