Is the "Non-Habitual Resident" regime returning to Portugal?
Recently, the Portuguese government announced plans to revitalize the Non-Habitual Resident (NHR) tax regime. This program, which offered attractive tax benefits to foreigners and Portuguese citizens who had accumulated wealth abroad, was set to expire in 2023 after former President António Costa decided to end it.
The measure taken by the previous president This meant that applications for the benefit could no longer be submitted after January 1, 2024, although it continued to apply to those who had applied before that date. Let's examine this issue and what the new developments are.
What is the NHR Regime?
For those unfamiliar, this system allows you to benefit from a fixed income tax rate of 20% on income earned in the country, over a period of ten years. In addition, some types of income generated abroad could be exempt from tax: dividends, rental income, interest income, capital gains from the sale of assets located abroad, income from employment or self-employment in another country, and also foreign pensions, although these are now subject to a flat rate of 10% (since 2020).
Changes in the Regime
The main novelty in this revival of the NHR is that its strategy will focus on to encourage the arrival of professionals and entrepreneursThe Portuguese government has decided that foreign pensioners will no longer be able to access the same tax breaks as before. These benefits will now be available to foreign nationals, rather than the previous focus on pensioners.
Benefits for Professionals and Entrepreneurs
Highly skilled professionals (HQAs) and entrepreneurs will continue to benefit from the flat 20% tax rate on their income (compared to the general maximum rate of 48%). This includes those in sectors such as technology, science, arts, and specialized technical activities. Furthermore, passive income, such as dividends, interest, and royalties generated outside of Portugal, will continue to benefit from tax exemptions provided they meet the criteria established in the tax regime. In the case of Portuguese citizens who have accumulated assets abroad, they must also have been tax residents outside of Portugal for the past five years.
Impact and Expectations
Restructuring the NHR system has the potential to attract a steady flow of talent and foreign investment, maintaining Portugal's position as one of the most attractive destinations for expatriates in Europe. Excluding pensioners could moderate the housing market and reduce strain on public services, thus balancing the system's economic and social benefits. Critics argued that, in its original form, the system contributed to the aging population by attracting retirees from other countries while pushing young people abroad due to high housing costs.
How can I benefit from this “new” NHR?
To access this regime, you must be a tax resident in Portugal. In this regard, the NHR is compatible with both the Golden Visa and other visas, such as the Highly Qualified Activities (HQA) visa, the Digital Nomad visa, or the Entrepreneur visa.
If you want to know which of these options best suits your investor profile, Schedule a meeting with our teamWe have the experience and knowledge necessary to offer you the best advice.
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