Non Habitual Residence (NHR)
Introduced to Portugal in 2009, the Non-Habitual Resident regime is a fiscal system created to attract foreigners to Portugal.
It offers attractive tax advantages in the form of reduced or zero tax on certain types of income for new residents to Portugal and most notably, tax efficient pension income for a consecutive period of 10 years.
Those that may benefit from the NHR Regime are:
- Retirees who receive their pensions from overseas.
- Individuals and investors who can structure their affairs to sync with the regime.
Professionals (both self-employed and employed) who qualify for ‘high valued activity’
Main NHR Advantages
- Tax exemption on certain foreign source income such as investment, rental and business or employment income (if certain conditions are met).
- 10% tax rate on pensions from overseas.
- Reduced income tax rate of 20% (normal income tax rates are up to 48%) on Portuguese sourced employment and self-employment income based on specific professions and activities.
- Capital gains tax benefits in certain situations such as on the disposal of UK residential property
In addition to the benefits associated specifically with the NHR scheme above, Portugal continues to be a tax efficient jurisdiction to live because, even without NHR status, it enjoys:
- Tax exemption on inheritances or gifts to direct family members
- No wealth tax
- No tax on wealth remitted to Portugal
The two main qualifying conditions are:
- You have not been tax resident in Portugal in any of the previous 5 years
- You are resident in Portugal with a permanent residence, either rented or owned.
Individuals wishing to apply for NHR status in Portugal must complete their application by the 31st March following the year of registration as resident. If the request is put in after this date the application may be denied, and so we always recommend to be well prepared.
Once the NHR status has been granted it is valid for a period of 10 consecutive years. It is worth noting that if an individual ceases to be resident by leaving Portugal and then subsequently returns to Portugal, the NHR 10 year period will resume (there is no need to reapply) and will continue to run its course as if they never left the country.
If you would like to receive guidance on how to benefit from the Non-Habitual Residence Regime, get in touch with us and we would be happy to arrange for a tax professional to discuss your options with you.