The Non-Habitual Resident regime

What is the NHR?

 

The Non-Habitual Resident Regime (NHR) is a Portuguese tax regime that came into force in 2009 and aimed to attract highly qualified professionals, pensioners and investors to Portugal by granting tax benefits within Personal Income Tax (PIT).

 

The end of the regime was announced at the end of 2023 and access to the NHR by new taxpayers is now limited to those who have become tax residents of Portugal until the end of 2024, who must submit their application for registration by 31st March 2025. However, since the regime’s individual benefit period is 10 years, this means that we will have the regime present and being implemented in practice until 2033.

 

Who is eligible for the NHR?

 

All natural persons who:

  • Have become tax resident of Portugal by 31/12/2023; and 
  • They have not been tax resident of Portugal for at least 5 years prior to becoming resident.

 

Exceptionally, those who have become tax residents by the end of 2024 may still apply for NHR status provided they can demonstrate that, in 2023, they were already in the process of relocating to Portugal, which is considered to have happened if they:

  • Have a promise or contract of employment, promise or secondment agreement signed by 31 December 2023, the performance of which must take place in Portuguese territory;
  • Have a lease or other contract granting the use or possession of property in Portuguese territory signed by 10 October 2023;
  • Have a reservation contract or promissory contract for the acquisition of a right in rem over real estate in Portuguese territory signed by 10 October 2023;
  • Have completed enrolment or registration for their children in an educational establishment domiciled in Portuguese territory by 10 October 2023;
  • Have a residence visa or residence permit valid until 31 December 2023;
  • Have initiated by 31 December 2023, a procedure for granting a residence visa or residence permit, with the competent authorities, namely by requesting an appointment or actually making an appointment to submit an application for the granting of a residence visa or residence permit, or by submitting an application for the granting of a residence visa or residence permit; or
  • They are a member of the household of a taxpayer who fulfils one of the conditions listed above.

 

How do I register for the NHR and what is the deadline?

 

Taxpayers who became tax residents in 2024 must apply for NHR status before the Tax and Customs Authority by 31st March 2025.

 

I became a tax resident in Portugal before 2024 but I did not apply for NHR status. Can I benefit from the regime?

 

Yes. According to arbitration case law and that of the administrative and tax courts, registration under the NHR regime has a merely declaratory effect and does not constitute the right to be taxed under the regime, so even if a taxpayer who met the conditions for access to the regime (becoming resident and not having been so for the previous 5 years) has not applied for registration by 31st March of the year following the one in which they became resident, they can go resort to the courts to have the respective tax regime applied to them.

 

What benefits does the NHR offer?

 

Type of income

Benefit

Employment or self-employment income (PIT categories A and B)

20% flat rate (instead of the progressive PIT rates of up to 53%)

Foreign sourced pensions and alimony (category H)

10% flat rate (instead of the progressive PIT rates of up to 53%)

Foreign source income other than pensions (income from labour, capital, property and capital gains)

0%, if they can be taxed at source in accordance with the applicable double taxation treaty (or if there is no treaty, if they can be taxed at source in accordance with the OECD Model Convention and do not come from a tax haven)

 

The table above provides a general summary of the NHR taxation regime, but there are some nuances that should be clarified in the specific case at hand (for example, in the case of foreign-source employment income, regardless of whether it comes from a high value-added activity, it may be exempt from taxation as long as it is actually taxed at source).

 

What are high value-added activities for the purposes of the NHR?

 

  • CEOs and executive manager of companies
  • Directors of administrative and commercial services
  • Directors of production and specialised services
  • Managers of hotels, restaurants, shops and other services
  • Specialists in the physical sciences, mathematics, engineering and related techniques
  • Medical coctors
  • Dentists and stomatologists
  • University and college professor/lecturer
  • Information and communication technology (ICT) specialists
  • Authors, journalists and linguists
  • Creative and performing arts artists
  • Science and engineering technicians and professions, intermediate level
  • Information and communication technology technicians
  • Market-orientated farmers and skilled agricultural and animal production workers
  • Market-orientated skilled forestry, fishing and hunting workers
  • Skilled workers in industry, construction and crafts, including skilled workers in metallurgy, metalworking, food processing, woodworking, clothing, handicrafts, printing, precision instrument making, jewellers, artisans, electrical and electronic workers
  • Plant and machine operators and assembly workers, including fixed plant and machine operators
  • Directors and managers of companies promoting productive investment, provided they are involved in eligible projects and have contracts granting tax benefits under the Investment Tax Code

 

How long do the benefits last?

 

The benefits of the regime apply for 10 consecutive years.

 

To continue benefiting from the regime, the taxpayers must continue to be considered tax residents in Portugal each year.

 

If they cease to be considered a tax resident in Portugal in a given year, the 10-year period does not stop counting, but the taxpayers can resume benefiting from the regime when they return (for the remaining years within the 10-year period).


How is the regime implemented?

 

The practical implementation of the regime is done annually by filling in and submitting the personal income tax return (to be submitted between April and June of the year following the one to which the income relates to).

 

The option to apply the special NHR regime versus the general PIT regime must be weighed up against the income actually earned by the taxpayers and their overall situation, and in some cases the option to be taxed under the general regime may be more advantageous.

 

Opting to apply the general regime for certain income in a given year does not imply the loss of the NHR status, and the option for the special NHR regime can be resumed in the tax return for the following year (always within the 10-year period).

 

Final notes

 

Even though the access to the NHR regime by taxpayers who become tax residents only from 1 January 2025 onwards is no longer possible, the regime is still in force for those who have obtained the NHR status until 2024 (or for those who, even if they have not registered, meet the conditions to benefit from the regime).

 

Considering the individual benefit period of the regime is 10 years, the last personal income tax returns in which the regime will be implemented will be filed, with reference to the 2033 tax year, between April and June 2034.

 

At Belim, we are available to help you confirm the requirements for applying the regime, including the criteria for tax residency in Portugal and those relating to the high value-added activities, as well as the procedure for submitting annual personal income tax returns, helping you to make the most of this tax regime.

 

Contact us for more information.



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