Non-Habitual Tax Residency (NHR) Statue
If you already own a passport from the European
Union or already have the right to reside in Portugal, there is still a possibility to profit from Portugal’s attractive tax system that allows you to become a
Non-Habitual Tax Resident.
This is how the NHR works:
Foreign-source self-employment or sole trader income derived from an eligible occupation, royalties, capital gains, and investment or rental income will be exempt from Portuguese tax as long as they may be taxed in the source country either under a double taxation agreement or under the OECD model tax convention. In addition, such income must not be deemed Portugal-sourced under applicable Portuguese law, and must not be sourced from a blacklisted tax haven.
Foreign-source employment income will be exempt from Portuguese tax as long as it is liable to tax (at whatever rate) in the source country either under a double taxation treaty or under the OECD model tax convention, and is not deemed Portugal-sourced under applicable Portuguese law.
Pension income will be liable to a 10% flat tax as long as it is liable to tax in the source country under a double taxation treaty or it is deemed as not being Portuguese-source income under applicable Portuguese law.
If your occupation is eligible, Portugal-source employment or self-employment / sole trader income will be taxed at a flat rate of 20%, while other Portugal-sourced types of income will be taxed at the normal rates applicable to resident taxpayers, the calculation of the applicable marginal tax rate taking into account all income, including exempt income.
In Portugal, there is no wealth tax or capital duty, and inheritance or a gift received by a spouse, descendant or ascendant is tax-exempt. Inheritance or gifts received by other individuals will be either not taxable under territoriality rules, or else may be subject to a flat 10% stamp duty.
Double Tax Treaties
One interesting feature of this regime is that many double taxation treaties (of which Portugal signed 79) grant the source country the possibility of taxing income paid to residents of the other country, although in practice many countries abstain from using this possibility so as to attract foreign investment.
This means that in practice many types of income will often be zero-taxed in the hands of the “non-habitual resident”, since Portugal will not tax them merely on account that they may be taxed in the other country.
Requirements to become a NHR
In order to qualify as a “non-habitual resident”, a Portuguese national or a foreign individual having the right to live in Portugal must register as a tax resident of Portugal after not having been resident in this country during at least the previous 5 years. It should be noted that under the law an unregistered individual will be deemed a resident for tax purposes if he/she either spends more than 183 days in the country during a 12-month period or has a place of abode in the country, "in a way that may lead to the supposition of an intention to keep and occupy it as a habitual home". However, there is no minimum stay requirement for a Portugal-registered tax resident.
EU, EEA and Swiss citizens have an automatic right to live in Portugal, and individuals of other nationalities must obtain a residence permit.
Recognition of non-habitual resident status is not automatic and is granted for a period of 10 years upon successful application to the Portuguese tax authorities up until March 31st of the year following that in which Portuguese residence was taken up.
In order to apply, all that is required is the filing of a request and of a statement to the effect that the applicant was not resident for tax purposes in Portugal during the 5 years preceding the arrival in Portugal. Only in the event, the tax authorities have doubts concerning the truth of what is stated will they request additional documentation, which may include a tax residence certificate from the previous country and/or a document proving that the vital and economic interests of the applicant were centered in another country during the previous 5 years.