What are the tax benefits of an NHR?

Movingto Editorial Team
December 23, 2022

If you're considering moving to Portugal or have recently made the leap, understanding the country's Non-Habitual Resident (NHR) status and its tax benefits is essential. As an expat in Portugal, this could be a game-changer for your tax situation.

The NHR Scheme: A Brief Overview

Portugal introduced the Non-Habitual Resident (NHR) status to attract foreign professionals of high cultural and economic worth. It offers significant tax advantages for a period of ten years from the year you become a tax resident in Portugal. But what exactly does it mean, and what are these benefits?

The Tax Benefits: Understanding Your Potential Savings

The NHR scheme offers attractive tax advantages. For certain types of income earned outside of Portugal, you might be exempt from local taxation.

The tax benefits of being an NHR (Non-Habitual Resident) in Portugal include:

0% tax on foreign income

This mostly applies to interest earned and dividends. Capital gains tax and rental income are not included.

0% tax on crypto

This is only the case if it's not your main source of income and you are not deemed a trader.

0% tax on dividends

You need to consider that the company should have directors and shareholders that aren't based in Portugal, or it can be classified as a Portuguese company, and you will be taxed in Portugal.

0% tax on wealth

There is no wealth tax in Portugal with this status

10% tax on pension

If you have a foreign pension, it will be taxed at just 10%. Currently, the tax-free allowance is set at €10,841 per year

20% tax on freelancing

If you are deemed a high-value professional, your income tax as a freelancer is capped at 20%

Get an EU passport, fast

This status entitles you to remain in Portugal for up to 10 years. After only five years, you are eligible for Portuguese citizenship.

The double taxation treaty

For example, the double tax treaty between the UK and Portugal prevents double taxation for individuals and businesses resident in both countries. It applies to taxes on income and capital, setting rules for determining which country has the right to tax certain types of income. If you own a company in the UK, live in Portugal and have NHR status, you could potentially pay yourself in dividends for zero tax

Expounding the NHR Tax Advantages

For expats in Portugal, the tax benefits can be a significant financial boon, particularly if you have foreign-sourced income. Here are the specifics of what the NHR status can offer:

  • For employment or self-employment income obtained in Portugal from high-value-added activities, a special flat tax rate of 20% applies.
  • Foreign-sourced income (including pensions, dividends, royalties, and interest) may be exempt from Portuguese taxation if certain conditions are met.
  • For pension income, if it is taxed in the country of source, it will be exempt from Portuguese tax.

Seeking Help: Navigate the NHR Scheme Successfully

Navigating the NHR scheme can be complex due to its specific rules and conditions. Consulting a tax expert can ensure that you apply correctly and reap the full benefits. At Movingto, we can connect you with knowledgeable professionals who can guide you through this process.

Ready to Enjoy the Tax Advantages of Portugal’s NHR Scheme?

Understanding the NHR scheme and its tax advantages is a crucial part of planning your life as an expat in Portugal. To make your transition as smooth as possible, consider seeking expert advice.

Let the Movingto team help you on your journey. Contact us today!

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