Non-Habitual Residency (NHR) is a unique tax regime that was put in place in Portugal in 2009. It has worked well to attract business owners, professionals, retirees, and people with a lot of money who want to set up tax residency in Portugal.
It has also worked very well for Portugal and the Portuguese government. The economy has grown due to the contributions of tax residents. The locals have also benefited from the job opportunities they bring.
The Portugal NHR tax system lets people who meet certain requirements pay less tax on income from Portuguese sources. It also allows a majority of foreign-sourced income to be tax-free in Portugal for ten years. If you are looking to move to Portugal, the NHR can help you save money on taxes. However, you need to learn how to activate this special tax status.
This article will talk about everything about the non-habitual resident tax regime, such as who is eligible, what documents are needed, how to apply, and how to get the application accepted. We will also cover the benefits and flaws of the tax regime. Continue reading to find out.
Portugal's NHR has several benefits for status holders.
Keep in mind that the NHR status's coverage of foreign income depends on certain factors. Employment income that qualifies for tax exemption must be from an eligible profession or from a country with a DTA (double tax agreement).
Income can also be tax-exempt if it is from a country without a DTA that is not a blacklisted tax haven. Other income, like real estate capital gains, royalties from financial assets, capital gains from disposable securities, and pension income are also subject to the DTA and tax-haven rules.
Before you can get NHR status in Portugal, you have to be a tax resident there. This means that you must live in the country and be legally required to pay your taxes to the Portuguese government.
If you are not already a tax resident, you can register at the local finance office (Finanças). However, you must first be an EU citizen or a foreign person who already has a SEF permit to live in the country.
Suppose you do not have a permit yet. In that case, you can apply for a visa through specialists like Prismaat and Lexidy. There are several kinds of visas available, each with specific requirements. These specialists will assist you in securing a suitable visa, which will allow you to be a Portuguese tax resident and apply for an NHR.
Aside from the residency permit, you must also stay in the country for more than 183 days in a 12-month period to qualify as a tax resident. It does not have to be consecutive to count. However, you can also qualify if you have lived in the country for fewer than 183 days but have a home there in a way that suggests you intend to keep and occupy it as your primary residence.
Although you are not required to, purchasing a Portuguese property can be beneficial. You can use your purchase deed as evidence that you are a resident. Nevertheless, a 12-month rental agreement can also serve as evidence of residency.
Keep in mind that the NHR status is only open to new tax residents. Thus, you must not have lived in the country for at least the previous five years to qualify. Portuguese nationals who have lived abroad for 5 years or more can also apply.
Before applying for NHR, here are the documents you must have:
The NHR application involves a series of connected processes. Here is a step-by-step guide and a detailed explanation of how it is done.
To obtain a residency permit, EU/EEA/Swiss citizens can register without a visa at their local town hall (Sítio da Câmara). All that is needed is a passport, an EHIC card, and a current address, with no need for proof of residency. On the other hand, non-EU citizens can get residency permits through the different visas available. However, the most common one is the Portugal D7 visa.
After getting a Portuguese residency permit, you might want to contact a specialist like Lexidy or Prismaat to help you with the rest of the process. Interestingly, all visa prices with Prismaat included the NIF and NHR registration.
You will need almost the same information you used to register for your NIF. This includes your address, email address, phone number, and NIF. If you are renting an apartment, make sure the long-term lease (minimum 12 months) is registered with Financas. Lots of Portuguese landlords don’t have their rental properties registered, and this will fail your application. Once you have registered at the Finanças portal, you can start your application for the NHR regime through one of the companies that offer this service.
Note that timing is an important factor in NHR applications. You must have proof of where you live most of the time by December 31 and a full application by March 31 of the year after you become a resident. This is because many people who wait until the last minute to apply for NHR status are turned down because their files are often not ready.
Also, keep in mind that you need to wait for around two weeks for the approval or rejection of your application. Finally, NHR status is granted to Portugal for a period of ten years. From the date you become a resident of the country, you are regarded as a non-habitual resident. After the 10-year period, you will return to paying tax at standard Portuguese rates.
The Portuguese NHR provides several benefits to holders, but is not without flaws. Here are some of its pros and cons:
To attain NHR status in Portugal, you must have lived in the country for 183 days in a 12-month period or maintain a habitual residence in the country. The status will be valid for ten years; however, it is non-renewable.
It takes up to two weeks to receive an approval or rejection notice on NHR applications.
Yes. NHR status holders can earn income from companies based outside Portugal. If the countries have a DTA with Portugal and are not on its blacklisted tax haven list, residents can still benefit from the NHR tax benefits.
Portuguese tax residents who have NHR status will only pay a flat 20% on income from economic activities in Portugal. Also, foreign income may be tax-exempt according to the DTA and blacklisted tax haven rules. Pensioners have to pay a flat 10%.
Portugal’s NHR is a special tax regime that allows people who have it granted to alleviate some of their tax burdens. It is not a visa; thus, it is only available to people who already have Portuguese residency permits and become tax residents in Portugal.
The tax status is very beneficial if you are a retiree, entrepreneur, professional, or high-net-worth individual. Check that your country has a DTA with Portugal and is not a blacklisted tax haven to get the most out of the tax status. But keep in mind that the tax benefit is only available for ten years before holders return to paying standard tax rates.
If you are looking to move to Portugal for tax benefits, follow the steps provided in this guide to start your registration as a non-habitual resident. You can also contact specialists experienced with NHR registration for more information or assistance.
Ana has worked in many startups and moved to a few countries, which led her to create MovingTo. She believes that remote work is a growing trend that is here to stay and that digital nomads will move to countries that have more to offer than the ones you were born into. She mostly writes opinion pieces for MovingTo.
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