Portugal NHR: Optimise Your Tax With This Guide

Ana Fankhauser
April 30, 2022
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The NHR tax regime in Portugal: What It Is and How to Get One?

Have you heard about Portugal's non-habitual resident (NHR) tax regime? If not, you may be missing out on a massive opportunity for tax savings and the chance to live in one of the most beautiful locations in Europe.

The Portugal NHR provides lucrative tax breaks to foreign residents and has already proven instrumental in attracting more than 10,000 citizens from all over the world. In the process, these new residents have alleviated their tax burdens.

The NHR tax is a win-win for everyone involved. Here's what you need to know about the NHR status in Portugal and whether it's right for you.

Benefits of the Portugal NHR Regime

0% tax on foreign income

This mostly applies to interest earned and dividends. Capital Gains Tax and rental income is not included.

0% tax on crypto
This is only the case if it's not your main source of income and you're not deemed a trader

0% tax on dividends
You need to be careful that the company has directors and shareholders that aren't all 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%

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,

It's affordable
Portugal is 80% cheaper than countries like Australia, USA or UK. Housing costs in cities like Lisbon have increased quite dramatically over the years, however, other expensive are significantly less than other countries.

What You Need to Know About the NHR tax regime in Portugal

If you're a professional or investor with what Portugal has deemed "high cultural and economic worth," then the NHR could help you keep more of your taxable income. Enacted in 2009, the NHR permits substantial tax savings for those who qualify.

What are some of the benefits of the program? Those who qualify for this designation will receive special personal income tax treatment for the next decade. On almost all foreign sources of income, they'll enjoy tax exemption.

But the advantages don't stop there. NHRs will also enjoy a 20 percent flat tax on self-employment and specific professions instead of Portugal's standard income tax rates of up to 48 percent.

To access these benefits, there are no minimum stay requirements. What's more, within the European Union, you'll become part of a white-listed tax environment.

You'll also enjoy free remittance of funds to Portugal, no wealth tax, and tax exemptions for inheritance and gifts to direct family members. As you can see, the pros are clear when it comes to gaining NHR status.

Jobs in Portugal With Visa Sponsorship

Do you have a job that qualifies as having high added value to Portugal? Jobs in Portugal with visa sponsorship must contribute to economic or cultural worth. These professions include:

  • Architects
  • Engineers
  • Geologists
  • Performing and television artists
  • Singers
  • Sculptors
  • Musicians
  • Painters
  • Auditors
  • Tax consultants
  • Dentists
  • Medical analysts
  • Clinical surgeons
  • Ship's doctors
  • General practitioners
  • Medical physiatrists
  • Doctors
  • University lecturers
  • Psychologists
  • Archaeologists
  • Biologists and life science experts
  • Computer programmers
  • Software consultants
  • Computer consultants and related services
  • News agencies
  • Other information and service activities
  • Scientific research and developments
  • Researchers of experimental development on natural sciences and engineering
  • Researchers of development in biotechnology
  • Designers
  • Investors, including investors in cryptocurrency exchanges
  • Managers
  • Directors
  • Higher management

If your career falls into one of these categories, you have a clear pathway to gaining a Portugal Visa that will, in turn, permit you to apply for NHR status.

What about retire in Portugal visa options? As one of the most affordable countries in Europe, it should be on the top of your list.

Like professionals and other employees, you may also be able to take advantage of the tax benefits outlined in this article. Explore the ins and outs of retiring to Portugal further.

Other Considerations With the NHR tax regime in Portugal

Portugal's NHR tax regime stems from the nation's relationship with Double-Taxation Agreements (DTAs). These agreements stipulate that most income categories need only be taxed in the nation of their source income.

That said, most nations avoid taxing income earned by non-residents because they wish to appear welcoming to foreign investment. For this reason, you can receive foreign income more or less tax-free in Portugal if you're from a nation that has signed a Double-Taxation Agreement with the country.

To date, Portugal boasts 79 such agreements. What if your homeland isn't in the mix? You may use the Organization for Economic Cooperation and Development (OECD) model tax convention.

Qualifying for Portugal Visa

At this point, you're likely wondering how to get your hands on a invaluable Portugal visa. The first step remains to ensure you qualify for NHR status. To do this, you'll need to meet one of the following two criteria:

  • Not have been a Portuguese tax resident within the past five years
  • Have the right to live in Portugal as a member of the European Union (EU), Switzerland, the European Economic Area (EEA), or with a Portugal Visa

As you can see, if you're not a citizen of the EU or Switzerland, you'll need to take advantage of Portugal's Golden Visa Program to gain NHR tax benefits. How does the Golden Visa program work? Let's take a closer look.

The D7 Visa or Passive Income

It's one of the most popular Visas among non EU- citizens. Portugal’s "Passive Income Visa" (a.k.a. “D7 Visa”, among other names), a residence visa followed by a residence permit, for non-EU citizens that have sufficient regular passive income (please let us know if you wish to receive information about other possible residence permits):

  • The basic requirement;
  • The application procedure and documentation;
  • Permit validity and stay requirements;
  • Portugal taxation; 
  • The associated fees and costs; and 
  • Procured non-legal services.

For someone intending to move to Portugal, this visa constitutes a good alternative to the Golden Visa: no investment is required, the application processing is faster and the Government fees are comparatively insignificant (for a family of 3, the savings in Government fees will be around €30,000.00).

The “Passive Income Residence Permit” does not preclude the holder from having a professional activity in Portugal and, provided the applicant has sufficient passive income, it is generally the best option for someone who intends to live in this country.

You may also like to note that as a new resident of Portugal you will be eligible to benefit from a special tax status under the so called "non-habitual resident" (NHR) tax regime, which will allow you to enjoy a 10-year tax exemption on most non-Portugal-sourced types of income.

For the D7 application, you must prove that you have passive income which can be pensions, dividends, investments, self-employment and rental income can also be considered.  Employment or funds in the bank alone are not usually eligible.

Each household member must have the following as a means of livelihood for the 12-month period:

• First applicant adult: 8,460 Euros;

• Second or more adults: 3,990 Euros each;

• Children under the age of 18 and older if dependents: 2,394 euros.

Income must be proved each year.

The Portugal Golden Visa

For non-European Union and non-Swiss residents, you can take the Golden Visa route to gain access to Portugal's tax advantages.

Where to start? You have a range of investment options from which to choose when it comes to how and where you invest. Most applicants put money in real estate or funds, which must be held for a minimum of five years.

As you've probably guessed, the Golden Visa Portugal remains one of the most popular residency-by-investment programs in the world. Since the program began in 2012, it has permitted thousands of families to relocate.

That said, you should cultivate a certain sense of urgency when considering a Portugal Golden Visa. Why? Because starting the 1st of January 2022, the program will make some critical changes.

These changes include:

  • An increase in the minimum investment threshold to qualify for residency
  • An increase in the investment fund amount option from €350,000 to €500,000
  • An increase in real estate acquisitions from €250,000 to €280,000 and up
  • An increase in investment rehabilitation projects worth €350,000 and up in the Azores, Madeira, and Portugal's interior territories
  • A capital transfer amount option increase from €1 million to €1.5 million
  • New real estate investment restrictions will include no investments in high-density regions such as Porto, Lisbon, or populous coastal towns.

Stay Requirements

Once you meet this investment requirement, you'll need to spend a minimum of seven days in Portugal during the first year.

What's the stay requirement after that? You must spend 14 days in the nation every two years.

Family Matters

One of the most significant advantages of the Portugal Golden Visa is that you can include your dependent family in your application. In other words, your entire family can benefit from the same tax benefits and a second residence with you.

Family members include your spouse or legal partner, children under age 18, and dependent children under 26. What's more, you may include parents of either spouse 66 years or older, dependent parents 55 or older, and siblings under the age of 18.

As you can see, it behooves you to apply for the Golden Visa as soon as possible.

Fortunately, the actual process of securing the Golden Visa is straightforward. But you'll need to follow a handful of steps before getting approved.

How to Get a Visa in Portugal

Once you get a Golden Visa, you'll have opportunities to become a permanent resident or citizen. But to do this, you'll need to follow all guidelines associated with the Golden Visa.

You'll also need to keep your investment in the country for five years. What must you do to apply for the Golden Visa? The steps include:

  • Onboarding
  • Bank account and NIF
  • Making the investment
  • Online application
  • Pre-approval
  • Biometrics visit
  • Golden Visa issuance

Once you've completed these steps, you'll gain access to a valid visa for two years. After that, you must apply for a residency permit, which is good for two years.

By the fifth year, you may apply for permanent residency and citizenship, or renew your Golden Visa in year six. Let's break these steps down further, so you have a complete understanding of what the process looks like.

Onboarding

What does the onboarding process look like? After you've made an investment decision, you'll need to complete onboarding paperwork for yourself and your family.

Once you've ensured this paperwork is complete? You'll need to submit it for review.

Bank Account and NIF

From there, you can get a Portuguese tax identification number (NIF). Once you've got this NIF, you may open a bank account in the country. Opening a bank account in Portugal can be done remotely.

Making the Investment

Next, you'll go through the process of investing in Portugal. You'll need to fill out the necessary paperwork and would do well to work with a visa specialist or attorney.

That way, you can make sure your investment and paperwork are in order.

Online Application

Once you've invested in the nation, you can officially start the online application. Work with an expert to ensure you correctly fill out the application and complete all necessary steps.

Pre-Approval

Once you've sent in your online application, wait for pre-approval status. They base this pre-approval status on your future fulfillment of the requirements outlined in the application.

Biometrics Visit

After you've received pre-approval status, you'll wait approximately two months. At that point, you'll attend a biometrics collection session. This live session must take place in Portugal.

Golden Visa Issuance

After you've visited Portugal for biometrics, you'll have an approximately four-month wait for your Golden Visa to get approved by the Serviço de Estrangeiros e Fronteiras (SEF).

You'll pay the government permit issue fee, and you'll receive the issuance of your cards. Typically, you'll work with a visa agency that will collect these cards on your behalf and send them to you.

NHR and EU, EEA, and Swiss Residents

Once you acquire residency with a Golden Visa, you can apply for NHR status.

NHR requirements include holding residence in Portugal on the 31st of December of the year you apply. You must also intend to keep habitual residence to get a visa to live in Portugal.

What does the process of applying for the NHR look like? It starts with proof of residency. Citizens of the EU, EEA, or Switzerland can register without a visa. To do so, they'll need to head to their region's city hall to present an EHIC card and passport.

These individuals will also need to provide a current address. That said, they won't need to provide any proof of address.

From there, EU and Swiss residents must apply for their nine-digit NIF numbers. Of course, those with Golden Visas will already have this number. With an NIF, you can register as a tax resident in the finanças.

NHR and the Golden Visa

What does the process look like for non-EU residents? Golden Visa holders will apply for NHR status through the appropriate governmental website.

Keep your NIF number handy as you'll need it. You'll also need to supply your email address, fiscal address, and phone number. Keep the following documents at the ready as you register:

  • Proof you weren't a tax resident in Portugal for the past five years
  • Tax returns for the past five years
  • A deed of property or rental agreement in Portugal

Approximately two weeks after completing your application and submitting it, you'll receive your official NHR status. As you can see, the process proves somewhat elaborate and best done with a professional's help.

NHR isn't a Visa

A lot of people make the mistake of thinking NHR is some kind of residency visa. It’s not. NHR is purely tax-related.

If you’re from outside the EU/EEA/Switzerland and you don’t have an EU/EEA/Swiss passport, you will most likely need to obtain a residency permit (such as the D7, D2, D6 or Golden Visa) to move to Portugal. Once you have moved to Portugal, you will be able to apply for the NHR program then but the two are not connected.

NHR is an extremely confusing term and many take it to mean it’s for people who don’t live in Portugal. In fact, the opposite is true: NHR is for people who live here and are tax resident he

Portugal: A Tax Haven for Crypto Investors

What else do you need to know about Portugal before considering a move? It holds a reputation for being the most crypto-friendly nation in Europe and with good reason.

Crypto earnings are tax-free in Portugal. Yes, you read that right. From Bitcoin to Ethereum, Dogecoin to Ripple, you won't pay taxes when you make money on individual crypto investments.

How is this possible? In Portugal, cryptocurrencies aren't considered money because they're not legal tender. What's more, they fall outside the legal definitions of taxable income in Portugal.

Of course, there's a caveat to this. Professional traders must pay taxes. The tax-free status only applies to individual trading.

If you're looking to relocate to an up-and-coming business and preparing to go head to head against companies such as Celsius Network and BlockFi, Portugal may not prove the best place for you.

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Ana Fankhauser