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Portugal’s NHR Program (Non-Habitual Resident Program)
The Non-Habitual Resident program is a special tax regime introduced by the Portuguese government to attract foreign investment and skilled professionals to the country. Portugal’s Non-Habitual Resident (NHR) program has gained popularity among expatriates and retirees seeking favorable tax conditions and a high quality of life in Europe.
Through this program, every eligible individual can benefit from generous tax exemptions and reduced rates on specific types of income for a period of up to 10 years. Established in 2009, the NHR program offers significant tax benefits to qualifying individuals who become tax residents of Portugal. In this article, we’ll get to know the details of the NHR program, eligibility criteria, benefits, and how to apply.
To qualify for the Non-Habitual Resident Program, applicants must meet these criteria:
- Be a tax resident of Portugal under Portuguese tax law.
- Not have been a tax resident of Portugal in the past five years.
- Register as a tax resident in Portugal with the Portuguese tax authorities.
- Spend at least 183 days per year in Portugal, or have a residential property in Portugal.
Why become a non-habitual tax resident in Portugal?
There are several key benefits you will get, if you choose to be a non-habitual resident program (NHR) in Portugal.
Tax Benefits: One of the main reasons for becoming an NHR in Portugal is the favorable tax regime offered by the program. NHRs may benefit from significant tax exemptions and reduced rates on certain types of income. Such as foreign pensions, dividends, interest, and capital gains, may be exempt from Portuguese taxation. This can result in substantial tax savings compared to other countries with higher tax rates.
Reduced Tax Rates: NHRs engaged in some high-value-added professions, such as scientists, researchers, engineers, and artists, may benefit from a flat tax rate of 20% on their employment income. This competitive tax rate can attract skilled professionals and entrepreneurs to Portugal, supporting the development and economic growth.
Wealth and Inheritance Tax Exemptions: NHRs are exempt from wealth tax on assets located outside Portugal, providing additional value to their financial advantages for individuals with significant assets or inheritances from abroad. This exemption extends to inheritance tax, ensuring that heirs are not burdened by additional taxes on inherited assets.
No Double Taxation: Portugal has double taxation treaties with numerous countries worldwide. To prevent double taxation of income earned abroad by NHRs. These treaties ensure that income taxed in another country is not subject to taxation in Portugal, providing clarity and assurance for individuals with international income sources.
Which professions can qualify as a non-habitual resident program in Portugal?
The program primarily targets retirees and individuals with foreign-sourced income, it also extends benefits to professionals in specific fields. Here are some professions that may qualify individuals for NHR status in Portugal:
- Doctors and dentists;
- Service managers such as hospitality, restaurant, and retail ones;
- Executive and general managers;
- ICT technologists;
- Engineers, mathematicians, architects, and physicists;
- Journalists, linguists, and authors;
- Production and administrative managers;
- High education and university teachers;
- Performance and creative artists;
- Researchers of various areas;
- Designers;
- Workers of different areas: for instance, industry, construction, fisheries, etc.
The eligibility for NHR status depends on so many factors. It includes the nature of the applicant’s professional activities, their residency status, and compliance with program requirements. In January 2020 government changes linked to the professions. So now, you do not only have to belong to the representatives of a specific profession or occupation.
But it is also important to have at least 5 years of proven experience in a particular area. Apart from having the experience of such relevance, you can also hold at least a level 4 qualification according to the European Qualifications Framework or a level 35 of the International Standard Classification of Education.
There is one piece of advice for those Individuals who are interested in applying for NHR status should consult with tax advisors or legal experts familiar with Portugal’s tax first. Laws and regulations to assess their eligibility and explore the full benefits available to them.
How to apply for Non-Habitual Resident Program in Portugal?
Applying for Non-Habitual Resident program or NHR status in Portugal involves several steps, including registering as a tax resident and submitting the necessary documentation to the Portuguese tax authorities.
1. Determine Eligibility: You have to make sure that you meet the eligibility criteria for Non-Habitual Resident Program set by the Portuguese government. Generally, to qualify for NHR status, you must not have been a tax resident of Portugal in the previous five years, register as a tax resident in Portugal, and engage in eligible activities or receive qualifying income.
2. Get NIF (Portuguese Tax Identification Number): If you don’t have a Portuguese tax identification number (Número de Identificação Fiscal or NIF), you’ll need to get NIF first. You can do this by visiting a local tax office (Finanças) in Portugal or to apply remotely through our website NIFNISS.pt.
3. Register as a Tax Resident: Once you get your NIF, you have to register as a tax resident with the Portuguese tax authorities. This step involves completing a residency registration form and providing documentation to support your residency status, such as proof of address, rental agreement, or property deed.
4. Submit NHR Application: After registering as a tax resident, you can apply for NHR status with the Portuguese tax authorities. You’ll need to submit an application form specifically for the NHR program, along with supporting documents to demonstrate your eligibility. These documents may include:
- Copy of passport or national identification card
- Proof of residency in Portugal
- Proof of income or employment contract (if applicable)
- Any other relevant documentation requested by the tax authorities
5. Wait for Approval: Once you’ve submitted your NHR application, the Portuguese tax authorities will review your application and supporting documents to determine if you meet the eligibility criteria for NHR status. This process may take some time, so be prepared to wait for a response.
6. Receive NHR Status: If your NHR application is approved, you’ll receive confirmation of your NHR status from the Portuguese tax authorities. This confirmation will outline the tax benefits and exemptions available to you as an NHR, as well as any conditions or requirements you must fulfill to maintain your NHR status.
7. Comply with Reporting Obligations: As an NHR in Portugal, you’ll be required to comply with certain reporting obligations, such as filing annual tax returns and declaring any relevant income or assets. Make sure to stay informed about your tax obligations and deadlines to avoid penalties or fines.
8. Seek Professional Advice: Navigating the NHR application process and understanding the associated tax implications can be complex. Consider seeking advice from tax advisors, legal experts, or specialized consultants with experience in Portuguese tax law and the NHR program to ensure compliance and maximize the benefits available to you.
If you’re learning more about living, working, and becoming a tax resident in Portugal, visit our blog Digital Nomad Visa Portugal and learn more here.
By following all these steps and ensuring compliance with Portuguese tax laws and regulations, you can successfully apply for NHR status in Portugal and enjoy the tax benefits and advantages offered by the program.
