Becoming a tax resident in Portugal can bring significant benefits, particularly through the Non-Habitual Residents Regime (NHR). The NHR is a Personal Income Tax (PIT) regime available to foreign nationals who wish to relocate and reside in Portugal. This 10-year scheme creates a favourable opportunity for new tax residents and has seen over 50,000 registrations since its introduction in 2009.
Benefits Of The NHR Regime Include:
Once registered as a Portuguese Tax resident you will not be required to prove your residency to the Portuguese tax authorities. Your status is more likely to be challenged by the income source state. It is therefore suggested to:
• Keep record of your dates in Portugal
• Avoid frequent change of address or renting short-term
• Request invoices that detail your Portuguese tax number or NIF for services received in Portugal
To qualify for the NHR regime you must either be a first time resident or have not held residency status within Portugal for the last five years. Once residency is established one of the following conditions must be met to be considered a tax resident in Portugal:
- 183 days or more spent in Portugal (consecutive or non-sequential) in the 12-month period starting or ending in the fiscal year concerned.
- Less than 183 days spent in Portugal but maintains a property for habitual residence within the country for at least 183 days of the year.
After residency has been granted and a tax number assigned, the NHR application can be submitted. We recommend that professional tax advice is sought either in Portugal or in your country of residence prior to enrolling in the scheme in order to optimise the benefits of non-habitual residency. It is also worth noting that even if the NHR policy is abolished, it cannot be withdrawn from those who hold NHR status at the time of change.
Tax obligations after acquiring NHR status are simple. A tax return must be filed annually in Portugal detailing worldwide income and expenses and social security contributions are required from Portuguese tax residents that receive employment or self- employment income.
Portugal's commitment to creating a favourable tax environment has been consistent for over a decade with minimal amendments to the NHR scheme made in that time. The latest Global Competitiveness Report from the World Economic Forum ranked Portugal higher than Switzerland, Sweden, and Netherlands for its 'shift to more progressive taxation' and 'rethinking how corporations, wealth and labour are taxed, nationally and in an international cooperative framework'.