Some of the many reasons people give for moving to Portugal are the tax benefits, of which the NHR (Non-Habitual Resident) status is a major part.
Please remember – The information on this page is for information purposes only and does not constitute tax advice. Always seek advice from a qualified tax professional.
What is the NHR (Non-Habitual Resident) Portugal Scheme?
Portugal’s NHR is a tax regime designed to attract high-net-worth individuals. The scheme grants preferential tax treatment to new residents of Portugal. In essence, the scheme grants eligible applicants a flat 20% tax rate on income earned in Portugal (instead of the usual Portuguese taxes, whose top rate is 48%).
Non-Habitual Resident Portugal status can also provide tax exemption on income earned from outside Portugal.
This can be especially beneficial for retirees with pension income but also for those with other sources of income, for example...
- dividends from a foreign company
- investments
- overseas salary
Don’t be confused by the name ‘Non-Habitual Resident’. The scheme, in fact, requires you to live full-time in Portugal.
How do I become eligible for Portugal NHR status?
There are several key factors...
- You must be legally resident in Portugal. If you’re from the UK, this might be via a D7 Visa or Golden Visa
- You must become a tax resident of Portugal, i.e. spend more than six months a year living in the country
Other points to remember...
3. You’ll also need a Portuguese tax number (NIF) that’s linked to a Portuguese address
4. NHR benefits are available for a period of 10 years from the date you register your residential status. NHR status is non-renewable
Which income sources are applicable for NHR tax benefits?
- Income from within Portugal
Whether your income comes from employed or freelance work, you’ll need to show that it’s work that the authorities deem ‘high value’ activities. You may also need to show reasonable experience and qualifications. Fortunately, the scope of ‘high value’ is broad and unlikely to be a barrier to acceptance.
- Income from outside Portugal
Portugal still offers a number of benefits if you become a Non-Habitual Resident. The income sources that qualify for tax exemption include...
- rental income
- real estate gains
- dividends
- interest on savings
- royalties
- Income from foreign-source dividends - Tax exempt in Portugal if originating from a DTA country where the dividends are taxable at source (as long as the country isn’t a blacklisted tax haven)
- Income from a foreign pension - Flat 10% tax rate for pensions paid from a DTA country (pensions used to be tax-free under NHR until this recent change was introduced in the 2020 budget)
- Income from real estate rentals and capital gains on the property - Both of these are tax-exempt in Portugal under NHR, as long as they don’t originate from a blacklisted tax haven
How do I apply for NHR Portugal status?
Step 1
Make sure you’re registered as a tax resident in Portugal. That means having a NIF (tax number), which is registered to your Portuguese address.
Step 2
Make sure you have ‘proof of habitual abode’. This can be either the deed for a property that you’ve purchased or a 12-month tenancy agreement if you’re renting in Portugal.
Step 3
Apply for a NIF at your local Finanças office. You can do this with proof of address from outside Portugal, for example, a bank statement from your home in the UK. But you’ll need to change it to a Portuguese address before applying for NHR status. If you want to apply for the NIF with your address in Portugal, bring your rental contract or property deeds to the Finanças office as proof of address. A utility bill should also suffice.
Step 4
You’ll need to register with the online Finanças portal. They will send a password in the post to whichever address is registered on your NIF. If you used an overseas address to get your NIF, make sure somebody is there to receive the letter for you and inform you of the password.
