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NHR Regime – Update of Procedures

Last Updated on March 2, 2020 by Miguel Silva Reichinger Pinto Correia

Following the publishing of the new list of “high value added activities” applicable to non-habitual residents (NHR) that register from 2020 onward, the Portuguese Tax Authority (AT) has decided to change the way which it controls how the high value added activities are performed.

Old procedure:

The AT had adopted a very lengthy and bureaucratic administrative procedure involving prior recognition, through presenting academic and contractual documents, and that took place simultaneously with the request for registration as a non-habitual resident or whenever the NHR would require such recognition at a later stage.Such approach did not rule out subsequent auditing by the AT concerning compliance with the regime requisites.

Such approach did not rule out subsequent auditing by the AT concerning compliance with the regime requisites.

New procedure:

Any NHR who wishes to benefit from 20% flat tax rate applicable to the activities recognized as being of high added value just need to refer such through the personal income tax return that is to be submitted annually by the NHR status holder, in accordance with the Law. There is no need to obtain prior recognition from the AT.

Proof concerning High Value Added Activities in case of audit

  • Employment or supply of services contract;
  • Proof of registration in a Professional Association or Guild;
  • Document proving that he or she has an administrative position; Declaration attesting to the beginning of the activity, in the case of independent workers; or
  • Other official documents that serve as proof that he or she exercises the invoked activity.

What is the NHR Regime?

It is the special Portuguese taxation regime applicable to the foreign income of natural persons. This program is specially designed for people wishing to transfer their residence to Portugal.

NHR status is valid for a period of 10 consecutive and non-renewable years, unless the taxpayer becomes non-resident for tax purposes for a period of 5 years before reaplying to the scheme.

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