Portugal’s tax incentives and beautiful location make it the perfect destination for those who want to relocate or retire in Europe. As tax advisors, we have witnessed firsthand the growing popularity of the Portugal Non-Habitual Residency (NHR) program among foreign investors. In this comprehensive guide, we will unveil the benefits, requirements, and application process of the Portugal NHR program.
Introduction to the Portugal NHR Program
The Portugal NHR program is a tax regime that grants unique tax benefits to qualifying individuals who become tax residents in Portugal. The Portuguese government introduced the program in 2009 to attract foreign investors and highly skilled professionals to live and work in Portugal. The program is open to citizens of any country who have not been tax residents in Portugal for the previous five calendar years.
What is the Portugal NHR Program?
The Portugal NHR program is a tax regime that benefits individuals who become tax residents in Portuguese territory. Under this regime, qualifying individuals may be exempt from paying tax on certain types of income for ten years. The program aims to attract foreign investors, highly skilled professionals, and pensioners to Portugal and Madeira by offering them a low tax rate on their worldwide income.
Benefits of the Portugal NHR Program
The Portugal NHR program offers several benefits to qualifying individuals, including:
Low Tax Rates
Under the Portugal NHR program, qualifying individuals may be eligible for a reduced tax rate of 20% on their employment income and self-employment (freelancer). They may also be exempt from taxing certain types of foreign income, such as dividends, interest, royalties, rents and capital gains.
No Wealth Tax
Portugal has no wealth tax, which means that individuals who become tax residents in Portugal are not subject to any taxes on their assets or net worth.
No Double Taxation
Portugal has signed double taxation treaties with over 70 countries, which means that individuals who receive income from these countries will not be taxed twice on the same income.
Who can apply for the Portugal NHR Program?
The Portugal NHR program is open to citizens of any country (including Portuguese citizens) who have not been tax resident in Portugal for the previous five years. To qualify for the program, applicants must fulfil the following requirements:
To apply for the Portugal NHR program, applicants must follow these steps:
Step 1: Become a Tax Resident in Portugal
Applicants must become tax residents in Portugal by spending more than 183 days per year in Portugal or by having a home in Portugal that is considered their primary residence.
Step 2: Register with Portuguese Tax Authorities
Once applicants have become tax residents in Portugal, they must register with the Portuguese Tax Authorities and apply for the NHR program.
Step 3: Wait for Approval
The Portuguese Tax Authorities will review the application and notify the applicant of their decision. Additional documentation may be requested, such as tax residency certification and personal income tax returns and settlements covering the last five calendar years.
Portugal NHR Program Tax Benefits
The Portugal NHR program offers the following tax benefits to qualifying individuals:
Tax Exemption on Foreign Income
Qualifying individuals may be exempt from paying tax on certain types of foreign income, such as dividends, interest, royalties, rents, salaries, and capital gains.
Reduced Tax Rate on Employment Income
Qualifying individuals may be eligible for a reduced tax rate of 20% on their employment income derived from Portuguese companies (or self-employed income derived from foreign companies), provided that individuals perform one of the following high-added-value jobs:
112 – General director and executive manager of a company;
12 – Directors of administrative and commercial services;
13 – Directors of production and specialized services;
14 – Directors of a hotel, restaurant, commercial and other services;
21 – Specialists working in physical sciences, mathematics, engineering and similar technical fields;
221 – Physicians;
2261 – Dentists and stomatologists;
231 – Teachers at universities and higher learning establishments;
25 – Specialists in information and communication technologies (ICT);
264 – Authors, journalists and linguists;
265 – Creative artists and performing artists;
31 – Intermediate level science and engineering technicians and professionals;
35 – Information and communication technologies technicians;
61 – Market-oriented farmers and qualified agricultural and livestock workers;
62 – Market-oriented eligible forestry, fisheries and hunting workers;
7 – Qualified industrial, construction workers and artisans, including qualified workers in the fields of metallurgy, metalworking, food processing, wood manufacturing, clothing production, handicrafts, printing, manufacture of precision instruments, jewellers, artisans, electricity and electronics workers;
8 – Operators of installations and machines and assembly workers, namely fixed installations and machine operators.
The workers included in the aforementioned professional activities shall possess at least a level 4 qualification on the European Qualifications Framework or a level 35 on the International Standard Classification of Education. They must also have five years of duly proven professional experience.
Portugal NHR Program Success Stories
Many foreign investors and highly skilled professionals have taken advantage of the Portugal NHR program and succeeded in Portugal. Here are a few examples:
George, a pensioner from the UK
George retired from the UK and decided to relocate to Madeira. He applied for the Portugal NHR program and was able to enjoy a 10% flat tax rate on his pension income. He also fell in love with the Portuguese culture and lifestyle and has made many friends in his new community.
Olga, a software developer from Ukraine
Given the war, Olga was a highly skilled software developer in Ukraine and was looking for new opportunities abroad. She applied for the NHR program and was able to work as a freelancer for a US tech company while enjoying the tax benefits of the program. She has fallen in love with the Madeiran lifestyle and decided to make Madeira her permanent home.
The NHR program is an excellent opportunity for foreign investors, highly skilled professionals, and pensioners looking for a low-tax destination with a high quality of life. Portugal’s beautiful location, warm climate, and vibrant culture make it an attractive destination for those who want to relocate or retire in Europe. If you are interested in the NHR program, we encourage you to explore its benefits, requirements, and application process to see if it is right for you.
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