Non Habitual Residency Program Portugal (NHR)
The Portugal NHR tax regime (non-habitual resident) is a hugely successful scheme offering lucrative tax breaks for foreign residents. The NHR scheme was initiated in 2009, updated in 2020 and is a fantastic initiative for those looking to optimize their tax planning and reside in Portugal.
Essentially, the non habitual resident Portugal scheme grants eligible applicants a flat 20% tax rate on Portugal sourced income (instead of the usual Portuguese taxes with a top rate of 48%). This rate is for income derived from high value added activities.
The key objective of the Non Habitual Resident Portugal scheme is to attract high value-added residents into Portugal, either those with pension income or those working in skilled professions - professions of high cultural and economic worth are given generous tax exemptions under the NHR regime (they are considered to be of added value to Portugal).
Under the NRH a flat rate of 10% tax is changed on pensions from foreign sources, for a period of 10 years as being tax resident in Portugal.
To be eligible for Non Habitual Resident status, you must meet certain requirements:
- First, become legally resident in Portugal;
- Then, become a tax resident of Portugal (you’re considered a tax resident when you spend more than six months a year living in Portugal);
- Lastly, you'll need to get a Portuguese tax number (NIF) and make sure it’s linked to a Portuguese address.
This last step is essential for successfully submitting your NHR application. NHR regime applicants must have proof of a habitual abode by December 31. The NHR application then has to be made before March 31.
It usually takes about two weeks for an application for the NHR regime to be accepted or declined and NHR benefits are available for a period of 10 years (non-renewable), starting from the date when you’re considered a tax resident of Portugal.
To date, over 10,000 citizens from across the world have successfully applied, helping them alleviate their tax burdens. *
* This article was written in 2023 and deemed correct at the time of writing. Rules, taxes, and law change and Exclusive Algarve Villas recommends the assistance of fiscal and legal advisors with the application and advising on the NHR program. Furthermore every fiscal situation is different and different countries might or not have tax treaties with Portugal there will be variables making the program more or less attractive for you.