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Tax Regime for Non-Habitual Residents - NHR
The Tax Regime for Non-Regular Residents, created on the 23rd of September by Decree-Law no. 249/2009 changed the articles 16, 22, 72 and 81 of the Portuguese Personal Income Tax Code (CIRS). The Ordinance no. 12/2010 of January 7th, complements the application of that regime and Law no. 20/2012 of May14th updated its wording. This regime applies to tax payers of Personal Income Tax (IRS) who had not resided in Portugal for tax purposes in the last five years, and transfer to the Portuguese territory its tax residence from 2009 onwards. It is basically an introduction of specific taxation rules for Personal Income Tax (IRS).
1. Scope
Based on a favourable Personal Income Tax regime, the aim is to attract to Portugal non-resident citizens, qualified professionals, as well as individuals with a superior wealth level or purchasing power. This attraction is based on the application of the exemption method as the preferred method of elimination of international juridical double taxation of foreign source and application of a special rate of 20% (mitigated and proportional taxation) to certain forms of income.
2. Concept
In order to qualify as a non-regular resident, it is necessary:
a) To be a tax resident in Portugal: A tax resident in Portugal is someone who remains in Portugal, each year, for more than 183 days (consecutively or not) or who, having remained less time, on the 31st of December of that year owns a property and is able to demonstrate that he/ she intends to maintain and occupy it as a residence.
b) Not to have been deemed tax resident in Portugal in the last 5 years prior to the application of the regime. The person simply has do demonstrate that he/ she was unable to fulfil the requirements of becoming a tax resident during the last 5 years.
This regime also applies to emigrants who want to return to Portugal.
The taxable person deemed non-regular resident acquires the right to be taxed as such during a period of 10 consecutive years, from the year of registration, as a resident in Portuguese territory, having to comply with the requirements of residence every year.
The applicant must request the inclusion of his/ her name at the Cadastre of Tax Payers when applying for the Portuguese residence permit or until the 31st of March of the year after he became resident in Portugal.
3. Who may apply?
Non-residents who are willing to establish permanent residence in Portugal or who wish to return after a minimum absence of 5 years (e.g. independent professionals, pensioners, dependent workers). Or even non-residents wishing to establish themselves as temporary residents because of secondment relations (e.g. independent professionals, salaried workers, members of statutory bodies).
4. Income Tax Regime
4.1. Income from Portuguese sources:
By choice, income from categories A and B may not be included, as long as these were generated by activities with high added value, such as architects and engineers, artists, actors and musicians, auditors and tax consultants, doctors and dentists, professors, investors, administrators and managers, senior executives, as specified in Ordinance 12/2010, of January 7th.
4.2. Income from foreign sources:
The income from foreign sources - dependent work - are exempt from taxation in Portugal, since they are actually taxed in the source state and provided, they were not obtained in Portuguese territory. The income from foreign sources – pensions – are exempt from taxation in Portugal, since they are actually taxed in the source state, or they are not obtained in Portuguese territory.
5. Other Requirements
• Obtain the Portuguese Tax Identification Number from the Tax Office;
• Open a bank account in Portugal.
• Regarding mandatory enrolment in Social Security, it should be noted that this is only required if the non-regular resident’s income is from category A or B in Portugal. In this sense, if they are not covered by Social Security, the non-regular residents should carry a valid health insurance, to ensure health and accident protection, or alternatively, have the European health card (in case of European citizens) to be adequately protected in case of illness or accident in Portugal.