Portugal’s non-habitual residence (NHR) regime – 10 years of tax benefits


Portugal’s non-habitual residence (NHR) regime – 10 years of tax benefits

By Matthew Krystman, Partner, Blevins Franks

Portugal’s non-habitual residence regime offers new residents very attractive tax advantages.  Some foreign income will be exempt from Portuguese tax; foreign pension income benefits from a special fixed low tax rate, and local ‘high value’ employment is also taxed at a lower rate than usual.

You may consider moving to Madeira for a healthier, more relaxed lifestyle.  But Portugal also offers much wider appeal, as new residents have the opportunity to enjoy a decade of generous tax breaks through the non-habitual residence (NHR) regime.

What is non-habitual residency?

‘Non habitual’ simply means that this regime is open to people who have not lived in Portugal in recent years.

The NHR was in fact introduced by the Portuguese government in 2009 to attract ‘high value’ foreign residents to live in Portugal. It therefore offers reduced tax rates and some tax-free exemptions for your first ten consecutive years in the country.

What are the tax benefits?

A reduced tax rate on high-value Portuguese employment income

Most NHR tax advantages apply to foreign income, but if you are employed in Portugal in a ‘high value activity’, you can benefit from a flat 20% income tax rate on this employment income.  This is instead of the scale rates of tax that range from 14.5% to 48%.

You must work in one of the pre-defined scientific, artistic or technical professions to qualify.

Tax-free foreign income

Tax residents normally pay Portuguese tax on their worldwide income. However, the non-habitual residence regime provides the opportunity to receive foreign income completely free of further Portuguese tax.

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