Non Habitual Resident
Non Habitual Residents – Portuguese Special tax Regime 2020
The NHR tax regime applies to foreign individuals transferring their residence to Portugal and for Portuguese nationals returning to Portugal after an extended period of living abroad. Individuals covered by the NHR regime can benefit from special personal income tax (“PIT”) regime for a ten year period.
As from the 30th January 2020 the Portuguese government decided to apply a tax levy of 10% on foreign pension income. Applicable only to those NHR beneficiaries starting from 31st March 2020.
Who can Benefit?
- Those who become residents in Portugal.
- Those who have NOT been tax residents in Portugal in the last 5 years preceding application.
The NHR status has to be requested until March 31st of the year after taking up residency in Portugal.
The NHR fiscal regime is granted for a period of 10 years providing you are considered a tax resident in Portugal during that time.
Portuguese source income
Employment and self-employment income can be liable to a special 20% flat rate if derived from high value added activities of scientific, artistic or technical character performed in Portugal. Other types of domestic income received by NHRs are liable to PIT according to the rules applicable to ordinary tax residents.
Foreign source of income
Employment income can be exempt from PIT provided that:
- It is taxed in the source State according to the
applicable Tax Treaty; or - If no Treaty is applicable, the income is effectively
taxed in the source State and it is not deemed as derived in Portugal.
Pension income
A flat rate of 10% applies when;
- Individuals are NOT taxed in the state of origin in accordance to the double tax treaty between Portugal and that country or origin.
- Income is NOT considered as obtained in Portugal under it’s domestic laws.
Other income
Foreign source dividends,
interest, capital gains and rental income, together with self-employment and professional income (in this case, only if derived from high value added activities), can be exempt from PIT if:
The income can be liable to tax in the country of source, according to the applicable Tax Treaty or to the OECD Model Tax Convention; and
- It is not deemed derived
in Portugal; and - It is not deemed obtained in a tax haven.
An individual is tax resident in Portugal for any year in which:
-
He/she stays in Portugal for more than 183 days (continuously or not) during a 12 month period, which begins or ends in that tax year; or
-
He/she has a residential accommodation available in Portugal in any day of that 12 month period, which is used as the individual’s habitual abode.
-
Any day (or part of a day) spent in Portugal will count as one day if the individual stays overnight in Portugal. Residency is established as of the first day of permanence in the country.
Other types of income
For each type of income, a specific set of conditions apply in order to determine if it can indeed be tax exempt in Portugal or taxed at a special rate. This analysis must be addressed on a case by case basis. Generically speaking, this regime allows other types of foreign source of income to be tax exempt in Portugal if:
- It may be taxed in the country of source in accordance with the applicable Tax Treaty.
- The income is not sourced from a tax haven.
Applying for NHR
Recognition of this status is not automatic and requires activation by attending to the following formalities:
- Application for a Portuguese taxpayer number;
- Registration as tax resident;
- Request the access codes to the Tax Authorities’ website;
- Application for the NHR status.
If the Portuguese Tax Authorities have doubts about the individual’s effective tax position, additional documents can be requested, e.g. tax residency certificate(s) and other documents to prove that the personal and economic interests of the individual were located in other State in the five years preceding the arrival in Portugal.
Important Considerations
Wealth taxes
Portugal does not have wealth taxes. Only local taxes on Portuguese real estate apply (as described below).
Acquisition of property
Portugal levies a municipal tax on the acquisition of Portuguese properties at rates up to 7.5%. Stamp tax duty at 0.8% is also due on the same amount.
Annual property tax
Portugal levies an annual municipal tax based on the registered value of Portuguese real estate at rates between 0.3% and 0.45% (depending on the municipality and the type of real estate). Additional Property Tax will also be levied at a rate between 0.7% and 1.5% on properties with registered tax value equal or higher than €600,000.
Note: Rates may be higher depending on several factors (type of property, type of owner, etc…).
Inheritance tax
Stamp Duty is levied at a 10% rate on Portuguese assets only except for spouses, descendants and ascendants, who are exempt.
Gift tax
Stamp Duty is levied on gifts located in Portugal at a 10% rate except for spouses, descendants and ascendants, who are exempt. An additional rate of 0.8% is due on gifts of real estate.
Since January 2020, the list of business activities benefiting of a favorable tax regime aimed at attracting professionals with diverse skills to Portugal, was altered.
These occupational profiles are now extended in light of the difficulties experienced by employers in various sectors in hiring workers since the inception of the Non-Habitual Residency Regime 10 years ago. The Portuguese Tax Authority (“AT”) has overhauled the qualifying Non-Habitual Residency professions eligible for the 20% flat-rate tax. Doctors, engineers, university professors or specialists in computer and communication technologies remain in the new table.
Other occupations, such as psychologists, designers, geologists or archaeologists have been struck off. New professions include activities such as hotel management, catering, trade and other service managers, farmers and skilled agricultural and livestock workers, skilled forestry, fishing and hunting workers or plant and machine operators and assembly workers.
The new table, which takes effect on January 1, 2020, is as follows:
I. Professional Activities (CPP
codes):
112 General Managers and Executive Managers of Companies;
12 Directors of Administrative and Commercial Services;
13 Directors of Production and Specialized Services;
14 Hotel, restaurant, trade and other service managers;
21 Experts in the physical science, mathematics, engineering and related techniques;
221 Doctors;
2261 Dentists and Estomachtologists;
231 University and Higher Education Professors;
25 Information and Communication Technology (ICT) Experts
264 Authors, journalists and linguists:
265 Creative and performing arts artists:
31 Intermediate science and engineering technicians and professions;
35 Information and Communication Technology Technicians;
61 Market-oriented farmers and skilled agricultural and livestock workers;
62 Qualified forestry, fishing and hunting workers;
07 Skilled professionals in construction as well as craftsmen, skilled workers in metallurgy, metalworking, food-processing, woodworking, clothing, printing, crafts, precision instrument manufacturing, jewelers, craftsmen, electricity and electronics specialists;
08 Plant and machine operators and assembly workers.
Workers in the above-mentioned professional activities must have at least the European Qualifications Framework qualification level 4 or the International Type of Education Classification level 35 or have five years of duly proven professional experience.
II – Other professional activities:
Managers and managers of companies promoting productive investment provided that they are eligible for projects and with tax
benefit concession agreements entered into under the Investment Tax Code. Net income in categories A and B earned on activities of high value-added, whether scientific, artistic or technical, by non-habitual residents in Portuguese territory, will be taxed at the autonomous rate of 20% with any withholding tax (art. 101) made at the same rate.