What is NHR
The Non-Habitual Resident (NHR) status in Portugal is a tax regime that was introduced in 2009 with the aim of attracting qualified foreign residents, investors and highly qualified professionals to live in Portugal. This status offers significant tax benefits to residents who qualify for the programme.
The main feature of the RNH is favourable taxation on income earned outside Portugal. According to this status, holders of this status are exempt from tax on income generated abroad, provided that this income is subject to taxation in the country of origin and if it is not income from pensions – which are taxed at a rate of 10 per cent.
In addition, in relation to income earned in Portugal, the statute offers a reduced flat rate of personal income tax for a period of 10 years. During this period, if the holder of the status was considered to be carrying out a high value-added activity in Portugal, they would be entitled to a special rate of 20% on labour income.
Transitional regime for 2024
The State Budget for 2024 approved a very significant change to the NHR, leaving out many of the potential beneficiaries of this regime, and, because this change was so significant, it provided for a transitional measure that allows citizens who had already started their immigration process before 31 December 2024 to still apply for non-habitual resident status in 2024 and benefit from it for 10 years under the same conditions as indicated above.
The transitional regime maintained the requirement that in order to obtain NHR, the applicant must not have been considered a tax resident in Portugal in the 5 years prior to applying for NHR status.
It also determined that the NHR continues to apply, under the same conditions as the previous regime, in the following situations:
- Persons who were already registered as non-habitual residents before 1 January 2024, and for as long as the 10-year period of the tax benefit has not expired;
- Taxpayers who, on 31 January 2023, meet the conditions to be considered resident for tax purposes in Portuguese territory:
- Stay in Portugal for more than 183 days; or
- Buying or renting a property in Portugal (having an available residence in conditions that suggest it will become their habitual residence).
- Taxable persons who become resident for tax purposes by 31 December 2024 and who declare, for the purposes of their registration as a non-habitual resident, that they have one of the following:
- Promise or contract of employment, promise or secondment agreement signed until 31 December 2023, where the duties are to be carried out in Portuguese territory;
- Rental contract or other contract granting the use or possession of real estate in Portuguese territory signed until 10 October 2023;
- Reservation contract or promissory contract for the acquisition of a right in rem over real estate in Portuguese territory signed before 10th October 2023;
- Enrolment or registration for dependents in an educational establishment domiciled in Portuguese territory, completed by 10 October 2023;
- Residence visa or residence permit valid until 31 December 2023;
- The procedure for granting a residence visa or residence permit, initiated by 31 December 2023, with the competent authorities, in accordance with the applicable immigration legislation in force, namely by requesting an appointment or actually making an appointment to submit an application for the granting of a residence visa or residence permit, or by submitting an application for the granting of a residence visa or residence permit;
- Is a member of the family household of the taxable persons referred to in the previous paragraphs.
What is End of NHR
Although the NHR has not ended, its scope has become quite limited, so those who meet some of the conditions identified above in the Transitional Regime should apply to be granted the NHR during 2024, thus avoiding being subject to the same tax rules as any resident in Portugal.
