Portuguese Residency Archives — Mygrate Investments

Guiding you through Portugal’s Non Habitual Residence Tax (NHR)

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In order to boost Portugal’s competitiveness internationally, the non-habitual tax regime was implemented in 2009 to attract up-and-coming investors and professionals into the country. The NHR offers substantial tax savings for those who qualify.

The advantages of non-habitual tax residency in Portugal

Special personal income tax benefits over a 10-year period
Possible to enjoy tax exemptions on almost all foreign source income
A flat rate 20% for certain source incomes within Portugal – including specific professions as well as from self-employment. (Normal income tax rates peak at 48%)
Become part of a white-listed tax environment within the EU
No minimum stay requirement
Benefit from tax exemption on gifts or inheritance to direct family members
No wealth tax
Free remittance of funds to Portugal

Application for the non-habitual resident tax regime in Portugal

Requirements:

The applicant should have the right to reside in Portugal either through being an EU/EEA/Swiss citizen, or through schemes such as the Golden Visa program.

The applicant must not have been a Portuguese tax resident in the five years prior to applying for NHR residency in Portugal.

The individual must have a place of abode in Portugal on the 31st of December of the year of application. This place of residence must be seen as an intention to maintain and occupy it as a home.

Do I have to buy or can I rent property as poof of residency in Portugal?

You are not required to purchase property in Portugal under the NHR regime but applicants must have a domicile in Portugal that demonstrates the intention to hold and occupy a place of residence. Therefore, although it is beneficial for NHR tax residents to buy property in Portugal, a rental contract for 12 months also sufficiently qualifies you as proof of residence.

What documentation is required to prove residency?

You will need to provide proof of a lease or loan agreement if you decide to rent a property. If you have bought a property, a deed of purchase will be required.

Portugal’s non-habitual tax resident and double taxation agreements

Double-Taxation Agreements (DTAs) generally allow for most categories of income to be taxed in the country of source but, in order to be recognised as jurisdictions open for foreign investment, choose not to tax the income earned by non-residents.

Under the NHR tax regime, Portugal does not tax most foreign source income on money that may be taxed abroad, thus allowing for NHR residents to receive foreign income completely free of tax.

Portugal has signed Double-Taxation Agreements with 79 countries using the OECD model tax convention in the absence of a DTA.

See below for the list of countries that have established Double-Taxation Agreements with Portugal.

Countries that have double taxation treaties with Portugal

Algeria, Austria, Andorra, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark, East-Timor, Estonia, Ethiopia, Finland, France, Germany, Georgia, Greece, Guinea-Bissau, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Ivory Coast, Japan, Kuwait, Latvia, Lithuania, Luxembourg, Macau, Malta, Mexico, Moldova, Montenegro, Morocco, Mozambique, Netherlands, Norway, Oman, Pakistan, Panama, Peru, Poland, Romania, Russia, Qatar, San Marino, São Tomé and Principe, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Tunisia, Turkey, United Arab Emirates, United States of America, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam

Taxes on foreign source income under the NHR regime

Employment income

Foreign source income is tax-exempt under the NHR regime or taxed at a flat rate of 20% if it falls under the list of eligible professions.

Self-employment income

Is taxed at normal progressive rates unless it falls under the eligible profession categorization.
Unless the individual in question already pays into another social security system, self-employment income will be subject to social security contributions.
Is generally taxed at a flat rate of 20%, although the taxpayer can choose to pay usual progressive rates if they are less.
Tax-exempt if the individual is from an eligible profession provided he is from a country with a DTA , or in the absence of which, under the OECD model tax convention and is not a tax haven,

Real estate income and capital gains

Tax-exempt if from a country with a Double Tax Agreement.

Tax-exempt if from a country without a DTA but which is not a blacklisted tax haven.

Capital gains from the disposal of securities – shares, bonds, etc. are subject to an optional rate of 28%, 35% if from a blacklisted tax haven.

Royalties and income from financial assets

Are tax-exempt if the income comes from a country with a DTA.

Tax-exempt if the income arises from a country without a DTA provided it is not a blacklisted tax haven.

Taxed at 28% or 35% if the country is a blacklisted tax haven.

Pension income

Tax-exempt if from a country with a DTA

Tax treatment of Portuguese source income under the NHR regime

Employment income

If employment does not fall under the list of eligible professions the usual progressive tax rates apply.If employment falls under eligible NHR professions, a tax rate of 20% applies, but progressive tax rates are an option if this amounts to less.

Self-employment income

The usual progressive tax rates apply if employment does not fall under the list of eligible professions.

If employment does not fall under the list of eligible professions the usual progressive tax rates apply.

If employment falls under eligible NHR professions, an optional tax rate of 20% is applicable, but usual progressive tax rates can also be applied if this amounts to less.

Real estate income and capital gain

Rental income is taxed at an optional rate of 28% or at the at normal progressive rates.Net capital gains are taxed at 50%, at the normal progressive rates.

Pension income

Is taxed at usual rates.

Professions Considered to be High Value Under the NHR

Certain professions of cultural and economic value to Portugal are granted generous tax exemptions under the NHR regime .The following professions are considered of high added value:

Architects, Engineers, Geologists, Theater, Ballet, Cinema, Radio, Television artists, Singers, Sculptors, Musicians, Painters, Auditors, Tax consultants, Dentists, Medical Analysts, Clinical surgeons, Ship’s doctors, General Practitioners, Medical physiatrists, Doctors, University lecturers, Psychologists, Archaeologists, Biologists and life science experts, Computer programmers, Software consultants, Computer consultants and related services, News agencies, Other information and service activities. Scientific research and development, Research and experimental development on natural sciences and engineering, Research and development in biotechnology, Designers, Investors, Managers, Directors, Higher management.

NHR in Conjunction with the Golden Visa

Citizens of countries outside of the EU/EEA/Swiss nations wishing to apply for the NHR regime in Portugal may want to take advantage of the Golden Visa program. Those investors who first acquired residency through the Golden Visa program in Portugal will then become eligible for the NHR regime. Mygrate can provide you, as the investor, with personalised advice to enable you make the best possible investment decision.

Frequently asked questions regarding the non-habitual resident tax regime

Is it possible to track applications for non-habitual residency in Portugal?

You can track the progress of your application if you registered online at the Portal das Finanças.

How do you know if your NHR registration has been accepted?

You can check the status of your application through the Portal das Finanças, under Aceda aos Serviços Tributários, clicking on Consultar Pedido and then Inscrição Residente Não Habitual.

Does it take long to apply for the NHR tax regime in Portugal?

Generally it only takes a couple of weeks before you hear whether your application has been accepted or declined.

Is it necessary to make a statement of assets when applying for the NHR regime?

No, you will just need to state your income on your tax returns.

Is the NHR regime in Portugal likely to change in the foreseeable future?

The regime has been in place since 2009 and has proved very popular – it is unlikely to change in the near future.

Is it possible to backdate my registration as a non-habitual tax resident?

Once your application is confirmed, your NHR status will automatically be backdated to when you first registered as a tax resident in Portugal.

When is the best time to apply for the Portuguese NHR tax regime?

You must apply for NHR before March 31 of the tax year during which you became a tax resident in Portugal.

Does Portugal have a wealth tax?

While there is no wealth tax in Portugal, an extension of the existing property tax, the Imposto Municipal Sobre Imóveis (IMI), was introduced in 2017 . This is an annual tax paid only on Portuguese properties, regardless of the country of residence of the owner. It is calculated by property value, on properties in excess of €600,000. Married couples and civil partners have a combined allowance of €1,200,000. The tax rate varies between 0.4%, 0.7% and 1.0%.

What is the Portuguese law in regard to civil partnerships?

Civil partnerships and marriage are treated with equally. Under Portuguese law, a couple in a civil partnership receive the same treatment as married partners for tax purposes.

What taxes are paid when buying property in Portugal?

Taxes on property vary according to the purchase. There are three main taxes on property:

Municipal property tax (IMI)

Real estate transfer tax (IMT)

Stamp duty (IS)

Does Portugal have an inheritance tax?

Spouses, direct descendants and ascendants are exempt. For anyone else, there is a 10% stamp duty on Portuguese assets.

Is there a gift tax in Portugal?

Spouses, direct descendants and ascendants are exempt from both inheritance and gift taxes in Portugal. A 10% stamp duty applies on Portuguese assets to all others, with an additional rate of 0.8% on real estate.

Are foreign source rental incomes, investment incomes, and capital gains taxed in Portugal?

They are not taxed in Portugal if they come from a foreign source.

Would the renegotiation of double tax treaties between my country of residence and my country of income affect the NHR regime in Portugal?

It is not likely that any existing double tax treaties between Portugal and other countries will be terminated. No other countries have signaled intentions to change these treaties with Portugal, and it is unlikely that amendments would substantially affect the NHR regime. However, there have been cases, as with Finland and Sweden, in which agreements have been amended.

Are there any other tax considerations that I may have overlooked?

Taxation laws are complex with regard to interactions between Portuguese and home tax law and solutions can vary from one case to another. Although we take care to ensure that all our information is correct and up-to-date, this outline must be considered a guide; there is ultimately no substitute for advice tailored to your specific circumstances.

Mygrate’s team will guide you through the process according to your situation and lifestyle choice, ensuring you and your family have all the information needed. We will assist you in the purchase of property and ensure that you avoid the pitfalls. We are also here to offer peronalised investment advice, aid with tax-planning, to offer statistical data on property transactions, and provide you with every opportunity to make well-informed investment decisions.

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Guiding you through Portugal’s Non Habitual Residence Tax (NHR)

MYGRATE INVESTMENTS