1. Definition and advantages
Created in 2009, NHR, or Non-Habitual Resident, status is a specific tax regime granted by the Portuguese government to foreigners who settle in the country. Issued under certain conditions, this status entitles the holder to a fixed, reduced rate of income tax for a period of 10 years.
For retired pensioners: reduced taxation at a flat rate of 10% on income from private sector pensions only.
Income from public sector pensions continues to be taxed in the country of origin.
A flat rate of 20% applies to working people whose professional activity is considered by the Portuguese government to have ‘high added value’ (of a scientific, artistic or technical nature). By way of example, entrepreneurs, artists, researchers and the self-employed are currently eligible for NHR status. The list of professions considered to be high added value is extensive and regularly evolves.
NHR status also allows foreign residents to benefit from tax exemption on certain types of foreign-source income, such as rental income, capital gains on property, interest, dividends and salaried income from non-Portuguese sources.
This tax exemption depends on the conclusion of a double taxation avoidance treaty between Portugal and the country of origin of the income. If such an agreement is in place, non-habitual residents will not pay tax in Portugal on this income, but will have to meet their tax obligations in the country where the income is generated.
We recommend that you consult a tax adviser for precise information on the specific conditions and advantages associated with this status, as well as on the tax treaties between Portugal and their country of origin.
2. Conditions for obtaining it
NHR status is obtained by submitting an application to the Portuguese tax authorities, known as the “Finanças”.
The following conditions must be met for the application to be accepted:
- Residence: you must become a tax resident in Portugal. This means that you must stay in Portugal for at least 183 days (consecutive or otherwise) in a calendar year or have a permanent residence in Portugal (owning property or long-term renting for 12 months)
- Non-habitual: You must not have been a tax resident in Portugal in the 5 years preceding your application. In other words, you must be a newcomer or a former resident who has not been subject to Portuguese tax for at least 5 years;
- Carry out an eligible professional activity or receive income from foreign sources considered eligible (e.g. private sector pensions).
You must be particularly careful about the deadline for applying for NHR status in Portugal. In fact, those who meet the conditions for this status must submit a complete application by 31 March of the year following the year in which they registered as a resident.
We suggest you seek professional advice to avoid having your application for NHR status rejected because it was prepared incorrectly or submitted too late.
3. Duration
NHR status in Portugal is granted for a non-renewable period of 10 years. After 10 years, you will be subject to the ordinary Portuguese tax system, which uses a progressive scale to determine income tax.
If you leave Portugal for a period of 5 years after benefiting from NHR status for 10 years, you can return and apply for a further 10 years of tax exemption or moderate taxation.
4. NHR and property
With regard to property and NHR status, NHR beneficiaries can enjoy the same property rights as Portuguese residents. They can purchase, sell or rent property in Portugal without any particular restrictions.
For income relating to property located abroad, NHR status allows, under certain conditions, exemption from Portuguese income tax, again for 10 years.
5. Hardy & Hardy support
Our company offers comprehensive support for all the procedures involved in obtaining NHR status. Alongside our legal partners, we will complete all the necessary formalities on your behalf and coordinate with the Portuguese tax authorities.
To benefit from our support, you generally need to have a property project with our company (purchase, sale, redevelopment or letting).
Please do not hesitate to contact us for more information about our support and how we can help you make the most of the NHR status and your property investments in Portugal.