Non-Habitual Residency Portugal
The Portugal Non-Habitual Residency program is designed to boost the national economy by attracting high-earning professionals with a wide range of skills and disciplines. Those in target careers benefit from reduced taxation in Portugal for a period of 10 years, and since its introduction, professionals from across the world have benefitted from the program. Its benefits have also been extended to certain retirees, which has transformed the country into the retirement haven of Europe.
Requirements To Qualify For NHR Portugal
The Non-Habitual Residency program has been in operation in Portugal for over a decade now. It has achieved great success by attracting a large number of high-net-worth individuals and specialized professionals to live and work in Portugal and contribute to its economy.
To qualify for the NHR Portugal program, you must meet the following conditions:
- You must not have been a tax resident in Portugal in the previous five years before applying for NHR status.
- You must be a tax resident in Portugal. To do this, you must have a home in Portugal and have lived in the country for at least 183 days in a calendar year.
- To qualify for NHR as soon as possible, the application must be made before the end of March in the year after gaining tax residency in Portugal.
NHR applications take about two weeks to be accepted or declined. Once accepted, you are granted NHR status for ten years – this is backdated to the date on which you became a resident. After this period, the individual the reverts to the general personal income tax bracket.
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Benefits Of NHR Status
Becoming a registered NHR beneficiary offers a number of tax benefits to the individual. These include:
- A flat rate of 20% tax on all income earned in Portugal. Normally, the personal income tax of Portuguese residents, including those who are self-employment, ranges from 14.5% to 48%, depending on how much one earns. This tax benefit is for those who are employed in positions defined and stipulated by the government as high value-added services.
- Income earned from employment abroad is exempt from Portugal’s personal income tax. This is subject to the income being taxed in the source country. Self-employment income from abroad earned in the provision of high value services as stipulated is also exempt from tax in Portugal, again provided it is taxed in the source country. Similarly, pension and passive income from abroad is exempt from taxation in Portugal, provided it is taxed in the source country.
- An exemption from wealth tax.
- Free remittance of funds into Portugal
- Tax exemption for cash gifts or inheritances paid or bequeathed to direct family members
- Become part of a white-listed tax environment within the EU.
- Maintain all these benefits for a ten-year period.
High Value Professions Under The NHR Tax Regime
The NHR tax regime is restricted to certain high value professions as stipulated by the government. These high valued professions include (but are not limited to):
- Architects and engineers
- Musicians and actors
- Doctors and surgeons
- University lecturers
- Computer programmers and software consultants
How Does A Non-EU Citizen Qualify for NHR Status?
The NHR status is easy for EU residents to access – all they need to do is move to Portugal and register as tax residents.
For citizens of Non-EU countries, the best way to access the NHR status is through the Portugal Golden Visa program, which enables investors to apply for residence in Portugal. Qualifying for the Golden Visa program first means you will already have a home or a property you can designate as your Portuguese residency – this is necessary for the NHR application process.
Another way to qualify for NHR status is to find employment in Portugal. Normally, when going to work in Portugal, your employer sponsors a work permit for you. Once you are in Portugal and meet the tax residency conditions, you may then apply for NHR status, provided your job is among the qualifying high-value careers specified by the government.
Step-by-step Guide To Apply For NHR Status
1. Become a Portuguese resident
This means that you have the legal right to reside in Portugal regardless of your country of origin. If you are an EU or Swiss citizen, it is fairly easy to register as a Portuguese resident, with simply a small fee and a few required forms. For Non-EU citizens, the Golden Visa program is the fastest and best way to gain Portuguese residency.
2. Find a tax adviser
This will give you a perspective on the tax system in your adopted country, compare the different tax regimes, and help you fully understand the requirements and benefits of the NHR regime.
3. Get a Portuguese Tax number
To earn money in Portugal, you must have a tax number. This is a nine-digit code used for identification purposes. To apply for a tax number, you will be asked to provide proof of residence in the form of your residency permit, passport and a utility bill. Registering at your local finance office is the easiest way to apply for a tax number.
4. Register as a tax resident
After you have received your tax number, you can register as a tax resident. This process can be done together with that of acquiring your tax number.
5. Apply for NHR status
This is the final stage in the application process and will usually take around two weeks. You will be required to sign a declaration to state that you have not been a tax resident in Portugal five years prior to your application and will also be asked to provide your tax returns for this period. If you have not provided sufficient information on your tax status five years prior, you will be asked for evidence that you were a tax resident in another country. You will also need a rental contract or proof of purchase of property in Portugal.
You can have your accountant or representative apply for you. Alternatively, you can do this yourself by applying through the government financial website. You will be required to indicate your tax number and identification to register and apply for your NHR status. Once you have registered on the government portal, you will receive a PIN by post to progress in the application. This takes about two weeks. Go ahead and apply on the financial portal to be accepted in the NHR regime.
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Frequently Asked Questions on The Portugal NHR Status
Who is eligible to apply for the NHR tax regime?
Freelancers, pensioners, financially independent individuals, and professionals in high value professions as stipulated by the government.
Is it possible to backdate NHR status?
Once your application has been accepted, your NHR status is backdated automatically to the day you registered for your tax number.
Will the NHR regime change in the near future?
The NHR regime has recently changed to impose a 10% tax rate on foreign-sourced pension income.
There may be further changes to the Non-Habitual Residency Program in the future – this includes but is not limited to tax rates within the program.
How much tax will I pay on income earned Portugal?
If you work in one the high value professions as listed above, income earned in Portugal will be taxed at a low flat rate of 20%.
What is Portuguese law on civil partnerships?
Under Portuguese law, civil partnerships are recognized in the same way as married couples.
Can you track your application for NHR?
Yes! Once you have registered on the website, you can easily track the progress of your application.
How long does it take to receive NHR status?
Once the registration has been done on the website, it takes just a few weeks to complete the process.
If my income is from a foreign source, am I exempt from paying taxes?
If you are paid from a foreign country, the NHR status grants exemption from local income tax if the country you are paid from taxes the income and has double taxation treaty with Portugal.
Is Portugal a tax haven?
Because of the favorable NHR tax regime which offers much lower tax rates than other European countries, Portugal could be considered a tax haven.
How Different Foreign Earned Incomes Are Treated Under NHR Regime
Foreign sourced income is tax-exempt when it comes from a country with a double treaty or taxed at a flat rate of 20% for some specific professions.
This income is taxed at a flat rate of 20%. The individual may also choose to have it taxed at the progressive income tax rates. You are also required to pay social security from this income. If it comes from a country with a double taxation treaty, and you are in the high value professions, your income will be tax exempt.
Royalties and Passive Income
This form of income is tax exempt if it comes from a country with a double taxation agreement. It is also exempt if the country it comes from is not a tax haven. If it comes from a tax haven country, it is taxed at a rate between 28% and 35%.
Real Estate Income and Capital Gains
Real estate income and capital gains are foreign income tax exempt when you are under the NHR regime.
As of 31 March 2020, pension income earned from abroad will be taxed at 10%.
How NHR Affects Incomes Earned in Portugal
Employment income earned in Portugal by NHR registered individuals is taxed at 20%, although these earners can also opt to pay tax at the normal progressive rates.
In this category, NHR registered earners will pay the usual progressive tax rates if they so choose. They can also choose to pay tax at a 20% flat rate depending on the amount earned.
Real Estate Income
Rental income is taxed at 28% or aggregated with other income and taxed at the usual progressive rates, while net capital gains are taxed at 50%.
Pension income that originates from within Portugal is taxed at the standard rate.
Benefits of Moving To Portugal
Low Cost Of Living
One of the main reasons that Portugal has become so attractive to foreign investors (including EU citizens) is due to its low cost of living, which is substantially cheaper than in many other European countries. Coupled with favorable tax breaks, pensioners and high net worth individuals have more money to spend and invest within its borders.
Residency By Investment Program
Portugal offers a residency by investment program known as the Golden Visa. The program is owned and managed by the government and enables foreigners and non-EU residents to gain residency legally. It requires one to invest a substantial amount of money in real estate to qualify.
It is worth noting that as a legal resident, you benefit from Portugal’s EU membership which grants you visa-free access to other EU countries.
Peaceful and Secure Society
Portugal is rated the third safest country in the world thanks to its low crime rates, making it a peaceful and pleasant country to live in.
The people of Portugal are incredibly friendly, and the country has been rated by Forbes as the most welcoming in the world. Once you move to Portugal, you will not feel out pf place, and most Portuguese residents can speak both English and Portuguese, so you won’t struggle with language barriers and can easily approach anyone in public for assistance.
Excellent Health System
Portugal’s healthcare system is rated as the 12th best in the world by the World Health Organization. If you are looking for a country with a robust and advanced health system, then Portugal is it. Its public healthcare is highly subsidized for the residents in the country, and affordable private hospitals are also available. Plus, under the national program, healthcare is free for children under 18 and those over 65 years of age.
If you are looking to spend your retirement enjoying golden sun, white sandy beaches and lovely tropical weather, then Portugal is the country to move to. These stunning assets, plus the country’s unique and vibrant culture, attract millions of tourists every year. Not to mention there are many hotels, golf courses and other exciting activities for a full and enriching life in Portugal, making it the ideal choice for those planning their retirement.
Best Cities To Live In Portugal
Lisbon is the capital city of Portugal. Although it is one of Portugal’s slightly more expensive hotspots in terms of living costs, it is still relatively cheap compared to other European cities. There plenty to see and do in Lisbon – you can experience Portuguese architecture first-hand, view major cultural landmarks and even pay a visit the tile work museum. Check out some of the city’s top sunspots in the evening to enjoy a beautiful sunset, or if you’re looking for a day trip, visit the Cascais beach for a day of lounging in the sun and enjoy the sand and ocean just a few minutes away from the city.
In the Northern part of Portugal is another highly in-demand city. Investors are flocking to Porto for its beautiful and pleasant weather. It has its own airport and is a major business hub with over 200,000 residents. It is also a tourist attraction which brings millions of tourists to the country every year.
For plenty of sunshine, ocean and beach, this is the city to live in. You will enjoy your summer days swimming in the ocean and lying on the beach. The winters are mild but not unpleasant. It is a bustling city with plenty of tourists and is much cheaper to live in than the other two.
This city is widely recognized for its excellent university and is home to a large student population. However, it is popular with residents from all walks of life as it is affordable, easy to access and a beautiful city with pleasant weather all year round.
Portugal Golden Visa
The Golden Visa program is one of the best ways for Non-EU citizens to gain NHR status in Portugal.
The scheme has been in existence since 2012. As well as helping foreigners gain residence in Portugal, it has also helped Portugal earn billions in investment from the foreigners. It has transformed many of the cities of Portugal with increased investment in real estate and other property.
It has also helped transform Portugal into both a beautiful tourist destination and an attractive investment country.
The NHR program began before the Golden Visa program. Together these two programs have helped Portugal develop and rise from the adverse effects of the 2008 financial crisis.
How Can You Take Advantage of The Golden Visa To Gain NHR?
1. To qualify for the Golden Visa, you need an investment property
It could be a home for personal use or a buy-to-let property. To qualify for the NHR regime, you will need to prove that you have a home in Portugal, so a Golden Visa investment property comes in quite handy for this!
2. You need to be a legal resident in the country
With the Golden Visa program, you are a legal resident of Portugal. To qualify for the NHR program, all you need now is to meet the tax residency conditions. With your existing legal residence status, you can now apply for one of the NHR-qualifying high value jobs (provided you have the skills required). Register at your local finance office to become a tax resident and follow the application procedures.
3. You can apply to the Golden Visa by yourself
or get yourself assistance from qualified consultants. These consultants will advise you on how to acquire a Golden Visa and other ways to benefit from the Portuguese economy. Therefore, the professional help you get while applying for the Golden Visa will be important to help you get your NHR status as soon as you get your residency permit.
4. You can also qualify for the Golden Visa by establishing a business in Portugal that creates at least five permanent jobs
The NHR program is targeted at individuals with skills or qualifications and experience in careers stipulated by the government as high value. You can start a business in these careers and meet all the conditions for both the Golden Visa and NHR programs to enjoy the benefits easily.
5. As a NHR registered person, you must be in Portugal for at least half a year every year
You are sure that you will always meet your minimum stay requirements as required by the conditions of the Golden Visa. Thus, you will have your residence permit renewed easily and quickly.
6. When it comes to applying for citizenship in Portugal, you will have a much easier time at the language interview
Having spent much time in the country, you will have an easier time showing how much of the local language you have learned.
7. You will have the opportunity to visit different areas of Portugal as you seek the best place to invest in a property to qualify for the Golden Visa
You will therefore live in a place that you know and love and have visited before.
The Non-Habitual Residency program is designed to position Portugal as a tax haven and to attract pensioners and high-level professionals to invest in and grow the country’s economy. It has many benefits for those who are accepted, a low rate of tax being just one, and has yielded great success for individual investors as well as the Portuguese and European economies.