Portugal has long been a popular expatriate destination. It boasts the nicest climate in Europe, in my opinion, and offers an excellent all-around quality of life. Thanks to the Non-Habitual Resident program, it also is one of Europe’s most tax-friendly jurisdictions. In this guide, I cover the program and explain how to apply.
Portugal’s NHR program is a tax rebate initiative that launched in 2009 with the aim of attracting talent and money to a country suffering a major economic crisis. It offers a number of benefits to qualifying new residents, including preferential tax rates on certain types of income. “New residents” is defined here as anyone, including Portuguese citizens, who have spent at least 183 days in the country during the current tax year or who maintain their permanent home there AND who have not qualified as tax residents of Portugal in any of the previous five years. In this regard, it is fairly similar to New Zealand’s own tax rebate program for new residents.
Where it differs from New Zealand’s program is in the types of income it covers.
Portuguese-sourced employment and business income derived from high added value activities that are of a scientific, artistic, or technical nature are taxed at a flat rate of 20%. Any other Portuguese-sourced income is taxed at the normal rate.
Foreign-sourced income is generally exempt, including most pensions, although there are notable exceptions such as the capital gains from the sale of securities. It is important to understand what foreign-sourced income means, however, as there are several misconceptions on the subject. I have written a short guide on the subject which you can access here.
Those approved for the program can benefit from the tax rebates for up to ten fiscal years. That should be true even in the event where the government cancels the program (there are rumors it may do at some point in the near future). Also, the program is valid in both mainland Portugal and its two autonomous regions, the Azores and Madeira.
How to apply
In order to qualify, you will first have to become a Portuguese resident. If you are an EU citizen, you already have the right to live and work in Portugal. Becoming a resident is thus as easy as moving there and getting a local address. If you are not an EU citizen, however, you will have to apply for a visa which fits your circumstances. Popular options include the Self-Employment visa and the Golden Visa.
You will then have to register with the Portuguese tax office. You will need to do this in person, with your passport and a proof of residence.
Once registered, you will be able to sign up for an online tax account. The process is fairly easy and can be completed via this link. A password will be mailed to the address you provide so do ensure that it is valid.
As soon as your password turns up in the mail, you will be able to apply for NHR status. This is done online and in most cases, you will receive your approval within a week or two (or a request for more information). Conveniently, you will also be able to use your online tax account to file your annual tax returns and communicate with the tax office.