Non-Habitual Residency in Portugal and Its Tax Benefits
Portugal is a popular destination for tourists everywhere. People come from all over the world to take in the lush beaches, rich culture and history, and beautiful architecture that the country has to offer. Did you know that there are also numerous financial opportunities for you to take advantage of in Portugal?
One such opportunity is a special tax regime. Of course, it requires that you visit Portugal for more than just tourism. The country has so much to offer to sweeten the deal. If you’ve always wanted to move abroad, then Portugal might be the destination for you!
Today we’ll take a look at the particulars of the personal income special tax regime for non-habitual residents in Portugal (NHR). Whether you’ve never been to Portugal, or wish to return to the country of your birth, this regime offers several NHR tax benefits in Portugal.
What is the NHR Tax Regime?
The non-habitual residency tax program was formerly known as the non-regular residency program. It was created to attract ex-pats and skilled individuals to come and live in Portugal and enjoy a set of tax benefits for the next 10 years.
The interested party must not be deemed a tax-resident of Portugal in the five years prior to the application. The program was intended to draw away exceptional expertise from other nations.
Individuals with outstanding qualifications or those participating in high-value-added services were targeted. Pensioners and other passive income earners were also welcome.
Those that returned would enjoy several NHR tax benefits in Portugal. So, let’s take a look at what advantages are in store for you if you opt for this scheme.
NHR Tax Benefits
Here is a list of the tax advantages offered under the NHR tax scheme.
- Pensions from abroad are taxed at a 10% flat rate.
- Income generated abroad via high-value self-employment will not be taxed. With the added clause that the income is taxed in the source country under the terms of a tax agreement between Portugal and said country.
- If already taxed in the country of origin, labor income will not be taxed in Portugal.
- No tax will be charged on income from royalties, interest received, and dividends from outside of Portugal. If such income is taxed in the country of origin, it must not be higher than between 5%-15% as agreed upon by the tax treaties signed with Portugal.
- If labor or self-employment income is generated from high-value-added activities conducted in Portugal, it is subject to a flat 20% special tax rate.
- The tax scheme is valid for the next 10 years, with the option to restart after suspension.
Miscellaneous Tax Benefits
The NHR tax benefits in Portugal also include several other benefits, such as:
- Income or capital gains from cryptocurrency are not subject to taxation.
- Capital gains from the sale of second-hand luxury goods that are also not taxable. This includes items such as art, luxury cars, etc.
- Inheritance is not taxed for spouses, descendants, and ascendants. Other individuals must pay a 10% stamp tax.
- Capital gains from the sale of a home are not taxed provided that the subsequent income is invested in a personal residence in Portugal, the EU, or the European Economic Area.
- Disposing of foreign assets does not carry a tax charge.
- Sizeable estates and fortunes will not be taxed, with the exception of AIMI (Addition to the Municipal Property Tax).