Portugal Non-Habitual Resident (NHR) – Tax Advantages

Recent changes have been introduced within the Portuguese law, which, when combined, may be interesting for foreign nationals currently considering becoming a permanent resident in Portugal.

Tax benefits for foreign residents in Portugal

NHR individuals can benefit from the special personal income tax (“PIT”) regime for a ten year period.
Foreign-source occupational pensions may be fully exempt from PIT if:

– Its recipient qualifies for the special NHR tax regime;
– The pensions are:
– Subject to tax in the source country (in accordance with the applicable Tax Treaty) or
– Deemed not to be derived in Portugal in accordance with the Portuguese sourcing rules, i.e., not paid by a Portuguese tax resident entity nor attributable to a Portuguese permanent establishment of a non-resident.

If these requirements are met, the pension will not be taxed in Portugal. In addition, the Tax Treaty between the source country and Portugal may preclude that country from taxing the pension, resulting in potential double non-taxation.

Qualifying for the NHR status

To qualify as a NHR, an individual must meet the following requirements:
– Be tax resident under Portuguese domestic legislation; and
– Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal.
An individual is tax resident in Portugal for any year in which:
– He stays in Portugal for more than 183 days (continuously or not) during a 12 month period, which begins or ends in that tax year; or
– He has a residential accommodation available in Portugal in any day of that 12 month period, used as the individual’s habitual abode.
Any day (or part of) spent in Portugal will count as one day if the individual stays overnight in Portugal. Residency is established as of the first day of permanence in the country.

Registration as NHR

Recognition of this status is not automatic and requires activation by attending to the following formalities:

– Application for a Portuguese taxpayer number;
– Registration as tax resident;
– Application for the NHR status.

Other Tax Considerations

Wealth taxes

Portugal does not have wealth taxes. Only local taxes on Portuguese real estate apply.

Property Acquisition (IMT)

Portugal levies a municipal tax on the acquisition of Portuguese properties at rates up to 6%. Stamp tax duty at 0.8% is also due on the same amount

Annual property tax (IMI)

Portugal levies an annual municipal tax based on the registered value of Portuguese real estate at rates between 0.3 and 0.5% (depending on the municipality and the type of real estate). Stamp Duty will also be levied at a 1% rate on properties with a registered tax value equal or higher than € 1,000,000.

Inheritance tax

Stamp Duty is levied at a 10% rate on Portuguese assets only except for spouses, descendants and ascendants, who are exempt.

Gift tax

Stamp Duty is levied on gifts located in Portugal at a 10% rate except for spouses, descendants and ascendants, who are exempt. An additional rate of 0.8% is due on gifts of real estate.