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 Western 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%. Management income is also taxed at the flat 20% rate (salary received as a company director). 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 and cryptocurrencies (unless held long-term). 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 or alters the program. 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 simple as moving there, getting a local address and registering. 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.
In both cases, you will have to register with the Portuguese tax office once you are settled. 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 simple 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 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.
A number of tax hacks can be used in Portugal in combination with the NHR program. To access this content, please log into your Insiders Club account. If you do not have an account, click here to learn about the benefits of membership.