If you are considering relocating to Portugal, the Portuguese Non-Habitual Residence (NHR) program is worth looking into.
It’s a highly beneficial scheme that will allow you to take advantage of tax breaks and reduce your tax burden in one of the most beautiful and welcoming countries in Europe.
In this article, we’ll explain how NHR works, who it’s open to, what requirements you need to fulfil, and how to go about getting approved by the government!
How to qualify
In order to qualify for the NHR regime, applicants must fulfil certain requirements.
The first is to hold a valid and effective residence permit issued by the Portuguese Immigration and Borders Service, or SEF. In other words, the non-habitual resident visa is only available to individuals who are already living in Portugal. Expats must also have a commitment to live in Portugal for a period of no less than five years; as of the issuance date of their residence permit.
Unlike other countries with similar tax breaks for foreign residents, such as Panama and Uruguay, there are no specific requirements for employment status. Applicants may be employed or self-employed.
Finally, applicants must have previously declared their worldwide income and assets to Portugal’s Tax and Customs Authority, or AT. Additionally, those who have been granted a Portuguese residence permit under any other residency program—such as golden visas—are ineligible for Portugal’s NHR regime. The Portuguese government has indicated that they are working to extend these benefits to children born in Portugal and students studying in Lisbon, although there is no confirmed date as of yet. These individuals may be eligible for Portugal’s resident program called Foreigners with Family Members Residing in Portugal.
How much should I save?
The main tax incentive under Portugal’s NHR program is a flat 20% tax rate on Portuguese source income, regardless of whether it’s generated inside or outside of Portugal.
However, that’s just a start.
To claim NHR status you must be able to prove that you have either never had a residency status in Portugal; or were a resident for fewer than 730 days in any of a 10 year period, unless you are not subject to Portuguese income tax under double taxation agreements.
That means expats need to prove they have their income taxes paid outside of Portugal (usually through a local account). Not only that but they must also contribute €1,000 into one of two Portuguese funds set up specifically for NHR applicants. These are worth €700 each and provide guarantees on interest rates and can provide aid with health issues and even housing costs if used correctly.
How do I get my NHR and how long does it take?
Portugal’s NHR program is an attractive residency scheme aimed at non-EU nationals who want to either work in Portugal or be there as private investors.
The official name of the scheme is Residency Certificate for Investment Purposes, but it’s more commonly referred to as a NHR (or non-habitual resident) permit. To qualify for one, you need to apply for a NIF (Portuguese tax identification number) and register as a tax resident. The main criteria which allows individuals to be considered a resident are:
- If you stay for more than 183-days in Portugal within a 12-month period
- Or on any given day, have had housing under conditions which lead you to maintain and occupy it as a habitual residence
- Have a certificate of residency
However, applicants cannot have been considered as a resident in Portuguese territory in any of the 5-years prior to the one in which they apply for an NHR.
The application for registration as a Non-Habitual Resident must be made before March 31st of the year following that in which you become a resident in Portugal. The NHR benefit will be held for 10-years; non-extendable – as long as you are still considered a resident in Portugal.
Will I pay taxes on my income abroad?
If you are a non-resident in Portugal, meaning that you are registered with your local tax office as resident elsewhere, then you will be subject to Portuguese income tax in one of two ways: firstly by way of source taxation if your income is paid directly into a Portuguese bank account (and not placed into a foreign bank account), or secondly by way of residence taxation if your income is earned outside of Portugal.
The former typically taxes around 25% on your total taxable income and latter around 20%. If you’re considering taking up residency abroad with an eye to incorporating a new business it’s worth doing some research into how those profits might be taxed.
Do I need health insurance?
The NHR program has been successful due to Portuguese resident’s natural sense of hospitality. This means that if a foreign resident should fall ill, they are entitled to access medical services in Portugal for free or at a discounted rate.
As soon as you apply for your visa, you will be provided with a ‘cartão europeu de saúde’ (European Health Card) allowing you access to healthcare in any of EU states. However, if you do not intend on having health insurance when residing in Portugal it is still advisable to keep your European Health Card in your wallet; just incase.
There is no standard system for expats and locals accessing state funded healthcare and so its important that you know what your entitlements are before using them.
Who can help me apply?
If you’re thinking of making Portugal your home and need help formalising that plan, talk to our multi-lingual team of lawyers. We will make sure that your application is successful and you are able to move to Portugal as quickly as possible.
There are a number of red tape issues involved in NHR applications so it’s important to contact an experienced legal team such as RHJ Law. We’ll not only aid you in moving to Portugal; we’ll provide you with expert advice for maintaining your non-habitual residency once you arrive.
Working with our trusted partners; we can advise you on where to settle and how to go about purchasing property in Portugal.
We look forward to hearing from you soon!
