The Portuguese NHR regime is a popular initiative made by the Portuguese government to receive a high level of foreign investments and individuals. For applicants, NHR is like a tax holiday for the first ten years of living in Portugal. Participants of the NHR program who become employees in Portugal can obtain a 20% income tax rate. This is considered much better than the typical tax rate that can get as high as 48%. In order to get the 20% rate, you need to be employed in one of the professions that have been pre-defined by the Portuguese government.
The NHR program is also very rewarding for retirees and expats because it provides some specific benefits. For example, pensions, which are usually considered foreign income, are completely tax-free.
Foreign Income Under NHR
Thanks to the NHR program, foreign-based income is considered tax-free by the Portuguese government for ten years. It doesn’t matter whether the foreign income is taxable in the home country or not; the NHR does not differentiate. Rental-based income, capital gains, dividends, pension income, all become tax-free under the NHR.
Different types of pensions are also considered tax-free with the NHR. Private pensions, company pensions, and even state-based pensions won’t be taxed, thanks to the NHR. That means that if your primary income comes from pension money and if you successfully apply to the NHR program, you won’t be taxed in Portugal.
That being said, the Portuguese income tax might apply to you on specific occasions, even if you have successfully completed the NHR regime. For example, if you are a British resident, and you want to pull out your entire pension fund within less than ten years, you might lose your tax-free NHR benefits. That is why you should, of course, get advice from a cross-border law specialist before you decide what to do with your pension.
Who Can Apply For NHR?
People from all nationalities, theoretically, can apply for NHR, as long as they have not been a Portuguese resident for the last five years. If you are interested in applying, you need to comprehend and follow Portuguese residency rules. While even non-EU citizens can apply to this program, EU citizens have more privileges. A European Union citizen can spend 182 days every year in Portugal to obtain a Portuguese residency. An alternative to this scenario is buying a home in Portugal.
Non-EU citizens may find it a bit harder to apply because they might not be able to spend 182 days a year in Portugal without a Schengen visa. However, many individuals from outside the EU have been residing in Portugal for a while, and thus, they become eligible for NHR.
Keep in mind that you will need to maintain a residency status in Portugal. You must have a place of stay before the end of the year (December 31st) of the same year. The place of stay must be intended to be occupied just like a normal home and you can just rent it for 12 months. The important part is that you must be able to show that you officially and legally live in a place in Portugal. That will be enough for a proof of residence.
For rent, proof of loan agreement will be enough. If you own the property yourself, you must show a purchase deed.
Portugal Golden Visa and NHR
One more important thing to note, Non-EU/EEA and Swiss residents can use the Portugal Golden Visa program and get into the NHR program. If you are an investor who got their Portuguese residency through Golden Visa, you can also join the NHR program. There are many specialists and consultants out there that can help you get your NHR if you are eligible for a Golden Visa. Make sure you do your research properly.
High-Value Professions That Receive The Most Tax Benefits
Under NHR, some professions are considered “better” than others. They can provide a high level of economic and/or cultural value and are prioritized in terms of tax benefits in the NHR program. Those professions include architects, engineers, singers, geologists, sculptors, auditors, painters, musicians, tax consultants, ballerinas, surgeons, doctors, dentists, medical physiatrists, psychologists, college lecturers, archaeologists, software consultants, software developers, biologists, computer consultants, news agencies, biotechnology researchers, natural science researchers, designers, investors, managers, directors, and several other jobs.
Different Types Of Income And Different Rules Under NHR
The NHR program has different rules for different types of income. For employment income, 20% of the flat income tax rate is applied, as long as the profession is eligible for the NHR. As for self-employment income, the applicants have an option to either be taxed at a 20% flat rate, or they can choose the standard progressive rates, assuming the percentage is lower. If the individual comes from a country with a double tax agreement with Portugal, they could be tax-exempt as long as they have one of the eligible professions, or if they are pensioners.
What To Do To Apply For NHR
As mentioned earlier, you need to have proof of residency. Then, you will need to register in a local town hall with your passport, EHIC card, and the proof of address. After you pay the fee and get register, you need a professional service that can help you get a NIF (Numero de Identificação Fiscal) and with the NHR process. You shouldn’t attempt to do the groundwork if you’re not sure about how to proceed, on PTNHR we can help you with all this process, you just need to apply here.
If you want to reside in Portugal, having a NIF is mandatory. You can get it in a local government finance office. At the same office, you can register to become a tax resident. Once you are done with everything, you can then apply for NHR on the government’s financial portal web page. We will assist during all the steps of the process, saving you a lot of paperwork and time.
Remember that your proof of residency must be registered before December 31st. The NHR application itself must be registered before March 31st. Typically, you will need around 14 days before you can find out whether your NHR application is accepted or rejected.