Portugal's Non-Habitual Resident (NHR) tax regime has been a big draw for international investors and tax residents since its launch in 2009. The scheme offered substantial tax benefits, including tax-free transactions and reduced rates on pension income and wealth for up to a decade.
However, in October 2023, the Portuguese Prime Minister announced plans to phase out the NHR regime. As of January 2024, the scheme closed to new applicants, with some exceptions for those meeting specific criteria.
What is the Non-Habitual Residence (NHR) Tax Regime?
The NHR status allowed individuals to establish tax residency in Portugal, granting them major advantages for ten years. Introduced to enhance Portugal's global competitiveness, the scheme was geared towards high-net-worth individuals and expats who could contribute to the country's economy and cultural sphere.
Benefits of NHR Tax Regime for Golden Visa Holders in Portugal
NHR status offered (and still offers some) Golden Visa holders several key advantages:
Tax exemptions on foreign-sourced income
Flat 20% tax rate on income earned within Portugal
Potential tax-free status on pension income
Exemptions on inheritance and gift taxes
These benefits made Portugal an attractive destination, especially for retirees, entrepreneurs, and high-income expats.
Changes to the NHR Tax Regime
The Portuguese Parliament approved the State Budget for 2024 on 29 November 2023, implementing a transitional regime to end the NHR. Key changes include:
Existing NHR beneficiaries retain their status for the full ten-year period
New applications closed from 1 January 2024, with some exceptions
A transitional period allows certain individuals to apply until 31 March 2024 or 2025, depending on specific criteria
Who Still Qualifies for the NHR Tax Benefits?
Individuals meeting certain conditions can still apply for NHR status:
Those who registered as tax residents in 2023 and were not taxed in Portugal in the previous five years can apply by 31 March 2024.
Individuals meeting specific criteria, such as having an employment contract or property agreement signed by certain dates in 2023, can apply until 31 March 2025
Qualifying applicants will benefit from NHR status until 31 December 2033.
Replacement of NHR Tax Regime: Application Procedure and Benefits
The Portuguese government has introduced the Incentivised Tax Status Program (ITS) or Tax Incentive for Scientific Research and Innovation to replace the NHR regime.
This new scheme offers:
20% flat tax rate on eligible professional income from Portugal
Possible exemption on professional foreign-sourced income
Exemptions on most foreign-sourced income (excluding pensions)
The benefits last for 10 years. To qualify, applicants must:
Become tax residents in Portugal
Not have been tax residents in the previous five years
Earn income in specific professional categories
Eligible categories include teachers, scientists, qualified professionals in sectors such as IT, manufacturing, tourism, and research and development.