What Is NHR Non-Habitual Resident Status ?
It is a tax status granted by Portugal in order to benefit from a special tax rate. The purpose of this new status is to attract foreigners with high value-added potential, such as retirees or skilled employees. Under certain conditions, the NHR status allows a tax rate on income of 20%
Conditions To Benefit From NHR Status
- The NHR scheme is granted to persons who become resident and provided they have not been taxed in Portugal during the five years preceding the application.
- Qualify as a Tax Resident by spending 183 days or more in Portugal within a calendar year; or having a permanent residence in Portugal on December 31st within that particular year.
The tax regime NHR in Portugal is granted for a period of 10 years non-renewable, as long as the individual continues to be considered as tax resident in Portugal during each of these 10 years. If for a year the person is not recognized as a tax resident in Portugal, then his status is not lost.
In fact, a person who has not been able to benefit from the NHR plan during this 10-year period can always return and benefit from the plan during any of the remaining years of that period, beginning in the year in which he or she becomes a tax resident again in Portugal. Attention years are not postponed later.
- Income from Portuguese sources
Non-habitual residents who earn income in Portugal or self-employed persons are taxed at a flat rate of 20%, applicable to net income won. As of January 1, 2020, the list has been modified.
The new list of professions with access to NHR status lists professional categories such as doctors, engineers, university professors or information and communication technology specialists. However, other professions, such as psychologists, architects, geologists or archaeologists, have simply disappeared. since rules and regulations will change time to time, we advise you e-mail us with your complete details in order to provide you with the updated information.
Foreign Source Income
According to the rules of non-habitual resident NHR status in Portugal, most foreign source income is exempt from Portuguese income tax for 10 consecutive years, as well as income taxable in another country. This means that foreign expatriates can potentially receive pensions, (which could be taxed at only 10%) rental income, real estate gains, interest, dividends and income from non-Portuguese sources by being tax-exempt.
It is important to note that this may apply even if income is not actually taxed in the country of origin. British dividends, for example, escape Portuguese taxation under the NHR scheme because they are taxable in Great Britain (according to the double taxation treaty concluded between the United Kingdom and Portugal). However, in practice, the “income not taken into account” rules can eliminate UK non-resident tax. As a result, you could pay no tax – in any country – on income (although gains on UK equities are not eligible for the HNR exemption).
How To Get NHR Status?
So with all these info this is the most important question.
How do I become a non habitual resident of Portugal ?
Non-habitual resident NHR status is granted by the Portuguese tax authorities, the Finanças. In order to benefit from the NHR status it is important to do things in the right order and not to rush.