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Portugal’s Non-Habitual Residency Regime

Portugal’s non-habitual residency (NHR) regime was introduced in 2009.

The program allows eligible non-residents the chance to legally earn qualifying foreign-sourced income without paying taxes in Portugal.

 

How is this possible?

Part of it is thanks to the country’s 79 double-taxation treaties. According to the NHR tax regime, Portugal will not tax qualifying income from other countries as long as that country has the power to tax that income.

This is true whether or not your source country actually applies that tax, and almost all countries (with the notable exception of the U.S.) choose not to tax non-residents. 

Under the NHR, sources of income that are eligible not to be taxed include foreign-source self-employment, capital gains, investment income, rental income, royalties, and occupational pensions.

 

Note that capital gains from the sale of securities are not exempt from taxation under NHR policies. 

 

In addition to the opportunity to legitimately reduce your overall income tax, non-habitual residents enjoy a number of other tax benefits, including a tax exemption for gifts or inheritance to direct family and free remittance of funds to Portugal.

As a non-habitual resident, you also have the opportunity to earn Portuguese income taxed at a special flat rate of 20 percent.

You can apply for non-habitual resident status after achieving tax residency in Portugal. Residency can be established through the Golden Visa program.

To qualify for non-habitual resident status, you must not have been a Portuguese tax resident in the last five years. In addition, you must currently reside in Portugal and own or rent property in the country.