Portugal's 0% Non-Habitual Tax Residency: A Complete Q&A Guide
Authored by Andrea Villegas
Visadb.io had a session with Lexidy’s verified Immigration & Tax Experts: Gabriel and Joana. They delivered highly valuable and incredible information about Portugal’s Non-Habitual Tax Residency.
Here you can read more about this amazing session, or watch it in the video below:
What is Portugal’s Non-Habitual Tax Residency?
It is a special tax regime created by the Portuguese government mostly to attract new residents to Portugal. It foresees several tax benefits, from 0% tax to exemptions on income and some reduced rates.
What is the Portuguese government’s motivation for this program? What are they trying to achieve by offering this program?
It was actually created when Portugal was in an economic crisis, so it was created to attract capital, people, and investments to the country. It became a success and the government decided to maintain it as it is also attracting talent, especially in terms of tech.
Who is the target audience for Portugal’s NHR Regime?
There are two profiles for the Non-Habitual Tax Residency in Portugal: passive income earners like passive investments, and high-level professionals, to say, artists and people who are athletes and receive a lot of income due to their image. Also tech talents and people who have high-added value like engineers or doctors.
Is Portugal's NHR Regime for certain citizens or for anyone?
The main requirement is actually to transfer the tax residence to the courtroom, so it is for anyone who can come to Portugal and become a real tax resident.
Are there any minimum income requirements you must have before you apply for the NHR Regime in Portugal?
No, the benefits will depend on the type and the source of the income, so with these two pieces of information a tax advisor can go to the list of benefits, and see if it is applicable for you.
Basically, there are no restrictions on applying and getting the status, but the benefits you can get from the program vary according to your income source.
What are the main benefits of Portugal’s NHR?
- You have an exemption (zero percent tax) on all foreign passive income.
- Zero percent tax on dividends and interest; for example, if you come to Portugal and have houses in the US, or if you receive dividends from shares.
- You could also have exemptions on active income.
- If you only get pensions, you get a reduced rate of 10%.
What types of income are exempt on Portugal’s NHR? Where do I not have to pay any taxes?
0% tax rate on dividends, royalties, rents. However, it is important to consider that a tax advisor needs to analyze the treaty between countries. (In 90% of cases, people are exempt).
What is the process if I decide to apply for the Non-Habitual Tax Residency in Portugal?
Since you need to be a tax resident, you first need to be allowed to live in Portugal. You need to revise your visa options unless you are an EU citizen for which you do not have any problems. Otherwise, you can apply for the D7 visa, or the D2 visa.
Portugal Digital Nomad Visa
Working Holiday Visa
D7 - Portugal Visa for Passive Income
How do you become a Tax Resident in Portugal?
The main way to become a tax resident is to have a permanent address in Portugal, so basically via a lease agreement for a minimum of one year or buying a property.
You also need to spend at least six months in Portugal in any period of 12 months.
If I have family in Portugal, can I use their address to apply for the NHR Regime?
Yes, you can live with your family, and they need to declare that you live there.
Is there a social security tax in Portugal? Do people with the NHR Regime pay for it?
Yes, there is, but it only applies if you are working in Portugal, so if you come to live with passive investments abroad with pensions or passive investments, you would not qualify for it.
If you arrive in Portugal and work actively as a freelancer or with an employment agreement, you do need to pay the tax rate, which is around 20%.
If you earn foreign income as well as local income, how is the taxation for the NHR Regime in Portugal?
If you are working and you are under the NHR program, there is only one tax benefit applicable to Portuguese income. There is no exemption on Portuguese income; the only benefit is a reduced rate of 20% instead of the progressive ones which goes to you.
If I live six months in Portugal, do I have to file for my income for only six months or the whole year under the NHR Regime?
If you decide to come to Portugal in 2022, and you have just moved in July, then this first year is applicable as a partial residency rule, and you will only declare the income that you receive after arriving in Portugal, so you will declare in 2023 the income received from July to December.
After that, since you are a tax resident for the whole year, then you declare the whole of your income.
What kind of income should I declare if I am a Non-Habitual Tax Resident in Portugal?
It is mandatory that you declare worldwide income, to say, everything that you receive in the world must be put in the tax return in order to have the benefits applied.
What happens if I work online for foreign customers in other countries while being a Non-Habitual Tax Resident in Portugal?
If you invoice in Portugal, then it is considered Portuguese income, although it can be foreign, but, to analyze the benefits you get with NHR, a tax advisor needs to look where the money is coming from.
Can Europeans apply for the Non-Habitual Tax Residency in Portugal?
Yes, they actually do not have to apply for a visa, but register in the city hall. It is bureaucratically simpler.
Does a physical mailbox qualify as a tax address for the Non-Habitual Tax Residency in Portugal?
No, you need to have a rental agreement submitted to Portuguese authorities which is verifiable when you start the process.
How do they treat foreign investment income that is not passive, for example from trading as a full-time job? Does that qualify as a 0% Tax under the Non-Habitual Tax Residency?
This is not passive income; this is professional income as a trader. So, this is not a dividend or interest.
How is crypto income considered for the Non-Habitual Tax Residency in Portugal?
Portugal still has no law on income from trading crypto. The only piece of information we have from the tax authorities says that the income from trading crypto would be a capital gain because you are selling something. However, we can only tax capital gains derived from assets.
Crypto cannot be taxed unless it is your professional activity.
Does a boat count as proof of residency in Portugal?
If the boat has all the conditions to be your permanent home, why not? This is a gray zone area in Portuguese law. Lawyers would need to fight a little bit, but it could be doable.
We hope this Q&A Guide was useful for you, and that you are ready to begin your Non-Habitual Tax Residency process with Gabriel or Joana.
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