Numbers: Tax Regime for Non-Habitual Residents in Portugal

At the moment, a total of 45,262 people benefits from this regime, with a significant increase from the end of 2018 to the present day.

Created in 2009, this regime granted an exemption at the level of personal income tax for private pensions earned abroad. These pensioners became residents in Portugal and benefited from this tax exemption.

As we already had the opportunity to publish, the State Budget for 2020 (OE2020) eliminated this exemption, creating a 10% rate over these incomes. This regime is also aimed to qualified people performing activities of high added value or intellectual property, industrial or specialized know-how, with a list of value-added activities that can benefit from a reduced tax paid over personal income, if you choose to receive these earnings in Portugal.

Retirees who are already benefiting from the NHR regime or who joined even before the entry into force of OE2020 can maintain this tax exemption or choose to adhere to a new 10% rate. This option is made when filling the tax return for the year 2020, which will be delivered in 2021.

The regime has been a success and the numbers have grown, with many retirees, first from the Northern of Europe, wanting to be taxed as a non-habitual resident. However, there are more young workers and entrepreneurs, that consider applying for the regime, not just for tax purposes but also because they believe in Portugal and the opportunities that it can bring in the future.

Another change that can also be detected is related to the Nationalities that join the regime, with more and more citizens from third state countries, after having their situation regularized with Immigration Services in Portugal, proceeding with their applications.

The tax incentive regime provided to NHR can be enjoyed for a maximum period of ten years, but the objective of these people is to remain in Portugal. As many of our Clients say “The climate, security, food and the cost of living are added value”.

For the country, this regime brings a very interesting tax competitiveness, gains in terms of taxes with property acquisitions and leases, boosting the real estate market, as well as in terms of the consumption of people who come to live in Portugal and also in terms of employment, that many of these foreign entrepreneurs promote.

With the amendment to the 2020 State Budget, the Government preserves the regime, without calling into question the interests of those who are already living here.

Like Portugal, there are several European countries that have tax regimes designed with the objective of attracting a certain type of income or taxpayer, but the fact that here it was decided in the beginning not to charge any tax over personal income for foreign pensioners (provided that it is paid by another Country), placed the Portuguese regime in the crosshairs of criticism from the Tax Authorities of some countries. This fact led to the change that we saw at the beginning of the year (10% tax).

This article was written in partnership with:

Martínez-Echevarría & Ferreira – Law Firm

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