Non Habitual Resident Tax Regime- Portugal

Non-Habitual Resident’s Tax Regime 

Foreign source income  
Employment Income
High value added activity employment income received by a NHR shall be tax exempt from PIT provided that it is either:

  • Taxed in the source State according to the applicable Tax Treaty; or,
  • If no treaty is applicable, the income is effectively taxed in the source State and not deemed as derived in Portugal in accordance with Portuguese sourcing rules.

Other income
Foreign source capital gains, investment and rental income, together with self-employment and professional income derived from high value added activities, shall be tax exempt from PIT if:

  • the income can be liable to tax in the country of source, according to the applicable Tax Treaty or according to the OECD Model Tax Convention, as interpreted according to the Portuguese comments and reservations made to its articles; and
  • it is not deemed derived in Portugal in accordance with Portuguese sourcing rules nor deemed obtained in a tax haven.


Foreign source pensions

Foreign sourced occupational pensions shall benefit from a tax exemption if they are liable to tax in the source country in accordance with the provisions of a tax treaty or are deemed not to be derived in Portugal in accordance with the Portuguese sourcing rules, i.e., not paid by a Portuguese tax resident entity nor attributable to a Portuguese permanent establishment of a non-resident.  Foreign source occupational pensions may also benefit from a potential double non-taxation should the applicable tax treaty preclude the source country from taxing the pension.(Note that taxing rights in relation to pensions of retired civil servants and other government employees generally are allocated by tax treaties to the paying country, regardless of the residence status of the recipient).

Qualifying for the status  

To qualify as a non-habitual resident, an individual must meet the following requirements:

Be tax resident under Portuguese domestic legislation; and

  • Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal. An individual is tax resident in Portugal for any year in which:
  • He is physically present in Portugal for more than 183 days in a calendar year; or
  • On December 31 of the relevant tax year, he has available accommodation in Portugal as an habitual abode.

Necessary documents and requirements
Recognition of this status is not automatic, and requires activation by attending to the following formalities:

  • Copy of the individual’s passport;
  • An address in Portugal;
  • Application for a Portuguese taxpayer number;
  • Certificates of tax residence from the countries in which the individual was resident for tax purposes during the five years prior to his arrival in Portugal;
  • Tax assessments showing that the individual was effectively taxed in the foreign country(ies) during that five year period;
  • Filing a formal request.

Other documents will be required if the individual is an employee or is self-employed rendering services eligible as derived from a high value added activity.
Copies of original documents must be notarized before being submitted.

Other considerations

Wealth taxes
Portuguese tax law does not envisage wealth taxes. Only local taxes on Portuguese real estate apply (as described below).   Municipal Property Transfer Tax Portugal levies a municipal tax on the acquisition of Portuguese properties at rates between 0 and 6%.

Municipal Property Annual Tax

Portugal levies a municipal tax annually based on the registered value of Portuguese real estate at rates between 0.4 and 0.8% (depending on the municipality and the type of real estate –buildings or land).

Inheritance tax

Inheritance tax on Portuguese assets is levied as Stamp Duty at a 10% rate except for spouses, descendants and ascendants, who are exempt.

Gift tax

Gift tax on Portuguese assets is levied as Stamp Duty at 10% rate except for spouses, descendants and ascendants, who are exempt. An additional rate of 0.8% is due on gifts of real estate.

Fees   

Fees for the regular services can be sent on request.

Legal notice   

Please note that this brochure is a brief introduction to possible tax consequences associated with a move to Portugal. It is intended only to be summary and simplifications have therefore been made. We strongly advise that individual advice be obtained before

Sources:
Deloitte
PricewaterhouseCoopers & Associates Information Flyer

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