Living in Portugal

Portugal: Non-Habitual Resident Rules Will Change This Year


Living in Portugal

New tax rules are forcing many to make a decision.

Portugal’s Non-Habitual Resident rules (NHR) were introduced by the Portuguese government to encourage ‘better off’ foreign nationals to move to Portugal. NHR is attractive because of some tax exemptions in the first 10 years of residency.  

Most income from a foreign country is currently exempt from Portuguese taxation for ten consecutive years. Given that Portuguese income tax rates range from 14.5% to 48%, this is very attractive for those seeking residency in Portugal- as many British expats have found. 

However, the State Budget Law Proposal for 2024 proposes the end of the Non-Habitual Resident regime.

What is changing?

From 1 January 2024, the NHR scheme will be rescinded. However, those that seek NHR status up to 31 December 2023 could still apply and benefit for 10 years. 

a.  The 20% flat income tax rates will be restricted to largely only scientific researchers/R&D specialists/academics. 

b.  Following on from a), the only people that will benefit from the exemption on tax from foreign income will be those individuals in a) above. 

c.  Foreign source pensions will no longer benefit from the 10% flat rate, being liable to the Portuguese progressive rates. 

Newcomers 

After that date, ‘newcomers’ to Portugal will be able to benefit from a 50% reduction in income tax for employment and self-employment for a period of 5 years. In effect this offers a progressive tax rate up to 25.5% as opposed to 50.5% for higher earners and may still be attractive for many.  

Conclusion

This has been a very attractive tax regime for those with foreign sourced income, including pensions that were only taxed at 10% pa. Anyone that has considered moving to Portugal will not have time to ‘sit on the fence’ much longer and will have to make a decision this year. For those seeking high earning jobs in Portugal, the tax regime will still be attractive. 

See also:

Tax Efficient Investing in France

Aisa International, s.r.o. is a wealth management firm with an award-winning team who provides investment advice, financial planning, and asset management for U.S., U.K., and E.U. expatriate citizens residing abroad. Holding all current regulatory licenses, including the FCA license in the UK and the Investment Licence in the European Union, Aisa International is uniquely qualified to provide personal financial advice for U.K. pensioners living outside of the U.K. Headquartered in Prague, Czech Republic, Aisa International serves its global clients where they reside through its OpesFidelio network of highly-qualified advisors. For more information, please visit www.asiainternational.cz.   

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