Frequently Asked Questions about Non-Habitual Residents in Portugal
Why was the regime introduced?
The Non Habitual Resident regime was introduced in Portugal in 2009. One of the principal objectives of this regime was to attract individuals and their families to Portugal by making it beneficial from a tax perspective to become tax resident in Portugal. As a result Portuguese NHRs have the ability to grow their wealth in a white listed jurisdiction, to dispose of their assets and may benefit from tax exemptions, to pass on their wealth without inheritance or gift taxes, namely for children or spouse and/or to enjoy their retirement without tax on their pensions.
What are the benifits?
A Non-Habitual Resident (“NHR”) will be exempt from personal income tax on certain types of qualifying income if this income is subject to tax in the country of source under an existing Double Tax Treaty that allows for this or, if no Tax Treaty exists, were subject to tax in another jurisdiction and are not considered as Portuguese source income under domestic rules. There is also the possibility of certain types of qualifying income under the regime from benefitting from a double tax exemption i.e. an exemption in Portugal and in the source jurisdiction. A special flat rate of 20% is also applicable for certain types of income arising from a number of highly qualified activities.
What types of income are eligible for exemption under NHR status?
Salaries, provided they are paid from a non-Portuguese source. Pensions paid abroad to NHRs are also exempt from personal income tax if such pensions were subject to tax under an existing Double Tax Treaty or if the pension should not be considered as obtained in Portugal and related contributions did not allow a deduction in Portugal. Dividends of a non Portuguese source obtained by non habitual residents are also exempt from personal income tax, provided that these conditions are met.
Who is eligible?
Any individual who becomes Portuguese tax resident in accordance with Portuguese Law i.e. who has its habitual domicile in Portugal or who spends more than 183 days in Portugal in the tax year, which runs from 1st January to 31st December or has a dwelling in Portugal at 31 December of that year with the intention to hold it as his habitual residence, and has not been taxed in Portugal, as tax resident, in the previous five years.
How do you apply?
You may apply when you have become a Portuguese tax resident or before 31st March of the following tax year. If you wish to apply for the NHR regime NDR can guarantee a prompt application. NDR has a direct channel to the central and local tax authorities dealing with the NHR regime and will allow you to obtain a decision on your NHR application within a short timeframe (up to 6 months).
How long does it take?
If you wish to obtain a prompt decision on your NHR application, NDR can guide you through the process enabling you to obtain a decision within a timeframe of up to 6 months. However the first “test” occurs after the declaration for personal income tax is processed by the tax authorities and the rates of the NHR regime are applied.
Are there any guarantees?
Whilst there are no guarantees that applications will be successful, the first tranche of applications have been accepted and there appears to be a genuine will on the part of the authorities to look at applications sympathetically. As long as the individual who wishes to become a NHR in Portugal fulfils all the legal requirements to become tax resident in Portugal and also the specific requirements to become a NHR, there is no reason for the registration to be rejected. However it is possible that issues may be raised when it comes to time to assess the income tax as a NHR.
Are there any other benefits?
One of the other objectives of the regime was to boost Portuguese competitiveness both in certain sectors including new technologies. As a result, qualifying income can be exempt from personal income tax provided such fees could have been taxed under an existing Double Tax Treaty or could have been taxed in another non black listed jurisdiction.
Does the term Non-Habitual mean that I have to be tax resident outside Portugal?
No. The term “non habitual” often leads to misinterpretations. It means that under the NHR regime you are required to have your tax resident in Portugal and here live for more than 183 days per year. As this regime is valid for each applicant for a period of 10 years tax authorities used the term “non habitual”.
Can i rent instead of purchase?
Yes. Rental is an option under the NHR regime. As occurs when you purchase a property, if you are renting a property you may be required from tax authorities to provide evidence of your address in Portugal, which can be done through providing your rental contract.
Do I have to make a statement of assets?
When applying for the NHR regime, you will not need to provide any statement of assets. This will also not be required when filing your first tax return. In each tax return you will only be required to provide information on your annual income.
Is the NHR Regime stable?
This regime was implemented in 2009 but only became fully operational in 2010. As such, the regime is quite new and some of its features are still being tested. Nevertheless, Portuguese Government is making efforts to ensure the effectiveness and fully operation of the regime, which has been developing over the months.
Do I have to pay tax in the source of income after my registration as NHR?
After your registration as a non habitual resident in Portugal you are able to request an international certificate of residence to the Portuguese tax authorities. This document then has to be sent to the tax authorities of source of income and that should enable you to be exempt of tax in that jurisdiction.
Is it possible to backdate my registration as Non-Habitual Resident?
You can backdate your registration as non habitual resident in Portugal. If you register before the 31st March of the tax year after you became tax resident in Portugal it will be possible to have your tax return for the year in which you became tax resident filed under the NHR rules.
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