Benefits, Eligibility, Deadlines, and Everything You Need to Know About the (NHR 2.0) Status

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The Non-Habitual Resident (NHR) status is a special regime that offers reduced Personal Income Tax (IRS) for 10 years to new foreign residents (of any nationality) and Portuguese citizens who have been living abroad for more than five years.

To benefit from this favorable tax regime, the non-habitual resident must either work in a profession considered to be of "high added value" or be a pensioner. This incentive aims to attract highly qualified professionals in key industries and retirees with pensions earned abroad. Pay attention to the latest updates explained below.

What Does the Law Say?

The NHR status was introduced in 2009 under the Investment Tax Code (Decree-Law No. 249/2009, of September 23). The Portuguese Tax Authority has created a guide for the Non-Habitual Resident Tax Regime, which you can consult [chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://info.portaldasfinancas.gov.pt/pt/apoio_contribuinte/Folhetos_informativos/Documents/IRS_RNH_PT.pdf].

A Transitional Model: What Changes and What Stays the Same?

Although the Non-Habitual Resident (NHR) regime was revoked as of early 2024, a transitional period allows applications until March 31, 2025.

According to Law No. 82/2023 of December 29, those who already benefit from the NHR status can continue under the regime for the remainder of their 10-year period.

Additionally, new applicants can still register for NHR status if they meet the tax residency requirements of Article 16 of the IRS Code and were already tax residents in Portugal as of December 31, 2023.

For individuals who meet residency requirements by December 31, 2024, additional conditions apply, such as having a rental contract or an employment contract, among other requirements, which you can consult [https://diariodarepublica.pt/dr/detalhe/lei/82-2023-835864042].

Who Can Apply for the Non-Habitual Resident Status?

In addition to being a professional in a qualified field or a pensioner, you must meet two main criteria:

  1. Be considered a tax resident in Portugal.
  2. Have not lived in Portugal in the past five years.

What is Required to Be Considered a Tax Resident in Portugal?

According to Article 16 of the IRS Code, you must meet at least one of the following conditions:

  • Stay in Portugal for more than 183 days (consecutive or not) within one year.
  • Own or rent a home in Portugal and intend to use it as a permanent residence.
  • Work abroad on behalf of the Portuguese State.
  • Be a crew member on a ship or aircraft operated by a Portuguese company.

How to Apply for Non-Habitual Resident Status?

Besides meeting the requirements to be considered an NHR, you must:

  1. Register as a resident in Portugal at a Tax Office (Finanças) or a Citizen's Shop (Loja do Cidadão).
  2. Obtain a Tax Identification Number (NIF) and apply for NHR status online through the Tax Portal (Portal das Finanças) or in person.
  3. Prove that you work in a "high added value" activity if requested by the Portuguese Tax Authority.

What Professions Qualify as "High Added Value" for NHR Status?

The Ministerial Order No. 230/2019 updated the list of high added value professions. The following professionals are eligible:

  • Doctors, university professors, scientists (physicists, mathematicians, etc.), IT specialists, engineers, artists, authors, journalists, company directors, and managers.
  • Skilled professionals in forestry, agriculture, fishing, and hunting.

Check the full list of eligible professions [chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/legislacao/diplomas_legislativos/Documents/Portaria_230_2019.pdf].

Main Advantages of the Non-Habitual Resident Status

For Portuguese Income:

  • A special fixed tax rate of 20% applies to earnings in Portugal from high added value activities under Category A (employment) and Category B (self-employment).

For Foreign Income:

  • Exemption from taxation in Portugal for high added value Category A (employment) and Category B (self-employment) income, if taxed in another country.
  • Exemption for capital income (Category E), rental income (Category F), and capital gains (Category G), if taxed abroad.
  • Pension income (Category H) is subject to a 10% tax in Portugal.

How to Declare NHR Income on IRS?

When filing your IRS tax return (Modelo 3) between April 1 and June 30, you must:

  1. Attach Annex L, including:

    • The code for the high added value activity and income amounts.
    • Your chosen method for eliminating double taxation for foreign income.

  2. If you have foreign-source income, specify:

    • Whether you choose the tax exemption method or the tax credit method to eliminate double taxation.

Important Note:

Annex L is individual—each taxpayer must submit their own form.

Which Documents Prove a High Added Value Profession?

You may need to provide:

  • A declaration from your employer confirming your job role.
  • An employment contract or service agreement detailing your functions.
  • For freelancers, a business registration certificate indicating the IRS or CAE code.
  • If your profession requires registration with a professional body, you must provide proof.
  • For executives, a power of attorney document confirming your role.

When Should You Apply and How to Benefit from NHR Status?

You must apply for NHR status by March 31 of the year following the year you became a resident.

To benefit from the status, when submitting your IRS tax return (Modelo 3) from April 1 to June 30, you must include Annex L with:

  • The activity code for high added value work.
  • The income amounts earned under this regime.
  • Your chosen method for eliminating double taxation on foreign income.

Final Considerations

The NHR status is valid for 10 consecutive years and cannot be renewed after that period. If you suspend your status, you can reactivate it within the 10-year timeframe, provided you regain tax residency in Portugal.

- Source: https://www.cgd.pt/Site/Saldo-Positivo/leis-e-impostos/Pages/estatuto-de-residente-nao-habitual.aspx

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