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Non-Habitual Resident (NHR) status end in Portugal in 2024

8 de January, 2024

Non-Habitual Resident (NHR) status end in Portugal in 2024

The Non-Habitual Resident (NHR) Status is ending in Portugal. See how this could impact you and how to take advantage of the regime's benefits.
Reading: 10 min

The Non-Habitual Resident (NHR) status in Portugal has been terminated, according to Law 82/2023 of December 29th. The Portuguese government assessed that the tax reduction scheme for new residents has achieved its proposed objectives and no longer seems justifiable. However, some individuals still retain the possibility of enrollment.

In this article, we’ll explain what it means to be a non-habitual resident, the benefits, who can still apply for the program, and the situation for those already enrolled.

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What is the Non Habitual Resident Statute (NHR)?

Created in 2009, the Statute for Non-Habitual Residents in Portugal is a special tax regime that grants the possibility of differentiated taxation on the income of individuals (IRS) who arrive in the country. It is aimed at new tax residents in the country, whether they are foreigners who have arrived in Portugal, or Portuguese citizens who have been emigrating for more than 5 years.

After registration, the regime is applicable for a period of 10 years, counting from the year in which the registration as a resident in Portugal was made. After this period, it cannot be renewed.

Person applying for the Non-Habitual Resident status (NHR).

What does it mean to be a non habitual resident in Portugal?

Non-habitual residents are individuals (of any nationality) who have transferred their residence to Portugal, and who have not had their fiscal domicile in the country in the 5 years prior to their registration as a resident.

Has the NHR ended in 2024?

According to the law, in general, it will no longer be possible to enroll in the mentioned Tax Regime. However, the law has some rules and conditions for those who are already in the process of changing.

Who can still benefit from the NHR in 2024?

If you fit into any of these cases, you can still change your tax residency in 2024 and become eligible for the NHR this year. In summary, the conditions are:

  • People who became tax residents in Portugal in 2023 or who already met the conditions by December 31, 2023.
  • Individuals who become residents for tax purposes by December 31, 2024, and have one of the following elements:
    • Employment contract or secondment agreement signed by December 31, 2023, for work in Portuguese territory.
    • Lease agreement or other agreement for the use of property in Portugal signed by October 10, 2023.
    • Reservation or commitment to acquire property rights in Portuguese territory signed by October 10, 2023.
    • Enrollment of dependents in an educational institution in Portugal by October 10, 2023.
    • Valid residence permit until December 31, 2023.
    • Initiation of the visa or residence permit application process by December 31, 2023, following immigration legislation.
    • Being a family member of the mentioned cases above.

Will the benefits be maintained for those already enrolled?

It is important to note that all those already enrolled in the NHR regime will not lose the rights they have already acquired and will be able to continue enjoying their benefits until the end of the granted period in the application.

Benefits of the NHR Regime

The advantage of becoming a tax resident in Portugal is that you can benefit from a more favorable tax regime on certain Portuguese and foreign income:

  • Amounts received for work (on their own or on behalf of others), obtained in Portugal, are subject to IRS (Personal Income Tax) at a flat rate of 20% (valid for work in technical, scientific or artistic areas);
  • Amounts received for work, obtained outside the country, may be exempt if they are taxed at source or in another country (valid for technical, scientific, artistic activities, or income from industrial or intellectual property);
  • 10% taxation on the value of foreign pensions for a period of 10 years (whether taxed or not in the country of origin);
  • Other income from abroad may be exempt from IRS, provided it can be taxed outside Portugal according to the applicable tax conventions or the OECD model (if it is not a tax haven).

These benefits are valid for a period of ten consecutive years, including the year of registration as a tax resident in Portugal.

Learn how to live legally in Portugal!

How many people are covered by the NHR scheme in Portugal?

In 2022, almost 800,000 foreigners lived in the country, according to the Foreigners and Borders Service (SEF).

According to the Court of Auditors, in 2021 57,887 people benefited from the non-habitual resident regime. In 2022 that number rose to 74,258, and the tax expenditure associated with this regime rose from 959 to 1360 million euros.

When will the NHR regime end in Portugal?

Although the decision is not yet official, it is expected that NHR status will no longer be granted from 2024. We can’t say an exact date for the closure either. There is, however, a high probability that the change will already be included in the new State Budget, with effect from January 1, 2024. Therefore, anyone who obtained tax residency in Portugal in 2023 should apply as soon as possible to be covered by the benefit.

Once again, it’s worth noting that this is a prediction, and no date has yet been announced.

Will the benefits end for those who are already registered?

No. The Prime Minister warned that those who are already enrolled will have their benefits maintained for up to 10 years, according to the regulations in force.

Origin of the Non Habitual Resident Status in Portugal

The Non Habitual Resident Status was created in 2009, with the objective of attracting to the country highly qualified professionals, holders of intellectual or industrial property or know-how, as well as foreign investors and retirees.

Who can request the NHR?

They can benefit from the statute:

  • Foreigners or Portuguese who have not been tax residents in Portugal in the last 5 years;
  • Tax residents in Portugal in the year in which they will apply for the regime. In this case you must have stayed in the country for 183 days or, if you have stayed less time, you must be able to prove a housing link.

What has changed in the NHR regime in 2020?

In 2020, the statute underwent some changes ( Law 2/2020 ), which are still valid in 2023:

Pensions from abroad

Until 2020 pensions received from abroad could be exempt from taxation Portugal, as long as they were taxed in the place of origin. The aim was to avoid double taxation on the amounts received, especially for retirees who had arrived in Portugal with the D7 Visa.

With the changes, the retirement amounts coming from abroad no longer have this benefit and are now taxed at a flat rate of 10%.

Activities considered for the NHR scheme

With the 2020 changes, some activities were excluded from the NHR: auditors, tax consultants, psychologists, and archeologists are no longer on the list.

The high value-added activities that are considered relevant to the regime are those listed in article 72(10) and 81(5) of the CIRS (Código do Imposto sobre o Rendimento das Pessoas Singulares – Personal Income Tax Code). They are the following:

I – Professional activities (Portuguese Classification of Occupations codes – CPP)

  • 112 – General Manager and Executive Manager, of companies;
  • 12 – Directors of administrative and commercial services;
  • 13 – Production and specialized services directors;
  • 14 – Directors of hotels, restaurants, commerce and other services;
  • 21 – Specialists in physical sciences, mathematics, engineering and related techniques;
  • 221 – Doctors;
  • 2261 – Dentists and stomatologists;
  • 231 – Professor of university and higher education;
  • 25 – Experts in information and communication technologies (ICT);
  • 264 – Authors, journalists and linguists;
  • 265 – Creative and performing arts artists;
  • 31 – Technicians and professions of science and engineering, of intermediate level;
  • 35 – Information and communication technology technicians;
  • 61 – Market-oriented, skilled farmers and animal production workers;
  • 62 – Market-oriented skilled forest, fishing and hunting workers;
  • 7 – Skilled workers in industry, construction and crafts, including in particular skilled workers in metallurgy, metalworking, food processing, wood, clothing, crafts, printing, precision instrument manufacturing, jewelers, craftsmen, electrical and electronics workers;
  • 8 – Plant and machinery operators and assembly workers, in particular fixed plant and machinery operators.

II – Other professional activities:

  • Managers and managers of companies promoting productive investment, provided that they are affiliated with eligible projects and with tax benefit concession contracts entered into under the Investment Tax Code, approved by Decree-Law 162/2014 of 31 October.

DO YOU WANT TO JOIN RNH? GET HELP FROM AN EXPERT >

How to join the Non Habitual Resident Tax Regime?

After your registration as a resident in Portugal, you must forward your application directly to the Finance Department (Autoridade Tributária e Aduaneira), through its website.

The application can also be made in person at an IRS service desk.

How to register as a Non-Habitual Resident?

Log in to the IRS website (you must have previously registered and have a password), you should follow these steps on the site:

  1. In the site’s search field, type “Non Habitual Resident”;
  2. Choose the “Deliver Order” option, or access this page directly by clicking this link here.
  3. Fill in the fields: start year of registration and foreign country of residence (where you lived the previous year),
  4. Declare that you meet the requirements to be considered a non-resident for the previous 5 years;
  5. Submit your request.

Track the order

You will be able to check the status of your application on the website 48 hours after making the request.

If you are approved, you can access your proof of registration.

If you are rejected, you will be notified by Finance and you can appeal the rejection, submitting documents and justifications you deem necessary.

Recognition and approval of the application

It is important to make a clarification about the recognition and approval of the request for RNH qualification. In the old rule, the applicant should request the appreciation of the Taxpayers’ Registry Services.

Currently, with the new rules, the Tax Authority warns that the homologation must be done through the IRS Declaration, being conditioned to the exercise of the requested function.

What is the deadline for joining the RNH status?

You can register in two stages:

  • Upon registration as a tax resident in Portugal ; or
  • Until March 31 of the year following to the year of registration as a tax resident (we recommend doing this immediately, before the program closes).

Should I join the NHR?

The NHR scheme offers advantages, but you need to evaluate each case individually. That is because the answer to this question will depend on your profile and the amount of your income.

If you do not feel confident to make this decision, we recommend that you seek help from a specialist to clarify your doubts. Atlantic Bridge can help you with this, talk to our consultants! But be sure to consider the possibility of joining the regime, because it can bring you great savings in the long run.

How should I declare the IRS with the NHR?

When it comes time to fill out your Personal Portuguese Income Tax return, questions regarding NHR should be in Annex L which is for reporting income that was received by non-habitual residents in one of the activities listed above.

Also in Annex L, the taxpayer must state which method he has chosen to avoid double taxation on foreign income.

High value-added income should be completed in boxes 4A, 4B, 4C and 4D and related annexes (A, B, C or D).

Income from dependent work

Income from dependent work (with an employment contract), should be indicated in table 4A in Annex A.

Professional income – simplified regime

In box 4B you have to enter the value of the professional income that was entered in box 4A of Annex B (value-added activities of industrial property, intellectual property or know how – according to the tables).

Declaration of professional income with organized accounting

For those with organized accounting the income should be indicated in table 4C of Annex C. The figures also refer to high value-added activities.

Imputed income

In this option income received under the tax transparency regime must be added. This is the case, for example, for some companies. The completion should be done in box 4D of Annex D.

Income obtained abroad

They should be indicated in Annex J, in box 5. In box 5A you should fill in employment and professional income that was earned abroad (for the case of high value-added activities). It is necessary to separate income that has been taxed abroad from income that has not.

See the informative leaflet on Non Habitual Resident published by the IRS for detailed information on filling out the IRS for those with NHRs.

DO YOU WANT TO JOIN RNH? GET HELP FROM AN EXPERT >


*This article is for information purposes only, and is not intended to exhaust the subject or to be used to make decisions of its readers on the subject.

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Atlantic Bridge

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