NHR Portugal – A Guide to Portugal’s Non-Habitual Tax Regime

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NHR, Portugal’s non-habitual residency tax regime, is something that has gained a lot of international excitement and attention. But, as anyone who has tried delving into the scheme will know, it can quickly become a confusing topic. 

It doesn’t help that NHR status is quite a broad tax incentive but one that has different implications for pensioners, sole traders, company owners, or those who get paid in royalties (to name a few of the groups). If you have different types of income (say a pension but you also earn money as a freelancer) they are likely to both get taxed at different rates – and one may be eligible for NHR and the other not. So, yes, it can get confusing. 

But even though the topic can be confusing, the intentions of the Portuguese government are positive. Portuguese tax rates are high and not particularly attractive to outsiders and the aim of NHR is to attract foreigners to Portugal. 

Recognising the unattractiveness of Portugal’s tax system, the Portuguese government came up with the NHR program to give newcomers to Portugal (or former residents who hadn’t lived in Portugal for the prior 5 years), and those who already have an income abroad, a 10-year special tax status. 

The best way to think of NHR is a cushion. Rather than being subject to normal Portuguese tax rates, NHR cushions the blow for the first 10 years. In many cases it allows you to pay tax elsewhere or to pay a simple flatrate. It also allows you to avoid double taxation. 

It doesn’t always mean that you’ll pay less tax than if you’d stayed in your home country, but it normally means you’ll pay less tax than if you were paying the standard Portuguese rates. And, you do have to consider what your taxes get you here – public healthcare, great weather, access to beaches and beautiful scenery, to name but a few things. 

Who’s eligible: 

  • Anyone who hasn’t lived in Portugal for the past 5 years (foreigners or Portuguese). 
  • Anyone who hasn’t been on the NHR scheme before (you can only join once).  

Sample Rates

The following are some of the sample rates. Please note: these are examples, and may not apply to your situation. 

Pensions – 10%

The NHR treatment of pensions is quite straight-forward in comparison to other areas. Previously pensioners could receive their pension in Portugal tax-free but, as of March 2020, and following complaints from other EU countries, it is now taxed at a flat rate of 10% under the NHR scheme. 

This generally applies to all income that’s paid out after retirement e.g. European state pensions, IRAs, Roth IRAs, 401ks, US Social Security, LISAs, annuities. 

There are, however, exceptions for certain government pensions such as those for civil servants, police, teachers, etc. 

Many pensioners are upset to find out about the 10% rule as often it’s the case that their pension may not be taxable in their home country or they may get a tax-free allowance there. 

The first thing to remember is what you get in return (e.g. public healthcare, quality of life, etc.) Secondly, it’s worth speaking to a financial advisor before you move to Portugal and become tax resident here to see if you can withdraw some of your pension in a lump sum under more favourable rates. 

Remote workers

Normally if you’re an employee working remotely while living in Portugal, and your income can be taxed abroad, that’s where you’ll pay your taxes. You do also have the option of paying the flat 20% rate if your activity is considered high value, so you will need to weigh up which is best for you. 

Employees in Portugal

High value activity professionals can benefit from a 20% flat rate of tax (+ social security) which, depending on how much you’re earning, may be better than the standard Portuguese rates of tax. 

Portugal has a unique list of activities that it considers high value, and this gets changed every year. Example professions that have made the list in recent years include journalists, dentists, IT professionals, linguists, general managers and executive managers of companies, hotel managers, jewellers, and electricians.  

Freelancers/Self Employed 

Like employees, freelancers generally often don’t benefit from NHR unless they fall into the high value category. If that’s the case, you would normally be subject to 20% + social security. 

A 20% flatrate may or may not be more advantageous than where you’re currently paying your taxes. It’s generally more advantageous for higher earners whose income above a certain threshold (e.g. €40k) would be taxed at a higher rate than 20%. 

However, NHR isn’t everything and you may find that, as a freelancer, the simplified regime offers you similar or even better tax rates. So, don’t despair if you don’t fall into the high value category and do weigh up whether the simplified regime is better for you. 

Note: If you carry out multiple types of work, you may find that some of it is eligible for NHR under the high value activity rules and some is subject to standard Portuguese taxes.

Entrepreneurs – 20% 

Generally speaking, most entrepreneurs (or those that own at LTD/LLC company) end up paying 20% + social security. 

Some people manage to find ways around this. For example, setting up a company in somewhere like Estonia or even Malta where corporation tax is just 5%. 

It isn’t quite as straightforward as that, particularly due to Portugal’s effective management rule. This rule basically asks where is the company being effectively managed from: Portugal or Malta? To get around this, many people have to hire staff and have an office there and so you really have to be earning quite a bit to make all this hassle worthwhile. 

How to pay 0% tax

As discussed, most people won’t end up paying 0% tax, however, there are one or two cases where people do. This is normally on income that can be taxed abroad but, for whatever reason, isn’t. Dividends, interest, rental income from abroad, and royalties are some examples of income that may fall into this category. 

A few important points

Before delving into the specifics, there are a few important points that are worth highlighting early on. 

NHR is not a residency visa

A lot of people make the mistake of thinking NHR is some kind of residency visa. It’s not. NHR is purely tax-related. 

If you’re from outside the EU/EEA/Switzerland and you don’t have an EU/EEA/Swiss passport, you will most likely need to obtain a residency permit (such as the D7 or Golden Visa) to move to Portugal. Once you have moved to Portugal, you will be able to apply for the NHR program then but the two are not connected. 

See a list of residency permits here. 

NHR is worth applying for

For most people, the NHR regime offers more favourable rates than normal Portuguese taxes. Because of this, it’s worth applying for. 

Once you become resident in Portugal (i.e. officially move here) you have a window in which to apply for NHR. That window is 31st of March of the following calendar year. So, if you move in August you have until the following March whereas if you move in February, you would have until March of the next calendar year. If you don’t apply within that period, you lose the right to apply for NHR. 

You may not think it’s worth applying if:

  • You’re a student or even still in high school. 
  • You aren’t currently earning a lot of money.
  • You don’t know if you’ll stay in Portugal. 

Even still, because you only really get one opportunity to apply, it’s generally worth applying for. 

There is a tax credit system

If you’ve paid tax elsewhere, you can use that as a tax credit against your tax in Portugal. 

For example: you pay 5% tax on your pension in another country but Portugal wants to tax it at 10%. Now, you only have to pay 5% tax to Portugal. 

Everything needs to be reported

Even if you won’t be eligible for tax in Portugal – for example, if you have income from a rental abroad – you still need to report those earnings in Portugal. 

NHR normally means tax residency in Portugal

NHR is an extremely confusing term and many take it to mean it’s for people who don’t live in Portugal. In fact, the opposite is true: NHR is for people who live here and are tax resident here. 

NHR doesn’t cover capital gains

NHR generally doesn’t cover capital gains. 

If you sell a stock, for example, that would normally be subject to 28% capital gains tax in Portugal. The same applies for precious metals such as gold or silver. 

If you sell a property abroad, however, you wouldn’t normally have to pay capital gains in Portugal. 

Applying for NHR

Applying for NHR is as simple as ticking a box on the Finanças Portal or visiting Finanças. Note: unlike some visas where you can apply as a family, with NHR each person needs to apply individually. 

Before you can apply for NHR, you need to be resident in Portugal. You don’t need to apply for NHR the day you become a resident (as it will be backdated to the day you started your residency) but you do need to apply sometime before 31st of March of the following calendar year. 

For example. You become resident in July; you have until the following 31st of March to apply. You become resident in January; you have until 31st of March of the following year to apply. 

Getting expert help

Some parts of the NHR scheme are relatively straightforward – pensions are taxed at 10%, for example – and the application itself is literally as simple as ticking a box within the Finanças portal online. 

However, unless you have a very simple income (e.g. a pension which you know will be taxed at 10%) tax-related issues aren’t always straightforward. It may hurt to pay €100 for an hour-long chat with an accountant, but it’ll definitely be money well spent – assuming you find a good one, of course. 

Because tax and finance rules change all the time, it’s generally a good idea to get an accountant, particularly if you’re self-employed. 

FAQs

The following are some of the most frequently asked questions about the NHR program.

What happens after 10 years?

After the 10 years are up, you would move onto normal Portuguese tax rates. It isn’t possible to rejoin the NHR scheme if you’ve already been on it. 

Note: you can apply for Portuguese citizenship after 5 years (in practice it takes around 2 years to process). This is ideal for people who are mainly moving to Portugal for a Portuguese passport. 

Can I pause NHR if I leave?

While most people who apply for NHR will stay for the whole 10 years, there’s no requirement to commit for the full decade. You can leave and become a tax resident elsewhere, including your previous country. 

While you can’t pause those 10 years if you leave on say year 5, you can suspend it for a few years and return. You would lose out on the years that you were away but still be eligible to rejoin the program. 

Can I join the NHR scheme even if I don’t live in Portugal?

Normally, you need to live in Portugal, however, there are some circumstances where you might be resident in Portugal but not be present in Portugal for a lot of the year.

  • If you travel full-time, for example, and don’t maintain a residency anywhere else, you could use Portugal as your base as long as you have an address here.
  • The Golden Visa program, aimed at those from outside the EU/EEA/Switzerland, allows you to be resident in Portugal but only requires you to spend an average of 7 days per year here.
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22 thoughts on “NHR Portugal – A Guide to Portugal’s Non-Habitual Tax Regime”

  1. Hi James,
    I would be grateful if you could explain the tax on pensions arrangement between Portugal and Ireland. I have retired from work in Ireland and considering retiring to Portugal and it’s very difficult to get this information.
    Thanking you,
    Marlene

    Reply
    • Hi Marlene,

      I don’t know about Ireland specifically, but if you have a pension from abroad and have NHR you would pay 10% tax on it.

      Reply
  2. I became a NHR in Portugal before March 2020 when the rate was zero. Will I be pushed up to the 10% this year? Or will my rate remain zero since I joined when it was zero? Thank you.

    Reply
    • Hi Susan,

      I assume this is for pensions? You should be grandfathered in to the zero rate. The 10% is only for anyone who applies after that date.

      Reply
  3. Hi James,

    Thank you for the useful information/article!

    I’m an EU citizen planning to move to Portugal while working remotely from there (my employer is German company), so I’ll be receiving my income outside Portugal (technically) in my German bank account.

    Do you think I’ll be eligible for the NHR in this case?

    Reply
    • Hi Kemal,

      Yes. See the section of the article dedicated to remote workers.

      Just make sure your employer is okay with you working remotely. Not all are.

      Reply
  4. Hi James,

    I am Portuguese/USA Citizen married to USA Citizen and both living and working in The Netherlands. We have property in Portugal and we intent to move to Portugal for good while working from Home remotely for European based companies. Will NHR apply to both of us and if so can you forward us to an expert in this area?

    Thanks and great site btw

    Reply
    • Hi Edgar,

      It’s open to both Portuguese and non-Portuguese as long as:

      * You haven’t lived in Portugal in the five years prior
      * You haven’t been on the scheme before
      * You become resident in Portugal

      It sounds like you’d meet those requirements. I’ll put you in touch.

      Reply
  5. Thanks for a very helpful article. Are there any travel restrictions once I apply for NHR? I understand that the requirement is for 183 days of the year, but would need to travel back to the US for work and also other European countries for vacations. I’m wondering how that affects the 183 days and if I should keep a log as proof just in case.

    Reply
    • Hi Allen,

      You’re asking a slightly complicated question without knowing all of your details.

      If Portugal is your only residence and tax residence then you should be spending 6 consecutive months or 8 months with gaps in Portugal per year during the five-year temporary residency period. This rule is more related to residency than NHR, but the two are connected.

      If you are planning to be in and out of the country a lot, it’s a good idea to keep a log. It isn’t normally asked for currently, but it could be in the future.

      Reply
  6. I have an investment portfolio in addition to my Soc. Sec. pension. I understand that the pension would be taxed at 10%. Would income and or capital gains be taxed in Portugal if the portfolio is in my home country?

    Reply
    • Hi Fred,

      This is a good question for an accountant. I’m just a writer, but can refer you to someone if you need.

      That said, I believe that shares are taxed in Portugal and subject to capital gains here. For the 10% rule to apply, it needs to be income that you can only receive at retirement age like a pension.

      As for other income, it depends on the type of income. Normally Portugal taxes you on your worldwide income, but under the NHR scheme you may be able to pay it elsewhere for the 10-year period.

      Reply
  7. Hi James,

    Thanks for the helpful write-up. My wife and I are looking to move to Portugal in the near future as remote US workers and are curious to know how this will impact the taxes we pay (both to the US and Portugal).

    We both receive income as W2 employees, although her W2 income is only from part-time work. Her main source of income comes via her personal design business where she holds contracts with individual clients. Any info/suggestions on who could help us better understand our situation RE: taxes would be greatly appreciated!

    Best,
    Josh

    Reply
  8. Hi James,

    I have NHR status in Portugal since a year, but I will be taking a job abroad for few years.
    Where in the Portal das Finanças can I request to suspend my NHR and ensuring I will not lose my status when I am back? Is there documentation required?

    Muito obrigado

    Laurent

    Reply
    • Hi Laurent,

      I think you will need to go into a Finanças office and speak to them.

      From a residency point of view, you are allowed to leave for up to two years for normal circumstances. If you’re leaving for longer and came in on a visa like the D7, you should make sure this doesn’t affect your residency rights.

      Reply
      • Hi James,

        “Before you can apply for NHR, you need to be resident in Portugal. If you move to Portugal on a visa, this will be the date that you moved to Portugal”

        You mean the 1st date arrived in Portugal , before obtained the staying permit from immigration office ?

        IE: arrived on November 01 of 2020, then the deadline of apply NHR is Mar 31 of 2021, rather than Mar 31 of 2022.
        As 2020 would be considered as 1st year of residence ?

        Reply
        • Hi Mike,

          I’ve edited the article slightly as it wasn’t straightforward. Generally, it’s March of the following year.

          If you arrived on November 01 of 2020, your deadline would be March 31 of 2021. However, if you arrived on January 01 of 2021, it would be March 31 2022.

          There is a lot of confusion over the start date for residency. I’ve heard some people say it’s the day you became resident and others say it’s when you became tax resident (which is often taken to mean when you changed your NIF to a Portuguese address). Still trying to get an answer on this one.

          Reply
  9. Great article – thanks. Does a remote worker in Portugal being taxed abroad also apply to their employer? I.e. if a US based company allows an employee to work remotely in Portugal, the employer can continue to be taxed in the US via the NHR scheme, but what’s the impact to the employer? Would they continue paying normal US taxes as if the employee was still in the US?

    Reply
    • This would need to be looked at on an individual basis, particularly when it comes to paying social security payments in Portugal and payroll. Remote.com is one service that aims to make this easier for companies.

      Reply
  10. Hi, does NHR tax apply if I hold a residency permit, am retired or semi retired drawing my income from large savings account.

    Reply
    • Hi Kenny,

      I don’t quite understand your question but I’ll try to answer.

      Yes, NHR is an option if you hold a residency permit. Despite the name, it’s something you apply once you become a resident. There are time limits on applying so be sure to read the notes in the article.

      Yes, it’s an option if you’re either retired or semi-retired. It’s basically open to everyone as long as they haven’t lived in Portugal for the past 5 years or signed up to the regime before.

      With regards to your savings account, is it located in Portugal or abroad?

      Reply

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