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

By James Cave / Published: February 2021.
Posted in: Money & Finance / 68 Comments & Questions

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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, to name a few of the groups. Some people may also have different sources of income, with each taxed differently under NHR — and some perhaps not eligible for it.

Another issue is the name: non habitual residency sounds like it’s aimed at people who don’t live in Portugal. The opposite is actually true and to be eligible for the NHR scheme you need to be tax resident in Portugal. But even though the topic can be confusing, the intentions of the Portuguese government are positive and the aim of the NHR regime is to attract foreigners to Portugal. 

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A lot of people make the mistake of thinking NHR is some kind of residency visa. It’s not. It’s something you apply for once you’re resident, not something that makes you a resident.

Who’s eligible: 

  • Anyone who hasn’t lived in Portugal for the past five years
  • Anyone who hasn’t been on the NHR scheme before
  • Anyone who satisfies both of the rules above and also become tax resident in Portugal

Sample Rates

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

Pensions

Previously pensioners could receive their foreign income pensions tax-free in Portugal 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[1]https://www.europeantax.blog/post/102g090/new-10-income-tax-charge-on-pensions-under-portuguese-nhr-regime. There are some exceptions. For example, UK government service pensions – including local authority, army, police, teaching, fire service and some NHS pensions. These pensions do not come under NHR rules as they remain taxable in the UK only[2]https://www.blevinsfranks.com/non-habitual-resident-regime-nhr-portugal-tax-advantages/.

Employees in Portugal

High value activity professionals can benefit from a 20% flat rate of tax[3]https://www.lexology.com/library/detail.aspx?g=d343f685-dc44-4d9d-ae5a-fef9eb3a66ea (+ 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 and the self-employed need to fall into the high value activity category to benefit from NHR[4]https://philippsauerborn.com/en/complete-guide-about-the-nhr-system/. If that’s the case, you would normally be subject to 20% + social security.[5]https://philippsauerborn.com/en/complete-guide-about-the-nhr-system/

A 20% flat-rate may or may not be more advantageous than where you’re currently paying your taxes. It’s generally more advantageous for high earners.

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. 

“John recently moved to Portugal and operates a freelance business, billing clients in his home country. Last year, his invoicing totalled €75,000. As a freelancer in the Simplified Regime, he is taxed on just 35% of his total income. 65% is automatically allotted to cover operating expenses. No further accounting is required. His annual tax is €5,625: just 7.5% of his gross income, far less than the 20% flat rate charges under NHR.” [6]https://www.eurofinesco.com/en/our-publications/sole_trader/1-simplified-regime/36-e2-sole-traders-a5-tablet-colour-cover-13th/file

Entrepreneurs – 20% 

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

Applying for NHR

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. 

Applying for NHR is as simple as ticking a box on the Finanças Portal or visiting Finanças. 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. 

What To Read Next

 

68 thoughts on “NHR Portugal – A Guide to Portugal’s Non-Habitual Tax Regime”

  1. Hello James,

    Thank you very much for writing this article.
    I'm a Portuguese citizen working in Finland (EU member country) since 2015 and now I'm planning to come back home but continuing to work remotely to my current employer (Finnish company without branch in Portugal).
    Under the NHR regime, would I be paying income tax in Portugal or Finland?
    Thank you in advance.

    Reply
  2. Hi James,

    Thank you for the very useful article.

    I was wondering whether you could put me in contact with an accountant/ whoever necessary to explain what is the best way to go about benefiting from the NHR tax status.

    Me and my partner are English but currently tax residents in France.

    We want to make the move to Portugal via the D7 visa and then apply for NHR status.

    My partner technically works as an employee for an American firm, but that could be changed to contractor status. We could then create a company in Estonia or somewhere that he then receives dividends from. Would this then be eligible for the 10% tax rate?

    I want to be sure that this is possible for us, as we wouldn't want to throw away our French residency if it all went wrong! (Not being EU citizens anymore has really screwed things for us!).

    Thanks for your help in advance

    Meg

    Reply
    • Hi Megan,

      Thanks for commenting. I'll certainly put you in touch.

      A phonecall with an accountant is definitely recommended as they can confirm everything.

      Reply
  3. Hi James
    Thank you for writing one of the most helpful web sites about moving to Portugal!
    My question is, what is differences between
    Tax lawyer
    Tax advisor
    Tax accountant
    Accountant.
    I hear all these being used, not sure which ones I need!

    I am self employed working remotely and have SS, dividends and copy right money.
    Thank you!
    Marla

    Reply
  4. Thank you for the informative article. If I studied Portuguese language in Portugal for one year and then moved to a different country for one year and then returned to live in Portugal on a D7 visa, would I be eligible for NHR? Would I have to leave Portugal for five years before returning to be eligible for NHR or would the visa to study language not count as a habitual resident against the five-year period to qualify for NHR?

    Thank you.

    Reply
    • Hi Damon,

      I'm not quite sure what you're trying to achieve, but could you not take this year out first and then move to Portugal?

      An accountant can confirm the rest of your question.

      Reply
      • Thank you James. This was helpful. There are two or possibly three countries that I am considering for long-term residency. I’m hoping to spend a year or so in each and then decide on one. I was trying to get clarification on how splitting time in Portugal would affect NHR eligibility. Thanks again.

        Reply
  5. Thanks for all the information. In applying for NHR status, do I need to fill out individual applications for both myself and wife?

    Looking forward to your reply.

    Howard

    Reply
  6. Hi James,

    Thank you so much for the amazing article and lots of quality discussion in the Q&A thread! I couldn't find a similar situation as me, so adding this question.

    I am Korean who moved to Portugal in May 2021 with my family reunification visa submitted. However, along with the SEF suspending most of appointments, I only have a pending application and don't have my residence card yet. If you know a lawyer or accountant who can help me apply for NHR, may I ask the introduction plz?

    Thank you!

    Reply
  7. Hi, thanks for the great article.

    Would you be able to kindly provide an account for US-Portugal tax law?

    I would like to understand my estimated tax implications if I were to move to Portugal and work remotely for a US-based company.

    Reply
  8. Hi James,

    I am self employed and own an LCC company based in Florida. I work online providing recruiting services to pharmaceutical companies. All my income gets taxed in the US at 22-24% (federal rate). If I understand correctly from this sentence "If you’ve paid tax elsewhere, you can use that as a tax credit against your tax in Portugal." once I have paid my US taxes and file my year-end tax form in Portugal, I wouldn't be liable to also pay tax in Portugal on that same income, correct? I would just put the tax that I have paid in the US in the Portuguese tax form to get the credit and avoid double taxation. Did I understand this correctly?

    Reply
  9. Hi James,
    definitely one of the better articles I have read around the NHR scheme. I am a UK employee and have the option of working remotely. Can you refer me to an accountant as I have some questions around the scheme specific to my role.
    Thanks,
    Richard.

    Reply
  10. Hi James,
    I have an Estonian company with which I am working as a digital nomad. I was thinking about getting a residency in Portugal, while keep travelling around, renting long term.
    Do you know a good accountant I can consult with that is an expert about NHR and Estonian tax law?
    Thanks

    Reply
  11. Hi James, thank you for a great article. I am not sure if you can help with this but me and my husband still run a business in the UK (we are self employed). We also have property in the UK and in PT. We pay our PT taxes on our PT rental income. We have NHR status. Our PT accountant asked us for our UK income and said that we should be paying our taxes in PT on our UK income. My UK accountant is confused and so am I! Any advice please, thank you.

    Reply
  12. Hi James,

    Wonderful article, thank you! My husband and I are originally from Ireland but we live in the US and are planning on moving to Portugal and becoming non habitual residents. We have a roth IRA and 401ks from the USA. We have already paid taxes in the USA on the roth IRA and if I were to stay in US would owe no taxes on the roth but would owe taxes on the 401k.

    1) My question is are roth IRAs taxed the same as 401ks even though I've already paid taxes on the roth iras and do they tax 10% on everything withdrawn or only the investment gains? Doesn't seem fair or logical to treat them both the same.

    2) For capital gains tax if I sell stock in my investment accounts is everything taxed at 28% regardless of how long you own stock, in the US long term capital gains are more favorable than short term capital gains. Then does the 28% apply to the increase in value only, so if I bought it for 25k and sold it for 28k it would only apply to the 3k or is the full 28k taxed at 28%?

    Any suggestions would be much appreciated.

    Thank you,

    Catherine

    Reply
  13. Hi James,

    Could you please clarify something for me:

    - Danish citizen, moving to Portugal
    - Danish employer, salary paid in Denmark (remote work)
    - Approved under NHR
    --> isn't the whole point, that I would not pay tax in Portugal, and due to double taxation agreements, my income will not be taxed in Denmark, because I am no longer a residence there?
    If I am correct, I'd suggest correcting the Remote Working section to reflect this.

    Reply
      • Hi James,

        Well, that was my suggestion. I had missed the part about "it is necessary for that income to be actually taxed (e.g., through the application of a withholding tax rate) by the source state."

        I guess this means that I would have to either pay tax in Denmark or in Portugal. Since I do no longer have a residence in Denmark, I would no longer be tax liable there. Hence, I would have to pay tax in Portugal. One question though - I would actually be partially tax liable in Denmark on the days I spend in Denmark (working). Is it fair to presume that the Portuguese IRS would say: days you have paid tax on in Denmark are exempt from Portuguese tax, however, those days that are not taxed in Denmark, will be taxed in Portugal?

        Reply
        • I would make sure you definitely are no longer liable.

          I would speak to an account (can pass your details on) as they can advise what would happen in practice.

          Reply
      • Hi James,

        Yes, this was more or less my suggestion.

        From what I can read, there is a requirement that the income in effectively taxed in the Source country.
        It is however unclear to me what "effectively taxed" means. I can imagine that it means that by end of the tax year, I will have to show my tax bill from "the Source country" that shows my full income has been taxed. However, I also read an interpretation that it means that as long as the Source country has the ABILITY to tax your income, the Portuguese IRS does not care whether you are actually taxed or not (in the Source country).

        Any views on the above?

        Reply
        • Hi Jesper,

          I'd speak to an accountant to confirm. Generally, the NHR regime isn't about providing a way for people to pay no tax (although they did do that with pensions for a while and upset other countries in the EU) but sometimes there are grey areas.

          Reply
          • Gotcha. Thanks for the two answers (I couldn't see your first answer for some reason).
            I am in touch with a financial advisor to get clarification.

            Appreciate your time.

            Reply
  14. Hi James,

    Thanks for the informative article. Do you know how website advertising revenue would be taxed under the NHR scheme (coming from the US, like Mediavine 😉 ) Would it be 0%?

    Reply
  15. Hey James, thanks for the great article. I am a US/Spanish dual citizen, but have only ever been a tax resident of the US. I moved to Portugal this past May, and am having quite a headache finalizing temporary residency as an EU citizen (keep being told different document requirements, 6x now!), which also complicates signing up for NHR, at the health center, and, of course, getting my Covid vaccination as well. Any chance you can put me in touch with an English-speaking agency that can help me get all of the above squared away? Cheers!

    Reply
    • Hi Xavier,

      That sounds like a nightmare! Some people have had success getting the vaccine by simply going to a vaccination centre with as many residency-related documents as they have and telling their sob story - https://www.portugalist.com/covid-vaccine-problems-portugal/

      As for all the other issues, I'll put you in touch with someone that can hopefully help.

      Reply
  16. Hello Carl,

    Thank you for this excellent overview. My girlfriend and I (EU citizens) are moving to Portugal and are at a bit confused as to whether or not she would be eligible for the NHR system and how she would pay her taxes. We are curious if you have a good expert to put us in touch with?

    Basically, we currently live in Belgium and my girlfriend, who is a Customer Success professional, currently has two offers to work for two foreign companies, one in the Netherlands and one from a US company. The Dutch company, with all of its business activities in the Netherlands, would most likely hire her in the Netherlands so that she would pay taxes in the Netherlands and we understand in this case she would pay 0% taxes in Portugal? On the other hand, if she accepts the offer from the US company, which also has no presence in Portugal and which has international business activities, she could register as an independent in Portugal (but apply for NHR status) and pay only 20% flat rate + social security on ALL income?

    Best regards

    Sam

    Reply
  17. Hi, n.
    I immigrated recently – from Denmark in this case. I am going for the NHR scheme to. Live in a rented apartment in the Seixal area on the southside of the Lisbon river. Am 53 years old and some remote part time hours on accounting and taxes for danish companies.
    On the NHR, I just had a bad experience on my first try to hire a lawyer and accounting in a 2-person-company to help me on the NHR and other tax and finance related topics. After signing and paying, I get no feedback/help.

    Could I ask you to put me in contact with a relevant portuguese accountant ?

    Thanks in advance.

    Reply
  18. Thanks for a very informative article. I am a US Citizen and I collect Social Security. All relevant taxes have already been taken and consequently, I am entitled to a certain amount, tax free, through my retirement. I don't think of Social Security as a Pension and would like to know if I would be expected to pay the 10% Portugese tax on money that has already been taxed. Thank you very much for your help with this!

    Reply
    • Probably best to speak to an accountant.

      There is a tax credit system to stop people being taxed twice. If you pay taxes on the income in the US you may be able to get a certain exemption on your Portuguese taxes.

      Reply
  19. I came to Portugal late 2020. My income is from private pension and non-Portuguese rental, so I applied for and obtained NHR in March 2021. I have asked for the assistance of an accoutant in filing my 2020 Portuguese return. They have told me a tax-free lump sum paid in the UK in January 2020 may be subject to Portuguese taxation. I really hope this isn't the case. My understaning was that only pension received in Portugal (post residency) was taxable in Portugal. Is this correct? Thanks

    Reply
  20. 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
  21. Thanks for the information! This website is really helpful. A recommendation on an accountant to discuss this further would be greatly appreciated. If they could help with my D7 application, even better!

    Reply
  22. 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
  23. 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
  24. Hi James

    Great website - very helpful.
    I have acquired NHR status (that was easy!) but my contabilista is not really responding and it's frustrating. Do you have a suggestion for where to find a responsive English-speaking accountant who's well versed in NHR?

    Reply
  25. 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
  26. 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
  27. 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.

      Reply
  28. 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
  29. 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 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
  30. 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
  31. 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 James,
      Could you kindly continue the answer with a situation whereas the savings account were located in Portugal and monies were transferred between a US account to this savings account quarterly for example? Perhaps a pension in the US were to deposit into that US account, but not into the Portugal savings account.

      Thank you

      Reply
      • Hi Carl,

        If I understand the question correctly, you want to know if you'd be liable for taxes in Portugal if your pension was moved between accounts outside of Portugal?

        Reply

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