The Portuguese “non habitual resident” tax regime
Updated: Dec 11, 2020
The non habitual resident regime turns Portugal a European Union white listed friendly tax environment.
Portugal has a long established optional Personal Income Tax (PIT) regime for the so called non habitual residents, offering very special PIT incentives, thus attracting to Portugal talent in high value added activities, as well as the Ultra and High Net Worth Individuals (UHNWI’s) and their families.
All individuals (Portuguese or not) becoming tax resident in Portugal, can opt for such regime (granted for a period of 10 consecutive years), provided they were not Portuguese tax residents in the previous 5 years.
Non habitual residents are subject to a reduced flat 20% PIT rate, both on salaries and business and professional income of a Portuguese source arising from listed high added value activities
Non habitual residents are also PIT exempt on salaries of a non Portuguese source, provided such income is subject to tax in the source country following an existing Double Tax Treaty or if the same is subject to tax in the other jurisdiction and is not considered as Portuguese source income under domestic rules, tin he absence of such Tax Treaty.
Non habitual residents business and professional income of a non Portuguese source, relating to listed high added value activities, intellectual or industrial property or also industrial, commercial or scientific information, is PIT exempt if it could have been taxed in the source country under an existing Double Tax Treaty or could have been taxed in another non black listed jurisdiction in accordance with the OECD Guidelines (Model Treaty).
Subject to actual taxation at source pensions paid abroad to non habitual residents are also PIT exempt. To enhance the regime stability and compliance to international standards, the Budget Act for 2020 introduced a new 10% flat tax rate to qualifying pensions not actually taxed at the source country. Although such new taxation is only applicable to new non habitual residents, those already benefiting from an existing 10 years period may opt for such 10% tax (thus securing non taxation at source). Qualifying pensions should have been tax at source or should not be due by Portuguese residents, should not relate to contributions done in Portugal or that allowed for a PIT deduction in Portugal.
Some other income (rental income, investment income and capital gains) of a non Portuguese source obtained by non habitual residents are also PIT exempt, provided it could have been taxed under an existing Double Tax Treaty or could have been taxed in another non black listed jurisdiction in accordance with the OECD Guidelines (Model Treaty).
In short, the non habitual resident regime allows professionals and UHNWI’s to accrue their income and wealth in a white listed friendly tax environment.
Due to the main rules of the Portuguese general system they are also able to sell or to dispose of their assets benefiting from generous tax exemptions or exclusions (including income, wealth and inheritance or gift taxes).
Foir such reasons also family offices and multinational companies are increasingly opting for Portugal as a basis for their operations and activities.
Find out how this regime could be combined with the so called Golden Visa (Portuguese by investment residency program) leading to outstanding opportunities in Europe's west coast.
April 2020 update
For generic information purposes only
Specific advise must be obtained before any decision is taken