Making Sense of Portugal's NHR Tax Regime
If you are considering a move to Portugal, you can likely take advantage of Portugal’s Non-Habitual Resident (NHR) tax regime. NHR is one of our most commonly asked-about topics, and we're excited to share what we know about it today.
Bordr’s NHR Overview
Trying to understand NHR can be overwhelming. Here are a few guiding questions to help you approach it.
- What is NHR?
- How can you take advantage of NHR?
- How to apply for NHR?
What is NHR?
Portugal’s Non-Habitual Resident (NHR) tax regime provides tax benefits to new Portugal residents. NHR lasts for a period of 10 years and cannot be extended or renewed.
Some of the key benefits of NHR are listed below.
- Tax exemption for most foreign-sourced income (e.g. dividends, interest, royalties)
- 10% flat rate on foreign pensions & social security income
- Tax exemption for gifts or inheritance to direct family members
- No wealth tax
- 20% flat rate for Portugal-sourced income derived from a high value-added “activity” (more commonly known as occupation in other countries)
NHR Eligibility Requirements
In order to qualify for NHR, you must satisfy the following requirements:
- You recently became a Portuguese tax resident. How do I become a Portuguese tax resident?
- You were not a Portuguese tax resident in the past five years
- You have the right to reside in Portugal
Note: Minors under 18 years old cannot apply for Portugal’s NHR regime through the Tax Office Portal. In order to submit an application for a minor, we recommend that you seek advice from an account/lawyer or contact the Tax office directly.
What happens after NHR?
After NHR, if you continue to live in Portugal, your worldwide income will be subject to Portugal's progressive tax rates.
Resources
You can read more about NHR from the official Portuguese tax office guide.
How can you take advantage of NHR?
Some parts of NHR have clear interpretations. For example, all foreign pensions, whether public or private, are taxed at a flat rate of 10% in Portugal. Others, such as whether or not your occupation is on the list of high value-added activities, can be subject to interpretation.
If you’re not sure how your income sources will be treated under NHR, we recommend that you speak with a Portuguese tax specialist about your situation. In terms of timing, it’s never too early to speak with a Portuguese tax specialist about NHR. In an ideal world, we would recommend that you speak to a tax specialist before you make the move.
Need help finding a Portuguese tax specialist? Sign up for our NHR Tax Consultation.
When is the deadline to apply for NHR?
The deadline to apply for Portugal's NHR tax regime is March 31 the year after you become a Portuguese tax resident.
How do you apply for NHR?
The final piece of the NHR puzzle is the NHR application itself. You can easily apply for NHR on your own and we’ve created free guides to help you with the process.
Step 1: Update Your NIF Address with a Portuguese Address
Before applying for NHR, you will need to update your address with the Portuguese tax office to a Portuguese address. This will indicate the start date of your tax residency in Portugal. You can follow our detailed guide on how to update your address.
Step 2: Apply for NHR status
After you receive your updated NIF document with your Portuguese address, you can follow our step-by-step guide on how to apply for NHR.
Note: Make sure to select the correct start date ("ano de inicio") when submitting your NHR application.
How we got here
One of the reasons we started Bordr was to add transparency to the process of moving to Portugal.
When researching NHR, we found that most information online fell into one of two categories:
- Free content about NHR generally
- Service offerings that bundle NHR consultations with the NHR application
Both categories have their limitations: the free NHR content does not provide personalized advice for your situation and the bundled NHR offerings feel excessive given how straight-forward the application process is.
We created this NHR overview to give you a simpler way of approaching NHR. We think that it's important to get expert advice on your particular situation and that's the piece worth paying for. The rest can be handled by well-designed guides, which we’re more than happy to share.
