8 de January, 2024
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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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.
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.
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.
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:
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.
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:
These benefits are valid for a period of ten consecutive years, including the year of registration as a tax resident in Portugal.
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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.
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.
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.
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.
They can benefit from the statute:
In 2020, the statute underwent some changes ( Law 2/2020 ), which are still valid in 2023:
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%.
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:
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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.
Log in to the IRS website (you must have previously registered and have a password), you should follow these steps on the site:
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.
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.
You can register in two stages:
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.
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 (with an employment contract), should be indicated in table 4A in Annex A.
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).
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.
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.
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.
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*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.
Author:
Atlantic Bridge
