Tax Benefits for New Tax Residents in Portugal
If you’re considering moving to Portugal or returning to your homeland as a Portuguese emigrant, Portugal has a very attractive regime – the NHR – which offers many tax advantages.
Applications must be done by March 31st of the year following becoming a Portuguese tax resident. However, the NHR might be ending at the end of the year 2023 and if you are considering applying, you will need to become a Portuguese tax resident by the end of 2023, which may take one month to complete. For more information about these changes, read the latest news on the NHR here.
The main Advantages
- 20% special flat tax rate on labour and self-employment income from high value-added activities sourced in Portugal.
- No taxation on labour income sourced outside Portugal if taxed in the source country.
- No taxation on self-employment income from a high-value activity sourced outside Portugal under applicable tax treaties.
- Zero tax on dividends, royalties and interests sourced outside Portugal regardless of the taxation in the sourced country.
- Capital gains from movable property are generally taxed at 28%, with exemptions in some cases.
- Capital gains on foreign property are not taxed.
- Flat 10% tax rate on foreign pensions and Private Pension Funds, with an optional tax credit method to avoid double taxation.
- The same 10% rate applies to income from early retirement, preretirement, or reserve, even without active employment.
Other Tax Advantages not restricted to the NHR
- No wealth taxes or any tax on large estates, except the AIMI (0.7% to 1.5%) on residential real estate exceeding €1,000,000.
- Full exemption from taxation for gifts and inheritances between close family members; for gifts and donations to others, there is a 10% stamp tax.
- Exemption from taxation for capital gains on permanent residence sales reinvested in another personal residence in Europe.
- Tax exemption for crypto asset gains held for over 365 days.
- Exemption for capital gains on the sale of second-hand valuable goods (art, cars, collectables).
- Equal tax treatment for marriage and civil partnerships.
Duration of the NHR status
The NHR status lasts for a continuous 10-year period. without interruption. Even if you move abroad and become a tax resident elsewhere during this time, the 10-year clock continues to run. You can return to the NHR status in Portugal, but the deadline remains unchanged.
Who can apply?
Individuals, both foreigners and Portuguese, who have not been tax residents in Portugal in the preceding 5 years, but who have now become Portuguese tax residents.
Portugal NHR and Social Security
In Portugal, holders of the NHR status must register with Social Security if they earn income from work. Self-employed NHRs are required to pay Social Security contributions after an initial one-year exemption period. Contributions are calculated at a 21.4% monthly tax rate on 70% of gross invoiced income, with a cap of 12 times the Social Support Index (IAS), set at €480.43 in 2023. The maximum tax base is €5,765.16, regardless of higher income levels.
Portugal NHR and Double Taxation Agreements
Portugal has signed tax treaties with almost 80 countries based on the OCDE Model. These treaties generally allow taxation in the source country and impose restrictions on taxing non-residents. Even in cases involving blacklisted jurisdictions with tax treaties, income from such jurisdictions may be exempt in Portugal under the NHR regime.