In a unexpected bold move, the Portuguese Tax Authority (ATA) ruled on the 8th of October that Non-Habitual Residents (NHR) no longer have to seek prior approval to be granted the recognition of an “high added value” profession which entails a flat rate of 20% personal income tax (15% in the case of independent professionals)
A further ruling issued last week instructed the services to archive all pending applications and invites the applicants to resubmit the PIT returns filed while waiting for an approval, to benefit from the reduced tax rate since the benefit was first claimed.
In other words, until now, NHRs who are engaged in a high added value activity included on a list defined by Ministry of Finance, had to submit a request for prior recognition of the eligibility of their job in order to obtain the reduced rate granted by the statute of NHR. From now on, the taxpayer acquires the right to be taxed at the reduced rate of 20% from the moment of the registration of NHR with indication of an eligible high added value activity.
The tax can even be lower if the applicant is self-employed, since in certain conditions only 75% of the gross income is taxable, reducing the effective tax rate to 15%.
Taxpayers should keep documents (university diplomas, contracts, invoices) proving said activity for random control after the submission of the personal income tax return.
Portugal recently revamped the list of the “high added value” professions that now encompasses skilled construction workers, chefs and other traditional professions alongside with doctors, engineers, scientists and artists.
The NHR regime is widely popular and more than 30.000 individuals relocated to Portugal under this tax regime. Regardless of having a profession or if such profession makes the “high added value” list, the NHR regime grants full tax exemption to most foreign sourced income such as royalties, dividends and interests. Benefits are guaranteed for 10 years.
By João Valadas Coriel, VCA’s managing partner