Non-Habitual Residency in Portugal : What Is It ?

The Non-Habitual Residency status came into effect in Portugal on January 1, 2013. Its main objective is to offer many more tax advantages to all nationals in order to attract capital to the Portuguese regions. The status of non-habitual resident is particularly aimed at individuals wishing to spend their retirement in Portugal. The same applies to residents of foreign countries who wish to enjoy their time in Portugal.
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Who is eligible for non-habitual resident status ?

Individuals wishing to benefit from the status of non-habitual resident of Portugal must meet certain conditions, as follows :

  • You must not have been a tax resident in Portugal for the last 5 years. More specifically, you must not be considered a resident and domiciled in the Portuguese region.
  • Reside in a Portuguese region for more than 183 days (not necessarily consecutive) during a year, while regularly filing the tax return and paying the property tax.
  • Have a document proving that the individual wishes to reside permanently in the Portuguese territory. At this level, expatriate citizens can buy a property that can be considered as their main residence. Likewise, individuals wishing to obtain the status of non-habitual resident may also resort to a long-term rental contract.

All of these residency criteria are also valid for any Portuguese offshore citizen (i.e., one who resides abroad) and would like to return to his or her country of origin. Any natural person wishing to obtain the status of non-habitual resident must submit his or her application before March 31 of the year following the year of his or her installation in the Portuguese region.

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Advantages of residing in Portugal with non-habitual resident status

The status of non-habitual resident offers quite beneficial tax rates. The partial exemption imposed by the General Tax Code varies according to the individuals wishing to reside in the Portuguese territory (retired, employed or non-residents exercising a professional activity). Depending on the classification, expatriate nationals can benefit from a partial exemption of 10% on their income (pensions and retirement). For public sector pensions, the tax rate will be determined in their home country.

For pensioners receiving pensions from private companies, the tax rate has been revised. It now varies depending on when the expatriates concerned moved to Portugal. Here are the new tax rates set by the Portuguese tax authorities : 

  • All retirees expatriated to Portugal before March 31, 2020 will benefit from a total exemption on pensions from private companies. At this level, the tax treaties have set the tax rate at 0%.
  • For pensioners expatriated to Portugal from April 1, 2020, they will benefit from a partial exemption with a tax rate of 10%.

Depending on the expatriate's situation and over a period of 10 years, a partial exemption of 20% will be applied to all salaried non-residents whose professional activity is in the high value-added professions. This also applies to rental income from real estate.

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How to qualify as a Portuguese habitual non-resident ?

Some people residing abroad can perfectly benefit from the status of habitual non-residents in Portugal. To do so, expatriates must first register as residents with the Portuguese tax authorities. This can be for example the "As Finanças" or the "Loja do Cidadão". As a reminder, expatriates must apply for non-resident status before the 31st of the year following the year in which they start residing in Portugal.

Before starting this administrative process, the natural person wishing to acquire the NHR must turn to the tax identification number. At this level, each expatriate must make a declaration of income so that the Portuguese tax authorities can better determine the tax rate. Whether it is income from rental properties or capital gains on real estate, the General Tax Code requires a tax obligation from habitual non-residents. 

Once you have obtained your tax identification number, you can now use the information on the finance portal "Portal das finança" to formalize the application for habitual non-resident status. To do so, it is important to send a request to the director of the taxpayers' registration service. 

Then, several other administrative steps must be taken in order to convince the Portuguese tax center. Indeed, the beneficiary must open a bank account, in order to allow the tax authorities to proceed with a withholding tax. Moreover, the opening of a bank account allows any taxpayer domiciled in Portugal to receive premiums paid and to make the automatic tax return. It also avoids the double taxation of the international tax treaty.

In order to open a bank account, or even to rent an apartment in Portugal, you will first need a Portuguese Taxpayer Number, called a NIF. You can request one directly online before starting any procedures to apply for a NHR status.

Expatriates wishing to benefit from the status of habitual non-resident must also determine the main residence. At this level, they can decide to buy a property or resort to a rental choice. Proof of the expatriate's domicile in Portugal must be attached to the files to be provided for the application for the status of beneficial non-resident.

To start all the administrative procedures concerning the obtaining of the status of non-habitual resident with the tax authorities, you must be patient. The final answer of acceptance to the Portuguese social security system can be "Accepted" or "Refused". If you are accepted, you become a non-habitual Portuguese resident. You will receive a residence card, along with a number allowing you to join the social security system of the host country. You will be able to take out a life insurance policy. You will be able to participate in social security contributions and benefit from medical coverage in Portugal.

Furthermore, expatriate citizens must check their eligibility before embarking on the expatriation project based on the acquisition of the status of Portuguese non-habitual resident. They must be careful to respect the deadlines and follow the evolution of the application, as the status is evolving and may call into question the internal law of each expatriate in the coming years.

Updated at 05-09-2023 by AnchorLess

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