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The End of the Non-Habitual Resident (NHR) Tax Regime as We Know It

Nov 30, 2023

The Portuguese parliament has approved the termination of the Non-Habitual Resident (NHR) Tax Regime. As we discussed in our previous article, this decision is final, and the state budget for 2024 has already been approved.

However, those who wish to enjoy this special tax regime can do so until the end of 2024, provided that they meet any of the following requirements:

Promise or employment contract, promise or secondment agreement signed by 31st of December 2023, whose duties must take place in Portugal;
Lease or other contract granting the use or possession of the property in Portuguese territory concluded until 10th of October 2023;
Reservation contract or promissory contract for the acquisition of real rights over property in Portuguese territory concluded by 10th of October 2023;
Enrolment or registration of dependents at an educational establishment domiciled in Portuguese territory, completed by 10th of October 2023;
Residence visa or residence permit valid until 31st of December 2023;
Procedure initiated by 31st of December 2023, for granting a residence visa or residence permit, with the competent authorities.

The Non-Habitual Resident (NHR) Tax Regime has been in place since 2009 and allows individuals who want to have tax residency in Portugal to benefit from a special tax regulation for 10 years, with a 20% tax rate applied to category A (dependent) and B (independent) income. Although this special tax regime has come to an end, the state budget has introduced a new tax incentive, especially for people who teach in higher education or do scientific investigations or come to work for Startup companies.

In addition to the workforce mentioned earlier, the workers who are "qualified for job positions recognised by the Agency for Investment and Foreign Trade of Portugal, E.P.E., or by IAPMEI - Agency for Competitiveness and Innovation, I.P., as relevant to the national economy, particularly within the framework of attracting productive investment" and "job positions or other activities carried out by tax residents in the autonomous regions of the Azores and Madeira, under the terms to be defined by regional legislative decree" are also eligible for this new tax benefit.

Moreover, people who work for certified startups are eligible for this new tax benefit. Startups are defined as companies with no more than 250 employees, an annual turnover of no greater than 50 million euros, and less than 10 years in operation. They must also have their headquarters or representation in Portugal, or at least 25 employees within the country. Furthermore, they cannot be a merger or division of a larger company.

These are still alternative paths for the Non-Habitual Resident (NHR) Tax Regime for those who wish to benefit from a more favourable tax regime in Portugal.

If you need any help regarding this matter or other related issues, please contact us, we will be delighted to assist you.

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Benefits of Personal Income Tax for Young Professionals

by Diogo Pedro • 07 May, 2024

Over the past four years, young workers who earned their first income as employees or self-employed individuals have been eligible for a tax benefit in their personal income tax, known as 'IRS Jovem”. This benefit is intended to offer young workers the possibility of minimising their tax obligations, allowing for a higher amount of disposable income. To enjoy this benefit, taxpayers are required to comply with the following requirements: Have a complete course of level 4 or higher studies on the National Qualifications Framework (high school level acquired through double certification and aimed at pursuing higher education such as a bachelor’s degree, a master’s degree, or a PhD). Age between 18 and 26 years old. Considered independent, i.e., no longer included in the parent’s household for tax purposes. The specified age limit includes individuals up to 26 years old, inclusive. However, this limit is extended to 30 years old for taxpayers who have completed a degree at level 8 of the National Qualifications Framework (PhD). In 2024, this tax benefit has been improved, with increased tax exemption rates and an expanded range of applications over time. In this sense, upon completing the course of studies required, the individual may qualify for an exemption from personal income taxes for a duration of 5 years, as explained in the following details: 100% of the income in the first year with a cap of 40 times the Social Support Index – “IAS” value (€20.370,40). 75% of the income in the second year with a cap of 30 times the IAS value (€15.277,80). 50% of the income in the third and fourth year with a cap of 20 times the IAS value (€10.185,20). 25% of the income in the fifth year with a cap of 10 times the IAS value (5€.092,60). Moreover, the exemption can only be used once by the same taxpayer and should be requested when preparing and filing the personal income tax return. It is also important to acknowledge that this benefit has implications for withholding tax, allowing adjustments to the value subject to withholding tax. However, be aware that, while the withholding tax rate applied corresponds to the total amount of income earned, it is only applicable to the portion that is not exempt. If you have any questions or need assistance with this or related matters, feel free to reach out . We would be delighted to help you.

Being an urgent process, this legal action has priority over legal actions not deemed to be urgent.

My application has been pending for months with the Immigration Office - AIMA. What can be done?

by Sara Ferreira • 29 Apr, 2024

It is known to the general public that the Portuguese Immigration Office (AIMA) has not been able to timely approve residency authorisation requests within the legal timeframe defined to do so, thus resulting in residency applicants having their applications on hold for months, in some cases even years. One way to tackle this inaction from the Immigration Office is to file a legal action, namely the Subpoena for rights, freedoms and guarantees of the citizens.