Non Habitual Residency in Portugal
Portugal's non-habitual residency allows qualifying individuals to save on income tax. These individuals are often wealthy—investors, pensioners, entrepreneurs, and other foreign investors. The NHR program was set up in 2009. It was meant to attract more wealth and cultural merit to the country; this program has successfully drawn in over 10,000 participants in the past decade.
How It Works
The success of the Portuguese non-habitual residency program involves something called a Double-Taxation Agreement (DTA). A DTA allows the country of residency to tax an individual's income that is made in another country. While this sounds negative, many countries abstain from taxing residents' income to draw in foreign wealth and investment.
An easier way of thinking about DTAs and the non-habitual residency is with an example. Say you are a business owner in the United Kingdom, and you have decided to live in Portugal and take part in the non-habitual residency program. Under UK's tax laws, they do not legally have the right to tax non-UK residents in some instances. At the same time, if you are a non-habitual resident, Portugal will not tax that income either. In other words, you are making money in the UK while living in Portugal and paying zero income tax.
Portugal has signed DTAs with 79 countries.
Who Can Apply?
While there are only two primary qualifications for the non-habitual residency, it is essential to understand some of the fine print involved.
The two qualifications are:
- You must be able to reside in Portugal. You can achieve this by either having a European Union, European Environment Agency, or Swiss citizenship.
- You are not considered a Portuguese tax resident, nor have you been one for the previous five years.
Beyond those qualifications, you also need to keep in mind what Portugal considers a "resident." To take advantage of the non-habitual residency program, you will need to have a place to live by December 31 of the year in question, and that place must be kept and maintained as if you were going to live there. You can also buy a property or rent—whatever you decide; you will need to be able to show proof of a loan agreement or a year-long lease if you are renting.
Gaining a non-habitual residency status gives you several advantages, including:
- Tax-free foreign-sourced income
- Zero wealth tax
- Nearly 30% less taxation for income taxes (20% rate versus almost 50%)
- Not required to stay for a minimum amount of time
- Exempt from inheritance or gift taxes to family members
- And more
Are you interested in learning more about non-habitual residencies in Portugal? Or perhaps you have questions about other programs and schemes, including the D7 Portuguese Visa or Golden Residency. P.P.Property is a premier Estate agent company dedicated to helping you find the best locations across Portugal for the best price.
The Non-Habitual Residency is for EU, EEA, or Swiss residents only. This allows those citizens to live income tax-free in Portugal potentially.
The D7 Visa is ideal for retirees or people who earn passive incomes. It is a fixed residency and requires applicants to make a certain amount of money.