Understanding Portugal’s New Non-Habitual Resident (NHR) Tax Program

Portugal has a special tax program called the Non-Habitual Resident (NHR) regime. It offers big tax benefits to attract people from other countries to move to Portugal. Let’s take a closer look at what the NHR program is, how it works, and how to apply for it.

What is the NHR Program?

The NHR program started in 2009. It gives tax breaks to people who become tax residents in Portugal but haven’t lived there in the last 5 years. 

With NHR status, you can get a lower income tax rate on certain jobs. You might also be able to get foreign income tax-free for up to 10 years.

Important Update

The old NHR program ended in January 2024. A new transition program is in place until the end of 2025. You had to become a tax resident in Portugal in 2023 to still be able to apply for the old NHR by March 31, 2024.

There are also some other specific situations where you might be able to apply until March 2025. This is mainly if you have already started the process to move to Portugal before October 2023. 

For example, if you had a signed work contract, property lease or purchase agreement, kids enrolled in school, or a residence visa application submitted.

After NHR, a new program will start called the Incentivised Tax Status Program (ITS). 

Portugal Incentivised Tax Status Program

What is the ITS Program?

The ITS program was introduced in January 2024, replacing the NHR regime which ended in December 2023. 

It provides tax incentives to individuals who become tax residents in Portugal and haven’t been residents in the previous 5 years. 

With ITS status, you can get a flat 20% income tax rate on certain professional income earned in Portugal. Most foreign income, such as dividends and capital gains (but not pensions), will be tax-exempt for up to 10 years.

Who Can Apply for ITS Status?

Both EU and non-EU citizens can apply for ITS status in Portugal. You’re eligible if you:

  • Become a Portuguese tax resident
  • Haven’t been taxed as a Portuguese resident in the 5 years before applying
  • Work in certain science, technology, or research jobs, or work for a company that invests significantly in Portugal

ITS works well with Portugal’s Golden Visa program too. The Golden Visa gives you a residence permit if you invest at least €500,000 in a Portuguese fund. Many people have used the Portugal Golden Visa to get Portuguese residency, then applied for NHR status to get tax benefits.

How to Apply for ITS Status

If you meet the requirements, applying for ITS is straightforward:

  1. Get a tax identification number (NIF) and register as a tax resident in Portugal.
  2. Get a Portuguese address. You need this to register your taxes.
  3. Fill out the official ITS application form. You submit this online through the government’s taxpayer portal.
  4. Gather supporting documents like your passport, Portuguese address, and last 5 years of tax residency.
  5. Submit your complete application before March 31st of the year after you become a tax resident.

Applications usually get approved in 1-3 months. 

If approved, your ITS status is valid for 10 years. During that time, you need to meet the minimum stay requirements to keep your Portuguese tax residence.

Portugal Standard Income Tax Rate

Portugal has a progressive income tax system. Here’s a table showing the 2024 tax brackets for residents:

Taxable Income (EUR)Tax Rate (%)Deductible Amount (EUR)
0 - 7,75014.50
7,751 - 11,63021.0498.75
11,631 - 16,46026.51,151.45
16,461 - 21,35028.51,485.45
21,351 - 27,01035.02,875.75
27,011 - 39,47037.03,425.85
39,471 - 51,49043.55,988.40
51,491 - 80,75045.06,779.15

New NHR Scheme in Summary

In summary, Portugal’s new ITS program offers significant tax benefits for up to a decade. It’s a great option to consider if you’re thinking about relocating to Portugal, either for retirement, or as a freelancer, entrepreneur, or digital nomad. If you qualify, be sure to apply and take advantage of these attractive tax incentives!