This article intends to clarify a lot of misinformation that we find on the internet about the non habitual resident tax regime in Portugal and Portugal residency.
The decision of moving to Portugal or to retire in Portugal can have a great impact on your taxation, therefore we strongly advise you to consult a relocation and tax Advisor before you make a decision.
1. The NHR Portugal is a tax program that does not require that you became a resident in Portugal: This is the first myth that must be clarified. Many people think that the NHR is a tax regime that can be applied without moving or relocation to Portugal “that is why it is called non habitual resident!” – I hear this a lot. Totally wrong, to apply for the NHR Program you need to become a tax resident in Portugal, meaning you need to spend more than 183 in the country and have a visa or resident permit that allows you to become resident in the country (among other conditions). The name Non Habitual resident actually refers to the fact that you were not a tax resident in Portugal in the past 5 years – one of the requirements to apply for this program.
2. Only the Golden visa gives me the right to apply for the NHR: This is one of the most common misconceptions about the NHR regime, in fact, from all the visas and residency permits you can apply for Portugal, the Portuguese golden visa is the only available route to obtain becoming a tax resident in the country because it is the only type of residency permit that doesn’t require your stay in the country for more than 183 days. So, if you are a holder of a residency permit based on investment (golden visa) you have the option of becoming a tax resident or not. Unlikely the other types of residencies that require the minimum stay of 183 days in Portugal and will, in fact, turn you into a tax resident in Portugal, for instance the residency permit based on retirement or passive income (also known as the D7 Visa).
3. The NHR will grant me 10 years of tax exemption on my income: Not true. The NHR program allows people who relocate to Portugal to obtain some tax benefits on the income that they have generated abroad, such as: profits, capital gains, interests, royalties. However, this is not a simple rule, it will also depend on the tax rules of the country where the income is from and the taxation agreements between Portugal and those countries. Also, this does not apply to the income you may have in Portugal in the future. However, if you have earned income from employment in Portugal, under the NHR status, the taxation can be reduced to a 20% flat tax rate if it is considered a high value work or profession. Also please keep in mind that any income generated in countries which Portugal considers to be tax havens are not tax exempted under the NHR Regime.
4. The NHR is going to be granted to me automatically, once I become a tax resident in Portugal: Well, in Portugal it is very rare that something is granted automatically, we are talking about a very bureaucratic country. So, once you become a tax resident in Portugal, meaning you are registered at the Portuguese tax office with a Portuguese address, you have until the 31st of March of the following year to request your non habitual resident status. This rule is very important and if you don’t pay attention you can lose this 10 year tax benefit and living in Portugal can become a burden, in terms of taxation.
5. Once I have the NHR in Portugal I don’t need to submit any tax returns: This is a very common mistake but please keep in mind that despite the fact that you were granted with a 10 year tax benefits special regime, you are tax resident in Portugal, therefore you must submit your personal tax returns in Portugal every year and declare your worldwide income. There is a special model to be submitted under the NHR program and I strongly advise you search for a good professional to help you with that.
6. If I decide to apply for Portuguese citizenship after 5 years of legal residency in the country, I will lose the NHR tax benefits: This is not true. Once your NHR status is approved it will be valid for 10 years even if, you become Portuguese citizen within that period! Please note that the NHR is also applicable for Portuguese that where not tax residents in the country for the past 5 years but decided to return to Portugal.
We hope this article has helped you to clarify the most common doubts about the Portuguese NHR regime and Portuguese residency. If you have any questions on how to get residency in Portugal, please look for professional advice since these are very specific matters that can have a great impact on your decision to relocate to Portugal.
