Non-habitual residents Portuguese special tax regime
Portugal created a special personal income tax regime for new residents which offers attractive tax opportunities for foreign pensioners.
This summary provides a brief overview and explains the main guidelines and potential implications of this regime for foreigners and Portuguese individuals settling in Portugal after an extended period of living abroad. It deals mainly with individuals receiving pension income. A separate brochure is available for employed and self-employed expatriates.
Overview of the regime
Non-habitual resident individuals (“NHRs”) shall benefit from the special tax Personal Income Tax (“PIT”) regime for a ten year period.
A foreign-source occupational pension may be fully exempt from tax if its recipient qualifies for the special tax regime of NHR in Portugal. In addition, the tax treaty between the source country and Portugal may preclude that country from taxing the pension, resulting in potential double non-taxation.
One of the requirements is that the pensioner be a non-habitual resident for Portuguese income tax purposes. The second requirement is that the pension is an occupational pension, paid from a foreign source.
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Additionally, the pensions should be either subject to tax in the source country in accordance with the provisions of a tax treaty or deemed not to be derived in Portugal in accordance with the Portuguese sourcing rules, i.e., not paid by a Portuguese tax resident entity nor attributable to a Portuguese permanent establishment of a non-resident.
If these requirements are met, the pension will not be taxed in Portugal and, depending on the provisions of the applicable tax treaty, it is usually also non-taxable in the source country for the duration of residence in Portugal. (Note that taxing rights in relation to pensions of retired civil servants and other government employees generally are allocated by tax treaties to the paying country, regardless of the residence status of the recipient). Qualifying for the status To qualify as a NHR, an individual must meet the following requirements:
Be tax resident under Portuguese domestic legislation; and
Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal. An individual is tax resident in Portugal for any year in which:
He is physically present in Portugal for more than 183 days in a calendar year; or
On December 31 of the relevant tax year, he has available accommodation in Portugal as an habitual abode. Necessary documents and requirements Recognition of this status is not automatic, and requires activation by attending to the following formalities:
Application for a Portuguese taxpayer number, for which a copy of the individual’s passport and an address in Portugal is required;
Application for the NHR status, including a written affidavit stating that the individual was not resident, for tax purposes, in Portugal, in the five years preceding the request. Nevertheless, in case the Portuguese Tax Authorities have any evidence or doubts about the lack of veracity of any of the elements included in the written affidavit, additional documents can be required, such as tax residency certificate(s) and any other documents able to prove that the personal and economic interests of the individual were located in another State in the five years preceding the arrival in Portugal.
Other documents will be required if the individual is an employee or is self-employed rendering services eligible as derived from a high value added activity. Copies of original documents must be notarized before being submitted. The NHR status has to be requested until March 31 of the year after taking up residency in Portugal. Other types of income This regime allows other types of income to be tax exempt in Portugal if:
It may be taxed in the country of source in accordance with the applicable tax treaty; and
The income is not sourced from a tax haven.
The exemption from taxation of foreign pensions is one of this regime’s main features
Portugal does not have wealth taxes. Only local taxes on Portuguese real estate apply (as described below). Municipal Property Transfer Tax Portugal levies a municipal tax on the acquisition of Portuguese properties at rates between 0 and 6%. Municipal Property Annual Tax Portugal levies a municipal tax annually based on the registered value of Portuguese real estate at rates between 0.3 and 0.8% (depending on the municipality and the type of real estate – buildings or land). Inheritance tax Inheritance tax is levied as Stamp Duty at a 10% rate except for spouses, descendants and ascendants, who are exempt
Gift tax is levied as Stamp Duty at 10% rate except for spouses, descendants and ascendants, who are exempt. An additional rate of 0.8% is due on gifts of real estate. The information provided in this document is a brief summary of complex tax rules and Portuguese tax legislation that should be considered before moving to Portugal. Please note that there may be tax implications in other countries as well. Tax treaties concluded by Portugal may also be relevant to some of the above taxes.