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Tax regime for non habitual residents

In 2009 Portugal introduced a beneficial voluntary Personal Income Tax (PIT) regime for non habitual residents aiming to attract talent in high value added activities and Ultra and High Net Worth Individuals (UHNWI’s) and their families to Portugal.

This regime aims to boost Portuguese competitiveness both in R&D and new technologies and other listed high value added sectors. UHNWI’s and their families may also benefit, as it is often more advantageous than other similar regimes.

The new regime is available to all individuals becoming tax resident in Portugal (if they were not Portuguese tax residents in the previous 5 years), and the status is granted for a period of 10 consecutive years.

In general terms, an individual is deemed to be tax resident in Portugal if one of the following conditions is met:

  • more than 183 days are spent in Portugal in any 12-month period starting or ending in the fiscal year concerned; or
  • having spent less than 183 days in Portugal, an individual maintains a residence suggesting being a habitual residence in Portugal in any period within the above 12-month.

Depending on the circumstances, the splitting of the tax year may be applicable, i.e., an individual may be considered as tax resident only during a part of the year.

Non habitual residents will be subject to a reduced 20% PIT rate both on salaries and business and professional income of a Portuguese source arising from high added value activities of a scientific, artistic or technical nature.

Non habitual residents will be exempt from PIT on salaries of a non Portuguese source if such salaries were subject to tax in the country of source under an existing Double Tax Treaty or, if no Tax Treaty exists, were subject to tax in another jurisdiction and are not considered as Portuguese source income under domestic rules.

Business and professional income of a non Portuguese source relating to high added value services of a scientific, artistic or technical nature, as well as from intellectual or industrial property or industrial, commercial or scientific information, earned by non habitual residents abroad are exempt from PIT provided such fees could have been taxed under an existing Double Tax Treaty or could have been taxed in another non black listed jurisdiction in accordance with the provisions of the OECD.

Rental income, investment income and capital gains of a non Portuguese source obtained by non habitual residents are also PIT exempt, provided the above mentioned conditions are met.

Pensions paid abroad to non habitual residents are also PIT exempt if such pensions were subject to tax under an existing Double Tax Treaty or if the pension should not be considered as obtained in Portugal and related contributions did not allow a PIT deduction in Portugal.

In conclusion, under the non habitual residents tax regime, MNC’s will have a major advantage in placing their centres of excellence in Portugal, for example their R&D departments, and Portuguese companies will have a significant stimulus to attract the best talent.

Furthermore, by becoming Portuguese non habitual residents, the UHNWI’s are able to accrue their wealth in a white listed friendly tax environment, to dispose of their assets benefiting from tax exemptions, to pass on their wealth or estate without inheritance or gift taxes and/or to enjoy their retirement without tax leakage on their pensions.

A white listed friendly tax environment in the European Union.

Contacte-nos

Rosa Areias

Rosa Areias

Tax Lead Partner, Membro da Comissão Executiva, PwC Portugal

Tel: +351 225 433 101

Leendert Verschoor

Leendert Verschoor

Transfer Pricing Partner, PwC Portugal

Tel: +351 917 887 221

Bruno Andrade Alves

Bruno Andrade Alves

Individuals Taxation Partner, PwC Portugal

Tel: +351 213 599 671

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