Non-habitual tax residents

Taxes

Portuguese tax legislation establishes a favorable tax regime for non-habitual residents in Portugal, as follows:

  • a special tax rate of 20% applicable to employment and self-employment income derived from a “high value-added activities” exercised in Portuguese territory, as per a list published by the Portuguese tax authorities;
  • employment income from a foreign source will be exempt from taxation, if such income is taxed in the State of source;
  • tax exemption (with progression) for foreign-source income (professional income, pension, rental income, capital gains, interest, dividends, as well as other investment income), provided certain conditions are met. In most cases, capital gains on the sale of securities are taxable at a flat rate of 28%;
  • no specific inheritance or gift tax; full tax exemption for gifts on inheritance to spouse, descendent or ascendants; Inheritance or gift to other individuals will be either not taxable or subject to a flat 10% Stamp Tax rate;
  • no wealth tax and free remittance of funds either in Portugal or abroad

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Residency rules

To qualify as non-habitual tax resident, an individual must be considered as tax resident in Portugal in a certain year and he/she cannot have been tax resident in the previous 5 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.

An individual may benefit from this regime during a 10-year period starting from the year of his/her registration as tax resident in Portugal.

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How to become resident

Register with the local tax authorities, very simple for EU and Non-EU citizens. However, Non-EU citizens need immigration permission.

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Pensions

The legislation provides for exemption (with progression) on foreign pension income, if:

  • the income is taxed in the other country in accordance with the Double Tax Treaty (DTT) between Portugal and that country; or
  • the income may not be regarded as Portuguese-source in accordance with domestic legislation.

As most DTT’s grant exclusive taxation rights on pension income to the country of residence, in practice, foreign pension income may be excluded from taxation both in Portugal and in the country of source.

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How can we assist?

  • Analysis of the possibility of applying for the non- -habitual resident status and its tax implications.
  • Preparation and submission of the application for the registration under the non- -habitual resident regime;
  • Preparation and filing of Portuguese personal income tax return (including a tax estimate) and related compliance.

Contacte-nos

Jaime Carvalho Esteves

Partner, PwC Portugal

Tel: +351 213 599 601

Leendert Verschoor

Partner, PwC Portugal

Tel: +351 213 599 671

Ana Duarte

Director, PwC Portugal

Tel: +351 213 599 671

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