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Non-Habitual Residency (for Edit)

Non-Habitual Residency (for Edit)

Are you contemplating weather you should move to Portugal? for a better lifestyle or to just lay on the beach soaking up the sunshine whilst enjoying some cocktails. But did you know you could also enjoy a decade of alms-giving tax breaks? That’s because Portugal now offers new residents special tax benefits under the non-habitual resident (NHR) regime.

What is non-habitual residency?


The Non-Habitual Residency scheme was launched in 2009 by the Portuguese Government, to attract retirees and skilled professionals to Portugal using tax breaks and benefits. NHR is technically a tax holiday for your first ten years living in the country. This gives foreigners the opportunity to receive qualifying income tax free, both in Portugal and in the country of source of the income. You simply register at the local ministry of finance office as a tax resident in Portugal, you will be required to remain in the country for a period of 183, consecutive or non-consecutive, days.


If employed in Portugal, non-habitual residents can benefit from a flat 20% income tax rate – a significant reduction on the usual scale rates that reach up to 48%.So employees who normally get taxed twice that rate pay the same percentage as standard rate taxpayers You can qualify for this rate if you work in one of the predefined ‘high value-added’ scientific, artistic or technical professions. Crucially, the NHR regime can be also be highly beneficial for retirees and other expatriates, as it offers the opportunity to receive foreign income – including pensions – completely tax-free.


Most UK pensions, private pensions, company pensions and the State Pension – will not be taxed under NHR. weather its a regular income, cash withdrawal or one lump sum – as a NHR you will not be taxed in either country. Rates in Portugal are relatively low and it only affects those who owns property worth more than €600,000 (€1.2 million for couples).


If you qualify for non-habitual residence in Portugal, you may further benefit from combining these structures with the regime rules. For example, you could potentially sell a UK property or dip into your pension tax-free and reinvest in a tax-efficient structure such as a life insurance bond. Fundamentally, the best option for you will depend on your individual circumstances and aims.


The NHR programme has been successful in attracting freelancers to Portugal from all over the world. And offer them a cost effective alternative to the traditional profit/loss method of tax accounting. Entrepreneurs qualify when their annual turn over does not exceed €200 000 another advantage is that the 1st year of business in Portugal, freelancers are entitled to a 50% income tax reduction.