With a stable political and social environment, a secure society, a highly skilled and English-fluent labour force and an excellent quality of life, it is not a surprise that Portugal is becoming a top choice for highly qualified workers, entrepreneurs and high-net-worth individuals who wish to take up residence in the European Union. So independent of your company’s location, you may be interested in expanding your team there, taking advantage of Portuguese lower cost of living, and optimizing the tax planning.
More than ever, Portugal has shown the world that it’s ready to play the leading role on the world stage, and the future looks promising. From north to south and within all cities’ potential, Lisbon is still the centre point for optimizing businesses, guaranteeing a healthy cost of living. This is due to the internal and external investment, the start-up blowout, attention from big-name companies and the relocation from the Web Summit, which provided significant growth and media attention. Lastly, technological infrastructures are equally important, both in telecommunications (broadband, fibre optics) and data centres, for the storage of large volumes of data and applications, and Portugal does not disappoint.
Why should Portugal be the top tax choice for your team?
As a part of its effort to attract foreigners, Portugal introduced the “Non-Habitual Residency” tax regime, commonly referred to as simply NHR. This regime encompasses several tax exemptions and privileges, and its main aim is to provide an opportunity to optimize taxes for certain groups of people.
In general terms, the qualification for NHR depends exclusively on being a tax resident in Portugal in a certain year and not having been a Portuguese tax resident in the five years prior.
Key advantages of applying for Portugal NHR status:
- Benefit from a unique personal income tax treatment over a 10-year period
- Enjoy tax exemption on almost all foreign source income due to DTAs (Double Tax Agreements)
- 20% flat rate for certain Portuguese source incomes (from specific professions and self-employment), as opposed to Portuguese income tax rates of up to 48%
- No minimum stay requirement
- Become part of a white-listed tax environment within the EU
- A tax exemption for gifts or inheritance to direct family members
- No wealth tax
- Free remittance of funds to Portugal
The eventual benefits and exemptions are evaluated on a case-by-case basis, considering each source of income and the source country to accurately assess how the income will be taxed in Portugal under the NHR.
It should be noted that EU, EEA and Swiss citizens have an automatic right to live in Portugal, having the legal obligation of registering accordingly, and individuals of other nationalities must obtain a residence permit.
Transitory regime
It is important to note that the government has abolished the Non-Habitual Resident (NHR) and is currently in a transitory regime where eligible taxpayers can register for the NHR statutes until March 2025.
It applies to taxpayers who were already registered as NHR by 1st January 2024, as long as the 10 years have not been exhausted.
If individuals become new tax residents by 31st December 2024, they can apply for NHR status until 31st March 2025, as long as they meet the legal requirements.
Requirements for the status include at least one of the following:
- Have a job offer or contract, or a secondment promise or agreement signed by 31st December 2023, to be exercised in Portugal.
- Have a rental contract or another agreement granting use or possession of a property in Portuguese territory, signed by the 10th October 2023.
- Have a reservation contract or promise to acquire a real estate right over a property in Portuguese territory, signed by the 10th October 2023.
- Ensure the enrollment or registration of dependents in an educational institution in Portugal by the 10th October 2023.
- Hold a valid visa or residence permit until 31st December 2023.
- Have initiated the process for obtaining a residence visa or residence permit by 31st December 2023, either by submitting an application or scheduling an appointment with the competent authorities.
- If the NHR registration request is submitted after 31st March 2025, the regime may apply from the year of submission, but only for the remaining period of the 10-year term.
Portugal maintains this transitory regime until the IFICI + program, also known as the NHR 2.0, is fully established. Learn more about this new program here.
For individuals thinking about setting up in Portugal, Softlanding will help you thrive, guide you through all the stages, assist you with the visa application process and arrange all documentation and requirements.
Choosing the right city to set up your team can be demanding, but none is more ideal than Lisbon. If you have your mind convinced, Softlanding is the right partner to support you in taking advantage of Portugal’s best jurisdiction and thereby enjoying its income tax freedom. For companies that want to benefit from the NHR regime, you can use our relocation program without establishing a local subsidiary in Lisbon, as under our Employer of Record, Softlanding will become the legal employer of your staff in Portugal.
For individuals thinking about setting up in Portugal, Softlanding will help you thrive, guide you through all the stages, assist you with the visa application process and arrange all documentation and requirements.
Note: This article was updated on 15th October 2024.
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