In 2012 Portugal took measures to streamline the so called Non-Habitual Tax Resident Regime, to attract non-resident citizens to the country.
This regime is now fully operational and offers significant tax benefits to those wishing to set up residence in Portugal, including citizens of other EU countries. Among the tax benefits are:
Exemption from taxation in Portugal, of foreign income, originated from dependent labour or pension income.
Taxation at 20% flat rate of proceeds from Portuguese origin, that result from high added value activities of a scientific, artistic or technical nature:
Architects and engineers, artists, actors and musicians, auditors and tax consultants, doctors and dentists, academic professors, investors, administrators and managers, senior executives, as specified in the Implementing Order No. 12/2010, from January 7th.
The benefits under the Non-Habitual Tax Resident Regime are granted for a period of 10 years.
Having tax residence in Portugal, also offers additional advantages, since there is no inheritance tax in Portugal for direct relatives.
Register at the local tax office as a tax resident in Portugal. This implies:
• You must have remained in Portugal for more than 183 consecutive or non-consecutive days in that year, or having remained for less time, having, at 31st December of that year, a home in such conditions that would lead to the assumption that it is intended to be kept and occupied as your habitual residence; • Request that the status of Non-Habitual Resident be attributed at the time of registering as a tax resident in Portugal, or by 31st March of the year following that in which you become a resident in Portugal.
Registration as a Non-Habitual Resident confers the right to be taxed as such for a period of 10 years as from the year of registering as a tax resident in Portuguese territory.
Once Non-Habitual Resident Status has been obtained, foreign income obtained by Non-Habitual Residents in Portugal is exempt from taxation in the following cases:
• In the case of pensioners and retired people when:
Income is taxed in the source State, in accordance with the convention to eliminate double taxation, signed by Portugal and that State;
Income is not considered to have been obtained through a Portuguese source, according to the criteria provided for in the IRS Code (personal income tax).
• In the case of income derived from employment, when:
Income is taxed in the State of origin, in accordance with the convention to eliminate double taxation, signed by Portugal and that State;
That income is taxed in another State with which Portugal has not signed any convention to eliminate double taxation, as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS Code (personal income tax);
• In the case of income from self-employment (through the provision of services of a high added value, of a scientific, artistic or technical nature, or through intellectual or industrial property, investment income, rental income, capital gains income or other increases in equity), when:
The income may be taxed in the source country, territory or region, in accordance with the convention to eliminate double taxation,
When no convention to eliminate double taxation has been signed, the OECD model convention may be applied (taking into consideration the observations and reservations made by Portugal) and as long as the source country, territory or region does not have a privileged tax regime, and as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS (personal income tax).
This information is purely informative and does not dispense consultation of the corresponding legislation and/or consultation of a qualified professional.