Five key tax benefits of obtaining non-habitual residency status in Portugal
5 Tax Benefits of Obtaining Non-Habitual Residency in Portugal
The following benefits only last for 10 years. After that, you will become a regular tax resident like other citizens and will have to abide by the traditional Portuguese fiscal regime.
1 – Flat rate of 20% on certain foreign-source income: Non-habitual residents are eligible for a special flat tax rate of 20% on certain types of foreign-source income that are considered to be high value-added activities. These activities include employment income, self-employment income, and certain professional and technical services. The 20% tax rate is significantly lower than the standard progressive tax rates that apply to Portuguese residents, which can be as high as 48%. It’s important to note that this flat tax rate only applies to the specified types of foreign-source income, and non-habitual residents may still be subject to Portuguese tax on other types of income earned in Portugal or abroad.
2 – Foreign-source pension income: Non-habitual residents (NHR) who receive a pension from a foreign source will pay 10% Portuguese tax on that income, provided that the pension is not paid by a Portuguese source or derived from a period of employment or self-employment in Portugal. This rate can be particularly beneficial for retirees who receive a pension from Ireland or the UK.
3 – Certain Irish Pensions or Retirement Accounts will have tax withheld in Ireland so careful planning before becoming NHR is required to ensure you don’t get unnecessarily taxed in Ireland & Portugal. You can easily be double taxed if you hold an ARF or PRSA.
4 – Double taxation agreements: Portugal has signed double taxation agreements with over 70 countries (including all EU Countries) to prevent double taxation of income earned in Portugal by non-habitual residents. These agreements typically specify that the income earned in Portugal will be taxed in the resident country of the non-habitual resident, with a credit for any Portuguese tax paid. This can be particularly useful for individuals who earn income from multiple countries, as it can help to avoid or mitigate double taxation.
5 – Non-habitual residents may also benefit from a reduced tax regime of 10% on certain types of foreign (Non Portuguese) income such as Dividends, Royalties etc.
It’s important to note that the non-habitual resident regime has certain requirements and restrictions, and it may not be suitable for everyone. It’s advisable to seek professional tax advice to determine whether non-habitual residency status is a suitable option for you.
Many clients ask about structuring property in Irish pensions and what happens if moving to Portugal. We have solutions for this but it needs to be looked at on a case by case basis.
Imperius Wealth offers a NHR service for Irish & UK clients wishing to become an NHR resident in Portugal. This can involve an administrative process with the Portuguese Tax Department (Serviço de Finanças), the Borders and Immigration Agency (Serviço de Estrangeiros e Fro
Email Mike Shannon at Imperius Wealth at mike.shannon@
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