The Portuguese Non-habitual Resident regime

The tax regime of “non-habitual residents” was created with the intention of attracting to Portugal the so called “high net worth individuals”, pensioners and professionals of high added value activities intending to rival with some competing systems in force in other countries. This tax regime is ruled by the Portuguese tax code and was introduced in 2009 with further regulations in 2010.

For this purpose, “non-habitual residents” are the individuals who became resident in Portugal and, during the five years prior to their registration as resident, were not domiciled for tax purposes in Portugal. The registration as “non-habitual resident” must be applied to the tax authorities, while registering as resident in Portugal. Therefore, the individual wishing to benefit from this regime would have to declare that, during the last five years, the conditions required to be considered as a tax resident in Portuguese territory were not fulfilled.

Once the registration as “non-habitual resident” is obtained, the tax regime is applicable for ten consecutive years, counting from the registration as “tax resident” in Portugal. However, the individual can suspend his or her registration as “non-habitual resident” and will be considered, during the time of the suspension, as a full “non-resident” and reapply to be a   “non-habitual residents again.

This regime is certainly advantageous, as income from employment or from self-employment obtained from high added value activities, with a scientific, artistic or technical nature, is taxed at the rate of 20%, which is very favorable when compared to the current top effective taxation of 56.5%.

Also, some types of income earned by “non-habitual residents” will be exempt under certain conditions:

1 .The individual is subject to tax in the country of origin, in accordance with the Double Taxation Agreement signed between Portugal and that country;

2. The individual is taxed in the other country, when there is no Double Taxation Agreement and as long as the income is not considered as having been obtained in Portugal.

Income derived from high added value services activities, with a scientific, artistic or technical nature is also exempt provide that:The income may be taxed in the country of origin in accordance with the Double Taxation Agreement signed between Portugal and that country;The income may be taxed in the other country when there is Double Taxation Agreement between Portugal and the country of origin.

The list of high added value activities in scientific, artistic, or technical sectors includes several activities, such as investors, administrators, managers, auditors and tax advisors engineers, artists, actors, architects, musicians, doctors and dentists, and university teachers.

Pensions obtained abroad by “non-habitual residents” are exempted as well, provided that one of the conditions of the following paragraphs is met:

1. They are taxed in the country of origin in accordance with the Double Taxation Agreement signed between Portugal and that country;

2. They are not obtained in Portugal.

For more information

Please contact:

Stefano Lucatello

Email: stefanol@kobaltlaw.co.uk

Tel: + 44 (0) 207 739 1700

 

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