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Portugal's New NHR Regime in 2024: A Comprehensive Tax Overview for Expatriates Considering Moving to Portugal Image

Portugal's New NHR Regime in 2024: A Comprehensive Tax Overview for Expatriates Considering Moving to Portugal

February 23, 2024

Summary

The article provides a detailed overview of the upcoming changes to Portugal's Non-Habitual Resident (NHR) tax regime, set to take effect in January 2024. Known as NHR 2.0, this new regime introduces substantial alterations in tax benefits and eligibility conditions for expats. While existing NHR residents can continue to enjoy current tax benefits until their ten-year term ends, new applicants will face different criteria focused on attracting professionals and executives in scientific research and innovation. NHR 2.0 offers a special 20% tax rate for eligible individuals and various tax exemptions on foreign-sourced income, with specific conditions for different categories of professionals.

 

 Key Takeaways

 

End of Current NHR Regime:

From 2024, no new tax residents can register under the existing NHR tax regime.

 

Grandfathering Provisions:

Current NHR residents and some new arrivals meeting certain criteria can still enjoy the old regime's benefits until the end of their ten-year period.

 

Focus of NHR 2.0:

The new regime aims to attract professionals in scientific research and innovation, offering a 20% tax rate and tax exemptions on some foreign-sourced income.

 

Eligibility for NHR 2.0:

Eligibility is based on holding specific job positions or engaging in high-value activities, particularly in Madeira, the Azores, and certain recognized sectors.

 

Special Tax Rates and Exemptions:

NHR 2.0 provides exemptions on foreign-sourced income with some tax exceptions and applies a flat 35% tax rate on income from blacklisted jurisdictions.

 

Former Residents Tax Regime:

A 50% relief on employment and business income is available for former Portuguese tax residents returning between 2024 and 2026.

 

Transition to the New NHR Regime

 

Nhr portugal

 

Portugal's Non-Habitual Resident (NHR) tax regime, long favoured for its attractive tax incentives, is undergoing significant changes. Starting 1 January 2024, the new NHR regime, will bring about substantial alterations in tax benefits and eligibility conditions for expats moving to Portugal.

 

The End of the Current NHR Regime

Effective from 2024, the existing NHR regime will no longer accept new tax residents. Individuals including British expats who are not registered as NHR residents before this date will not be eligible for the regime. However, current NHR residents will continue to enjoy the existing tax benefits in Portugal until the completion of their ten-year term under the law.

 

Grandfathering Provision for Existing NHR Residents

A grandfathering rule ensures that individuals already registered as NHR residents before 31 December 2023, will maintain their tax benefits until the end of their ten-year period. This provision safeguards the interests of those who planned their financial planning and tax planning strategies based on the current NHR benefits.

 

Special Grandfathering for New Arrivals

Expatriates meeting specific criteria, such as having employment agreements or property contracts signed before certain 2023 deadlines, a special grandfathering rule applies. This allows them to secure NHR status under the old rules by applying until 31 December 2024. This provision extends to household members of the taxpayer meeting these conditions.

 

NHR 2.0: Focusing on Scientific Research and Innovation

 

Non-Habitual Residency

 

The new NHR regime aims to attract executives and entrepreneurs involved in scientific research and innovation. Eligible individuals, such as those holding qualified job positions or engaging in high-value activities, can benefit from a special 20% tax rate on their employment or entrepreneurial income for ten years.

 

To satisfy the new eligibility criteria individuals must meet one of the following conditions:

 

Hold a job or engage in activities as a tax resident in the Autonomous Regions of Madeira and the Azores, following guidelines set by regional decrees. This includes roles in higher education, scientific research, and employment within the national science and technology system, as well as positions in entities recognized as technology and innovation centres.

Qualified positions and governing body members are eligible for contractual benefits related to productive investment, as defined in Chapter II of the Portuguese Investment Tax Code.

Highly skilled professions, as determined by Ministerial Decree, in companies with relevant applications in the year of employment or the preceding five years, benefiting from the Tax regime for investment promotion (RFAI), or in industrial and service companies (with activities in areas specified by Ministerial Decree) that export at least 50% of their turnover in the year of employment or the preceding two years are included.

Other qualified job positions and governing body members in entities engaged in economic activities recognized by AICEP or IAPMEI as beneficial to the national economy, particularly in terms of attracting productive investment and reducing regional disparities, are also covered.

Research and development personnel with eligible costs under the R&D tax incentive system outlined in the Investment Tax Code, as well as job positions and governing body members in entities certified as start-ups under the Portuguese Start-Up Law, are eligible as well.

This incentive is part of Portugal's strategy to attract skilled professionals in key sectors.

 

Tax Exemption and Special Tax Rates Under NHR 2.0

 

Retire portugal

 

Under NHR 2.0, eligible taxpayers will enjoy tax exemptions on foreign sourced income from employment or self-employment, rental and capital gains on foreign sited assets. The tax exemption does not extend to pension income although its possible to structure pension income very tax efficiently with professional advice. Additionally, income derived from blacklisted jurisdictions will be subject to a flat 35% tax rate. Understanding these exemptions and tax rates is crucial for effective tax planning under the new nhr tax regime.

 

Former Residents Tax Regime

Former Portuguese tax residents who become residents again between 2024 and 2026 can benefit from a 50% relief on employment and business income, capped at EUR 250,000. This relief, designed for individuals who have not been tax residents in Portugal in the preceding five years, applies for five years and cannot be combined with any other special tax regime.

 

How does Brexit affect British Expats who are planning on moving to Portugal?

 

Nhr Status Portugal

 

Impact of Brexit on Moving to Portugal from the UK

The UK's departure from the European Union, commonly known as Brexit, has significantly altered the process and implications for UK citizens moving to Portugal. Here are some key points:

 

Visa and Residency Requirements:

UK citizens are no longer EU citizens, which means they can no longer move to and reside in Portugal (or any EU country) without meeting specific visa and residency requirements. This often involves applying for a visa or residence permit, subject to Portugal's immigration rules. 

 

Healthcare and Social Security:

Access to healthcare and social security benefits in Portugal for British expats may not be as straightforward as it was pre-Brexit. UK citizens might need private health insurance and should understand their rights and obligations regarding Portugal’s social security system.

 

 Working in Portugal:

The freedom to work anywhere in the EU, as was the case before Brexit, no longer applies to UK citizens. Working in Portugal now typically requires a work permit or a specific visa, depending on the nature and duration of employment.

 

Property Ownership and Taxes:

While buying property in Portugal remains possible, Brexit could impact the tax implications for UK citizens, particularly regarding capital gains tax and inheritance tax laws.

 

Recognition of Professional Qualifications:

Professional qualifications obtained in the UK may no longer be automatically recognized in Portugal, potentially affecting those seeking to work in regulated professions.

 

Driving License:

UK driving licenses may not be valid long-term in Portugal, and exchanging them for Portuguese licenses could be necessary.

In summary, while moving to Portugal from the UK is still possible post-Brexit, it now involves more bureaucratic procedures and considerations, especially regarding residency, work permits, healthcare, and taxation. It's advisable for UK citizens to seek updated information and potentially legal advice before planning a move to Portugal. 

 

European Health Insurance Card (EHIC) and Global Health Insurance Card (GHIC)

 

Portugal Tax

 

For British expats in Portugal, the usage and validity of the European Health Insurance Card (EHIC) and the Global Health Insurance Card (GHIC) post-Brexit have specific guidelines:

 

European Health Insurance Card (EHIC):

Prior to Brexit, the EHIC allowed UK nationals to access state-provided healthcare during temporary stays in other European Economic Area (EEA) countries and Switzerland at a reduced cost or for free. However, post-Brexit, the EHIC issued in the UK is not valid for new UK expats moving to Portugal or other EU countries.

 

Global Health Insurance Card (GHIC):

The GHIC replaced the EHIC for UK residents post-Brexit. It entitles UK residents to state-provided healthcare during visits to the EU at a reduced cost or for free, similar to the old EHIC. However, the GHIC is not a replacement for comprehensive travel insurance.

 

 British Expats in Portugal: Pre-Brexit Residents:

UK nationals who were legally resident in Portugal before 1 January 2021 can use their UK-issued EHIC for temporary stays in other EEA countries and Switzerland.

 

Post-Brexit Tax Resident:

UK nationals who moved to Portugal after 31 December 2020 cannot use the UK-issued EHIC in Portugal. They may be eligible for a GHIC for use during temporary stays in other EU countries but would need to arrange healthcare coverage in Portugal through other means, such as registering for the Portuguese health service or private health insurance.

 

Access to Portuguese Healthcare System:

British expats living in Portugal should register with the Portuguese health service (Serviço Nacional de Saúde, SNS) to access healthcare. This usually requires a residence certificate and a social security number.

 

Tourists and Temporary Visitors:

UK tourists or those on temporary visits to Portugal can use their GHIC for necessary healthcare during their stay.

It is important for British expats to understand these changes and arrange appropriate healthcare coverage in Portugal. They should also be aware that neither the EHIC nor the GHIC is a substitute for comprehensive travel or health insurance, especially for long-term residents who may require more extensive healthcare services.

 

Client Testimonial

 

Explore our client testimonial video and witness the transformative power of our financial planning and wealth management advice. Hear how our services have guided clients towards financial success, providing strategic insights, and maximizing their wealth. Discover how we can help clients secure their NHR and D7 Visas whilst supporting them with their tax planning, retirement planning and wealth management needs to unlock the path to a prosperous financial future.

 

Please watch this video: 

 

Conclusion and Call to Action

The 2024 changes to Portugal's NHR regime represent a significant shift in the country's approach to expatriate tax. For those considering moving to Portugal or adjusting to these tax changes, understanding the new tax regime is crucial for effective financial planning and tax planning.

 

Frequently Asked Questions

 

Expats in Portugal

 

What is the new NHR regime (NHR 2.0) in Portugal?

NHR 2.0, starting in 2024, is an updated version of the NHR tax regime, focusing on attracting professionals in research and innovation with new tax benefits and eligibility criteria.

 

Who is eligible for NHR 2.0?

Eligibility is based on engaging in qualified activities, particularly in scientific research and innovation, in specific regions and sectors.

 

What happens to current NHR residents after 2024?

They can maintain their current tax benefits until the completion of their ten-year term under the grandfathering provision.

 

Are there special provisions for expatriates planning to move to Portugal before 2024?

Yes, a special grandfathering rule applies to expatriates meeting specific criteria, allowing them to secure NHR status under the old rules by applying until 31 December 2024.

 

What are the tax benefits under NHR 2.0?

Benefits include a 20% special tax rate on certain types of income and tax exemptions on foreign-sourced income, with specific conditions. 

 

Contact Us Today

Looking to navigate the new NHR landscape in Portugal?

If you are planning on moving to Portugal under the NHR regime please contact our team for tax guidance and professional advice tailored to your tax planning needs in Portugal.

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Useful Resources

 

Moving to Portugal

 

For further information about the nhr tax regime for British expats moving to Portugal please visit the website page:  https://www.fiduciarywealth.gi/what-we-do/our-services/non-habitual-resident-portugal

For further information about 'Residency in Portugal' including visas please visit website page: https://www.fiduciarywealth.gi/what-we-do/our-services/residency-in-portugal

You may also download our 'NHR' guide by completing the 'Enquiry Form' on our website home page: Financial, Retirement & Tax Planning Services For British Expats | Fiduciary Wealth Management

Other useful articles: https://www.fiduciarywealth.gi/news/10-most-common-mistakes-british-expats-make-before-establishing-residency-in-portugal-381

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