Introduction

The non habitual resident regime is a special personal income tax regime for new residents in Portugal that offers excellent tax opportunities for passive income, foreign pensioners, employment and independent personnel services (Self-employed).

To benefit from the Regime, they just need to qualify as tax residents in Portugal in a given year and have not been tax residents in any of the previous 5 years.

The non habitual resident can benefit from the regime for a period of 10 years. 

It is an extremely completive regime, when compared internationally with other favorable tax regimes.

It doesn’t only benefit wealthy individuals, but also for pensioners and high qualified workers. 

Background
The Regime was approved in 2009.
In 2010 the table of high added value activities was published (Ordinance No. 12/2010), and in May of that year the DSIRS issued instructions regarding the NHR regime.
In 2019, a new table of high added value activities was approved.
In 2020, the OE 2020 Law amends the taxation rule for pensions and similar income obtained from abroad.

The Regime

 
1.    Pensions 

Foreign-sourced pensions (and other similar income) are subject to a special rate of 10% since 2020.
Taxpayers registered until March 2020 are subject to a transitional regime, with foreign-source pensions being totally tax-exempt. In addition, the tax treaty celebrated between the source country and Portugal usually precludes that country from taxing the pension, resulting in a double non-taxation. Generally only pensions of retired civil servants are allocated by treaties to the source country (some treaties that follow the UN model allow the source country to tax pensions paid by public entities). 

2.    Passive income: dividends, interests, royalties rents and capital gains
Passive income from foreign source is exempt from tax in Portugal (state of residence) if: 
•    “Can be” subject to tax in the state of source in the terms of the convention celebrated between Portugal and the source country. They don’t need to be taxed. The only requirement is that the convention includes the possibility of being taxed in the source state. 
•    In case there is no convention between Portugal and the state of source, the income “can be” subject to tax in the state of source in the terms of the OECD model tax convention. The Portuguese Tax authorities reserve themselves the right to make its own interpretation of the OECD model tax convention (and is not sourced from a tax haven, according to Portuguese black list).
The conventions celebrated between Portugal and other countries allow the source countries to tax the passive income. The OECD model also allows the source counties to tax the passive income (except capital gains in most cases).
The law doesn´t require effective taxation in the source country, so it is to obtain a double non-taxation.  
Passive income from Portuguese source is subject to tax, generally by a flat tax rate of 28% (depends on the kind of income). 

3.    Employment
Employment income from a foreign-source is exempt from tax, if they have been taxed in the source country. The law requires effective taxation, but does not establish a minimum requirement. There are no restrictions about employment income that is sourced in blacklisted countries. 
Income form Portuguese source are subject to a flat tax of 20%, if they are considered to have high value added – and at the moment there are 2 lists of professions:
• Old list (Ordinance 12/2010), in force until 12.31.2019 and which continues to apply to taxpayers registered under the regime until 2019.
• New list (Ordinance 230/2019), in accordance with the codes of the Portuguese classification of professions, which entered into force on 1.1.2020 and is applicable to taxpayers registered until January 1, 2020 (and to those previously registered by option)
Since October 2019, there is no need to obtain prior recognition of high added value activity by the Tax Authorities. The tax payer only has to demonstrate that his activity is classified as High Value Added if Tax Authorities ask for it.  

4.    Independent Personnel Service 
Income from foreign source is exempt from tax in Portugal (sate of residence) if: 
•    It results from an high value added activity, and
•    “Can be” subject to tax in the state of source in the terms of the convention celebrated between Portugal and the source country. They don’t need to be taxed. The only requirement is that the convention includes the possibility of being taxed in the source state. 
In case there is no convention between Portugal and the state of source, the income “can be” subject to tax in the state of source in the terms of the OECD model tax convention. 
Income from personnel service from Portuguese source is subject to flat tax of 20%, if the service are considered to have value added (the list of professions is the same of the employment situations). 
Foreign income from professional services that would not meet the criteria of “value added”, are taxed under the same rules of the normal residents in Portugal.  

Requirements 
To qualify as a non habitual resident, an individual must: 
•    Become a tax resident under Portuguese domestic legislation; and 
•    Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal. 
To become a tax resident in Portugal 
•    Stay in Portugal for more than 183 in a calendar year; or 
•    On December 31 of the relevant tax year, he has available accommodation in conditions that one would assume that he will move his residence to Portugal. It is not necessary to buy a property, but only to rent one. 

Other advantages of Portugal as residency
•    There is no wealth tax in Portugal and there is no obligation of declaring any assets for the Portuguese tax authorities (only income);
•    Inheritance and gifts, between ascendants and descendants (ex: father to son, or grandfather to grandson, or soon to mother) and husband and wife, are exempt from tax;
•    Other inheritances and gifts (like uncle to a nephew or unrelated persons) are taxed at a flat rate of 10% on the assets located in Portugal (other assets will be non-subject to taxes);
•    Portugal is part of the UE and the Schengen area;
•    For citizens of countries that are not members of EU or Schengen, Portugal has approved in 2012 the “Golden Visa Program” (although to become a Portuguese resident for tax purposes and benefit from the NHR regime a residency authorization this is not required);
•    The Portuguese nationals may benefit from the regime, what makes the regime extremely attractive for emigrants that want to return;