March 2015

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

Decree-Law nr.

The Portuguese Non-Habitual

Tax Resident (NHR) Regime
A. The non-habitual tax resident
regime

status for a ten-year period, after

249/2009, of
September 23,

which they will be taxed under the

standard IRS regime.
1. The Decree-Law

Portuguese tax residence for IRS

of

purposes, in a given fiscal year,

other

may be acquired via a number of

created a new

Decree-Law

Personal Income Tax

measures directed at improving

regime for NHR

individuals.

NHR individuals may enjoy such

September

nr.
23,

249/2009,
among

Portuguese

international

competitiveness,

such

as

the

approval of the Tax Code for

Investment

(Cdigo

Investimento),

Fiscal

created

do
new

Personal Income Tax (Imposto

sobre o Rendimento das Pessoas
Singulares,

hereinafter

IRS)

regime for NHR individuals.

granted to individuals who became

for

tax

purposes

a) Staying for more than 183 days

in the Portuguese territory,
whether

in

Portugal starting from January 1,

2009 without having been so in the
five years preceding its acquisition.

these

days

are

consecutive or not, in any 12month period beginning or

ending;
b) If staying for a shorter period,
having

This status would apparently be

resident

different ways, such as:

in

the

Portuguese

territory, on any day during the

period

referred

above

dwelling under circumstances

that lead to the presumption of
an intention to hold and occupy
it as a place of habitual abode;

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Tax Resident Regime
Julho 2014

2
c) Being, on the 31st of December, a

the ones of the United Kingdom

crew member of a ship or

and

aircraft at the service of an entity

applicable to pensions and (iii) the

with residence, head office or

remaining to active income, in this

effective

case encompassing income derived

management

in

Portugal; or

where one of the spouses is, on

31st

(ii)

another

both from foreign and domestic

d) Being a member of a household

the

Switzerland,

of

December,

Portuguese tax resident.

The new tax regime targets nonresident individuals who are likely
to establish a permanent or a
temporary residence in Portugal.

sources,

following

expatriate,

rectius impatriate, taxation regimes

such as the ones existing in Spain
and France.

income derived by NHR residents

be

IRS

exempt (without

progression except in the case of

capital gains on real estate, where

The regime includes three different

the income being exempted must

sets of rules, (i) one of them

be taken into account in order to

applicable

to

determine the tax rates applicable

passive

income

foreign-sourced
(interest,

to non-exempt income) in Portugal,

dividends, certain royalties, other

provided that it may be taxed in the

income from capital, capital gains

source State under the rules of a tax

and

treaty entered into by Portugal or,

income

from

immovable
non-

if no treaty exists, that (i) it may be

domiciled taxation regimes such as

taxed in the source State according

property),

similar

to

targets non-resident
individuals who are
likely to establish a
permanent or a
temporary residence

Under the first set of rules, passive

will

The new tax regime

in Portugal.

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

The passive income

to the rules of the OECD Model Tax

territory under the territorial scope

Convention on Income and on

rules of the IRS Code, is required in

included in this

Capital, as interpreted in the light

order for the exemption (with

of the Portuguese reservations on

progression) to be applicable. This

regime comprises

its articles and of the observations

last rule exempts pensions which

on its commentary; (ii) it is not

are not paid by entities with

considered

residence, head office, effective

interest, dividends,

to

arise

from

Portuguese source under the IRS

management

or

Code territoriality rules; and (iii)

establishment

to

other income from

the source State, region or territory

payment relates to in Portugal.

capital, capital gains

tax havens blacklist.

and income from

The

potential liability to taxation in the

independent personal services and

immovable property.

source State under the rules of a tax

also to certain royalties.

certain royalties,

is not included in the Portuguese

regime

only

treaty or of the OECD Model Tax

Convention, no effective taxation
being thus required.

which

the

The third set of rules will be

applicable

requires

permanent

deriving

Under

to
from

it,

employment
exempt

active

income

employment,

foreign-sourced
income

from

IRS

will

be

(with

The second set of rules relates to

progression, except insofar as it

pension

actual

derives from certain high value

taxation on the source State under

added activities of a scientific,

the rules of a tax treaty or,

artistic or technical nature, as

alternatively, no connection of the

defined by Ministerial Order),

income

provided that it is taxed in the

income,

with

where

the

Portuguese

The Portuguese Non-Habitual

Tax Resident Regime
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4
source State according to the rules

its commentary; (ii) it is not

of a tax treaty entered into by

considered

Portugal or, if no treaty is in place,

Portuguese source under the IRS

that it is taxed in the source State

Code territoriality rules; and (iii)

and that it is not considered to arise

the source State, region or territory

from a Portuguese source under

is not included in the Portuguese

the IRS Code territoriality rules.

tax havens blacklist.

services of a

Effective taxation is therefore only

domestic or foreign

Income from independent personal

services and royalties will be
exempt (with progression, except
insofar as it derives from certain
high value added activities of a
scientific,

artistic

or

technical

nature, as defined by Ministerial

Order) if it may be taxed in the
source State according to the rules
of a tax treaty entered into by

to

arise

from

required in regard of employment

income. However, the independent
personal services exemption will
only be applicable to income
derived from certain high value
added activities of a scientific,
artistic or technical nature, as
defined by Ministerial Order.

Portugal or, if no treaty is in place,

High

that (i) it may be taxed in the source

income deriving from employment

State according to the rules of the

or independent personal services

OECD Model Tax Convention on

of a domestic or foreign source (the

Income

as

latter if it does not qualify for the

interpreted in the light of the

mentioned exemptions), are liable

Portuguese reservations on its

to autonomous taxation at a special

articles and of the observations on

20% flat rate and not to the

and

on

Capital,

value

added

activities

High value added

activities income
deriving from

source (if not

exempt) are liable to
autonomous
taxation at a special
20% flat rate.

The Portuguese Non-Habitual

Tax Resident Regime
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5
general and progressive IRS rates

rates of up to 48% (plus 2,5% on

category of income it will imply

(whose higher bracket is of 48% for

taxable income above 80.000 and

that all the remaining categories of

tax year 2015; moreover, taxpayers

5% on taxable income above

income will be subject to the said

with taxable income above the

250.000 during 2015) or to special

progressive rates, with application

limit of the higher bracket - 80.000

lower flat rates, depending on its

of the credit method and forfeiture

for 2015 - are liable to an additional

nature. The option for credit must

of the exemption method.

rate of 2,5% on income exceeding

be exercised on an all-or-nothing

such amount and of 5% on income

basis, meaning that opting for the

exceeding 250.000 during the tax

credit method in regard of one

Ministerial Order nr. 12/2010, of

year), provided that it derives from

category of income will imply that

January 7, defined the high value

high value added activities of a

the option is extended to all

added activities of a scientific,

scientific,

remaining categories of income

artistic

and

qualifying for the regime. The main

artistic

or

technical

nature.
NHRs deriving foreign-sourced

the

exemption

method

completely forfeited.
Additionally,

under both these sets of rules will

income taxed at the special 20% flat

be allowed to opt, in its regard, for

rate

the credit method, the standard

progressive IRS rates (of up to 48%,

method for the elimination of

plus 2,5% on taxable income above

international double taxation in

80.000 and 5% on taxable income

Portugal. Whenever this option is

above 250.000, during 2015) in its

exercised, the income will be taxed

regard.

under the standard IRS regime,

exercised on an all-or-nothing

being liable either to progressive

basis. If exercised in regard of one

also

This

opt

option

or

technical

nature

feature to be highlighted from this

income that will be IRS exempt

may

NHRs

2. The Ministerial Order

deriving
for

is

the

also

Order

is

the

fact

that

sportspersons activities are not

included in its scope, contrarily to
what was initially expected and
thereby departing this regime from
the

well-known

Spanish

and

so-called

Beckham

Law.

Nevertheless, the Ministerial Order

encompasses a wide range of
professions
follows:

and

activities,

as

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Tax Resident Regime
Julho 2014

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Portuguese

English

1 - Arquitectos, engenheiros e tcnicos similares:

1 - Architects, engineers and similar technicians:

101 - Arquitectos;

101 - Architects;

102 - Engenheiros;

102 - Engineers;

103 - Gelogos.

103 - Geologists.

2 - Artistas plsticos, actores e msicos:

2 - Visual artists, actors and musicians:

201 - Artistas de teatro, bailado, cinema, rdio e

201 - Theater, ballet, film, radio and television

televiso;

Artists;

202 - Cantores;

202 - Singers;

203 - Escultores;

203 - Sculptors;

204 - Msicos;

204 - Musicians;

205 - Pintores.

205 - Painters.

3 - Auditores:

3 - Auditors:

301 - Auditores;

301 - Auditors;

302 - Consultores fiscais.

302 - Tax Consultants.

4 - Mdicos e dentistas:

4 - Doctors and dentists:

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Tax Resident Regime
Julho 2014

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Portuguese

English

401 - Dentistas;

401 - Dentists;

402 - Mdicos analistas;

402 Analyst Doctors;

403 - Mdicos cirurgies;

403 - Surgeons;

404 - Mdicos de bordo em navios;

404 Board doctors in ships;

405 - Mdicos de clnica geral;

405 - General Practitioners;

406 - Mdicos dentistas;

406 - Dentists;

407 - Mdicos estomatologistas;

407 - Dentist Doctors;

408 - Mdicos fisiatras;

408 - Physiatrists;

409 - Mdicos gastroenterologistas;

409 - Gastroenterologists;

410 - Mdicos oftalmologistas;

410 - Ophthalmologists;

411 - Mdicos ortopedistas;

411 - Orthopaedists;

412 - Mdicos otorrinolaringologistas;

412 - Otorhinolaryngologists;

413 - Mdicos pediatras;

413 - Paediatricians;

414 - Mdicos radiologistas;

414 - Radiologists ;

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Tax Resident Regime
Julho 2014

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Portuguese

English

415 - Mdicos de outras especialidades.

415 - Doctors in other specialties.

5 - Professores:

5 - Teachers:

501 - Professores universitrios.

501 - University professors.

6 - Psiclogos:

6 - Psychologists:

601 - Psiclogos.

601 - Psychologists.

7 - Profisses liberais, tcnicos e assimilados:

7 - Professional services, technicians and similar:

701 - Arquelogos;

701 - Archaeologists;

702 - Bilogos e especialistas em cincias da vida;

702 - Biologists and experts in life sciences;

703 - Programadores informticos;

703 - Computer Programmers;

704 - Consultoria e programao informtica e

704 - Software consultancy and activities related

actividades relacionadas com as tecnologias da

to information technology and information

informao e informtica;

technology;

705 - Actividades de programao informtica;

705 - Computer programming activities;

706 - Actividades de consultoria em informtica;

706 - Computer consultancy activities;

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Tax Resident Regime
Julho 2014

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Portuguese

English

707 - Gesto e explorao de equipamento

707 - Management and operation of computer

informtico;

equipment;

708 - Actividades dos servios de informao;

708 - Activities of information services;

709 - Actividades de processamento de dados,

domiciliao

de

informao

actividades

relacionadas; portais Web;

information and related activities; Web portals;

710 - Actividades de processamento de dados,

domiciliao

de

informao

709 - Activities of data processing, hosting

actividades

710 - Activities of data processing, hosting

relacionadas;

information and related activities;

711 - Outras actividades dos servios de

711 - Other information service activities;

informao;
712 - Actividades de agncias de notcias;
713 - Outras actividades dos servios de
informao;

712 - Activities of news agencies;

713 - Other information service activities;
714 - Scientific research and development;

714 - Actividades de investigao cientfica e de

desenvolvimento;
715 - Investigao e desenvolvimento das
cincias fsicas e naturais;

715 - Research and development of science

physical and natural;

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Tax Resident Regime
Julho 2014

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Portuguese

English

716 - Investigao e desenvolvimento em

716

biotecnologia;

biotechnology;

717 Designers.

Research

and

development

in

717 - Designers.

8 Investidores, administradores e gestores:

8 - Investors, administrators and managers:

801 Investidores, administradores e gestores

801 - Investors, administrators and managers of

de

investimento

companies promoting productive investment, if

produtivo, desde que afectos a projectos elegveis

allocated to eligible projects under tax benefit

e com contratos de concesso de benefcios fiscais

contracts awarded under the Tax Code for

celebrados ao abrigo do Cdigo Fiscal do

Investment;

empresas

promotoras

de

Investimento;
802 Quadros superiores de empresas.

802 - Senior employees of companies.

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Tax Resident Regime
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3. The Administrative Rulings
The Portuguese tax authorities

types of foreign-sourced income)

that they would be covered by the

issued a ruling in May 6, 2010

were deemed applicable in 2009.

regime; and

(Administrative Ruling nr. 2/2010)

This position raised serious doubts,

dealing with practical aspects of

as the law sets out that the benefits

the regime, namely its application

of the regime are granted for a ten-

in 2009 and the requirements to

year period. It remains to be seen if

obtain the NHR status.

this ten-year period will be taken

Both of these requirements may be

into account in different ways,

viewed as illegal, as the Decree-

starting in 2009 for the benefits not

Law clearly establishes that it is

depending

applicable starting from 1 January

Concerning the application of the

regime in 2009, Portuguese tax
authorities therein assume the
position

that

the

features

depending on the definition of the

on

the

Ministerial

Order and in 2010 for those which

b) doing so after 23 September

2009, the publication date of the
Decree-Law approving the regime.

2009.

are.
A second ruling has been issued in

qualifying activities (the 20% flat

In regard of the requirements to

August 3, 2012 (Administrative

tax rate for employment and

obtain the NHR status, the ruling

Ruling nr. 9/2012).

independent

services

took the position that for those

income, as well as the exemption

becoming Portuguese tax residents

Among other minor features (all

for foreign-sourced independent

in 2009 the regime would only be

already clearly established by law),

personal services income) are only

applied on a case-by-case basis,

this ruling has changed the tax

applicable starting from fiscal year

and to:

authorities position concerning the

personal

2010.
The remaining features of the
regime (the exemptions for other

requirements to obtain the NHR

a) taxpayers registering as tax

status. Under the new ruling, it is

residents under the assumption

sufficient that a taxpayer adds to its

application to the regime a

The Portuguese Non-Habitual

Tax Resident Regime
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It is sufficient that a

statement

he

documents, as ruling nr. 9/2012

solemnly declares that he or she

expressly states that it is applicable

taxpayer adds to its

did not fulfil the conditions to be

to pending applications.

application a

resident in the five preceding tax

statement under
which he solemnly

considered

under

which

Portuguese

tax

years, either under our domestic

law or by effect of a tax treaty
entered into by Portugal.

Finally, it must be noted that, vis-vis activity code 802 - senior

employees of companies, ruling nr.
2/2010

has

restrictive

adopted
view,

very

which

has

This ruling partially revokes ruling

remained unchanged by ruling nr.

nr.

(illegally)

9/2012. According to this view,

required taxpayers to present upon

only persons with management

application foreign certificates of

roles

conditions to be

residence

companies

establishing that they had suffered

category,

considered a

an effective tax burden abroad in

incomprehensible

the five tax years preceding their

usually only members of corporate

Portuguese tax

redomiciliation into Portugal.

bodies (maxime, members of the

resident in the five

This

preceding tax years.

significantly less burdensome and

declares that he or
she did not fulfil the

2/2010,

and

change

applications
will

which

also

submitted

certificates

renders
to

the

unblock

new
regime

previously

applications

whose

decision was being delayed by the

lack of any of the mentioned

and

powers
may

fit

which

to

bind

into

this

is

an

position,

as

board) have such powers and the

concept of senior employees of
companies must naturally differ
from that of investors, directors
and managers.

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

13
Ruling nr. 2/2010 has also clarified

20%

that those employed in companies

domestic source employment or

fully or partially owned by the

independent

Portuguese

Autonomous

income deriving from high value

Regions and Municipalities and

added activities of a scientific,

those in charge of a Portuguese

artistic or technical nature.

State,

permanent establishment of a nonresident company also qualify for

activity code 801 - investors,
administrators and managers of
companies promoting productive
investment, provided of course
that

such

companies

and

permanent establishments have

entered into tax benefit contracts
under the Tax Code for Investment
and that the activity of such
persons is allocated to the specific
projects giving rise to the tax
benefit contracts.
4. State Budget Law for 2012
Law nr. 64-B/2011, of December 30,
which approved the State Budget
Law for 2012, has introduced a new

withholding

tax

rate

personal

for

services

This rate, applicable from January 1,

2012 onwards, means that NHRs
with domestic source income of
these categories are, from that date
on, no longer liable to the standard
withholding tax rates of up to 44,5%
for

employment

income

(depending on the amount of the

income and on their personal and
family circumstances) and of 25%
for independent personal services
income. This solved the previous
problem of the tax paid in advance

The State Budget

Law for 2012
introduced a 20%
withholding tax rate
for domestic source
employment or
independent personal
services income
deriving from high
value added activities
of a scientific, artistic
or technical nature.

The Portuguese Non-Habitual

Tax Resident Regime
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during the year being higher than

It has been expressly established in

One of them was that taxable

the final tax due, as such income is

the Amended State Budget Law for

income of individuals became

liable to a special 20% flat tax rate

2012 that such term was previously

subject to an extraordinary surtax

and

and

non-existent, which means that

of 3,5% in 2013, applicable to the

progressive rates of up to 48% (plus

applications previously denied on

employment

2,5% on taxable income above

the

being

personal services income deriving

80.000 and 5% on taxable income

extemporaneous and still pending

from high value added activities of

above 250.000 during 2015), as

appreciation, namely due to the

a scientific, artistic or technical

mentioned in point 1. above.

submission

administrative

nature obtained by NHRs liable to

appeals, will now be decided

autonomous taxation at a special

favourably. It is also possible that

20% flat rate, as well as to any non-

cases of applications previously

exempt income liable to the general

Law nr. 20/2012, of May 14 - the

denied on the grounds of being

and progressive IRS rates.

Amended State Budget Law for

extemporaneous and already fully

2012 -, introduced a term for the

decided (i.e., where no appeals are

submission of applications to the

pending) might again be submitted

NHR regime.

to the Portuguese tax authorities,

not

to

the

general

5. Amended State Budget Law for

2012

grounds

although
Under the changes introduced to

of

this

of

should

be

approached with care.

the IRS Code, applications must

now be submitted until March 31 of
the tax year following that in which
Portuguese
acquired.

tax

residence

is

6. State Budget Law for 2013

The State Budget Law for 2013
(Law nr. 66-B/2013, of December
31) introduced two changes to the
regime.

or

independent

In the case of employment income

deriving from high value added
activities of a scientific, artistic or
technical

nature,

the

3,5%

surcharge was added to the 20%

withholding tax rate introduced by
the State Budget Law for 2012. In
the case of independent personal
services income of the same nature
the surcharge was only levied

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

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The State Budget

Law for 2013

upon the submission of the yearly

interpretation

tax return.

authorities of the second condition

The second aspect of State Budget

by

the

tax

of paragraph (5) of article 81 of the

Code, according to which the non-

introduced an

Law for 2013 was a change to the

extraordinary surtax

(5) of article 81 of IRS the Code,

of 3,5%.

the exemption of (i) employment

This

income;

sustenance, as the tax exemption

wording of paragraphs (3), (4) and

which establish the conditions for
(ii)

professional
obtained

independent

services

through

high

income
value

taxation

of

non-Portuguese

sourced pensions applies only in

cases where no tax treaty exists.
interpretation

has

no

for foreign sourced pensions is

clearly

applicable

to

pensions

added activities, royalties, capital

sourced in States with which

income, rental income and capital

Portugal both has and has not

gains; and (iii) pension income,

entered into a tax treaty. Moreover,

respectively.

it makes no sense to sustain this

This change is, in our opinion,

irrelevant, in all cases, as it does not
amend the already previously tax
exempt status of such items of
income.

position, as it would imply that

foreign pensions earned by NHRs
which had not been taxed at source
would be exempt if they originate
from tax havens but would be
taxable if they originate from States

However, as far as pension income

with a tax treaty entered into with

is concerned, it has the intention to

Portugal.

put

an

end

to

an

abusive

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Tax Resident Regime
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Other additional problems have

not fully clarified with the very

also arisen in the application of the

subtle change deriving from the

regime, especially deriving from

State Budget Law for 2013.

interpretation and

The effects of that change have

the poor drafting of

the poor adaptation of the IRS

return form to some of the regimes
features. Namely, the tax return
form

seemed

to

require

that

pensions are taxed abroad in order

for them to be IRS exempt under
the regime (which, we stress again,
is not legally required) and the
electronic filing system seemed to
have been configured in a way that
raises difficulties in the application
of the regime to passive income,
such as capital income, rental

been debated. As the new wording

was enacted without retroactive or
interpretative effect, it remained
doubtful

whether

the

tax

authorities would accept to apply

the exemption for pension income
to

pensions

received

until

December 31, 2012 and sourced in

States with which Portugal has
entered into a tax treaty.

It

was

expected

that

an

administrative ruling would be

The tax authorities interpretation,

issued by the Secretary of State of

together with the poor drafting of

Tax Affairs or the Director-General

the

raised

of Taxes in the aftermath of the said

practical and important doubts on

legislative change, in order to fully

the application of the regime

eradicate the existing doubts.

IRS

return

form,

concerning pensions which were

the IRS return form

have raised practical
and important
doubts in the past on
the application of the
regime concerning

7. Other developments in 2013

income, royalties and capital gains

on real estate.

The tax authorities

pensions. However,
the regime is now
fully applied by
Portuguese tax
authorities.

The Portuguese Non-Habitual

Tax Resident Regime
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However,

the

expected

when the requirements for their

such mistake, in order to be fully

clarifications

emerged

more

exemption (a) possibility of

protected.

prosaically, with the issuing in

taxation at source according to the

December 2012 of tax assessments

rules of a tax treaty entered into by

for taxpayers under the regime and

Portugal or, if no treaty is in place,

with no foreign sourced pension

(b) that (i) it may be taxed in the

income, and with the issuing in the

source State according to the rules

end

of

of

March

2013

of

tax

the

OECD

Model

Tax

assessments for taxpayers with

Convention on Income and on

foreign sourced pension income.

Capital, as interpreted in the light

Tax assessments for taxpayers

under the regime were pending
issuance since its inception, which
was previously a source of major
concern as regards its practical
application. The regime clearly
then became fully applied by
Portuguese tax authorities.
The

said

assessments

were,

however, incorrectly issued as

regards foreign sourced capital
income, rental income, royalties
and capital gains on real estate, as
these were deemed taxable even

of the Portuguese reservations on

This problem was also solved at the

end of 2013. Pending appeals were
decided in favour of taxpayers and
Portuguese tax authorities have
issued corrective tax assessments
replacing all assessments suffering
from this mistake, even those not
under appeal.

its articles and of the observations

8. Changes to the procedure to

on its commentary; (ii) it is not

register as tax resident in

considered

Portugal

to

arise

from

Portuguese source under the IRS

Code territoriality rules; and (iii)

Decree-Law nr. 14/2013, of January

the source State, region or territory

18, changed the rules applicable to

is not included in the Portuguese

the registration of taxpayers. Non-

tax

Portuguese

havens

blacklist

were

verified.

nationals

are

now

required to obtain a valid residence

permit or residence card in order to

In certain cases taxpayers were

register

forced to submit administrative

Portugal, something which was

appeals against assessment bearing

previously not required, at least in

theory.

as

tax

residents

in

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

18
Registering as a tax resident in

applicable to returns submitted as

Portugal is a requirement to be

from January 1, 2014 concerning

granted the NHR status, which

income obtained in preceding tax

means that those wishing to apply

years.

for the regime must now: (i)

register as non-resident taxpayers;
(ii) obtain residence permits (for
non-EU nationals) and residence
cards (for EU nationals); (iii) in
order to register as tax residents;
and (iv) only then apply for the
NHR status

Following the clarifications of 2013

in regard of pensions and passive
income, the changes introduced to
the form clarify that only foreignsourced employment income must
be effectively taxed by the State of
source in order to qualify for the
NHR exemptions. In fact, the form

9. State Budget Law for 2014 and

now expressly states that (i) all

subsequent developments

foreign sourced pensions and (ii)

The State Budget Law for 2014

(Law nr. 83-C/2013, of December
31) once again approved a 3,5%
extraordinary surtax, applicable in
the exact same terms as the one in
force during 2013.
Moreover, Ministerial Order nr.
365/2013,

of

December

23,

approved a new IRS return form,

foreign sourced passive income

that is liable to tax at the State of
source is tax exempt in Portugal,
regardless of effective taxation
abroad.

Registering as a tax
resident in Portugal
is a requirement to
be granted the NHR
status.

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

19
10. Expected changes for 2015 - the
IRS Code Reform

it is potentially liable to taxation in

the source State under the rules of

The Commission charged with the

2014 IRS reform, which entered

a tax treaty or of the OECD Model

Tax Convention.

into force on January 1, 2015, had

Moreover, the Commission also

proposed to the Government the

proposed

the

enactment of significant changes to

actuaries,

airline

the NHR regime, directed at

directors and managers of all

increasing its attractiveness.

companies, regardless of their

The

most

relevant

proposed

change was a widening of the

exemptions

for

income

encompass:

to

passive

foreign-sourced

income

(i)

all

(interest,

dividends, royalties, other income

from capital, capital gains on any
foreign asset, including shares, and
income from immovable property),
regardless

of

the

liability

to

inclusion
pilots

of
and

activity sector and of the existence

of a tax benefit contract with the
Portuguese State, in the list of high
value

added

scientific,

activities

artistic

or

of

technical

nature which qualify non-exempt

employment

and

independent

personal services income for the

special 20% flat rate.
This

inclusion

would

operate

potential taxation at source under

through an amendment to the

an existing tax treaty or the OECD

Ministerial Order mentioned above

Model Tax Convention; and (ii)

in point 2.

independent

personal

services

income of any kind, provided that

The changes
introduced to the
form clarify that
only foreign-sourced
employment income
must be effectively
taxed by the State of
source in order to
qualify for the NHR
exemptions.

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

20
Finally,

the

Commission

also

require legislative action, but only a

method being applied and the

proposed the abolishing of an

change in the Ministerial Order

exemption method forfeited in

existing

tax,

approving the list, and therefore

regard of all of them, it is now

applicable to cases where exempt

may simply be approved by the

possible to opt for the progressive

foreign-sourced income derived by

Minister of Finance.

IRS rates on a per-income category

withholding

NHRs from securities is paid

through Portuguese entities, as in
practice

the

rendering

withholding
the

was

exemption

ineffective in such cases.

11. Effective changes for 2015
Despite high expectations, only the
last of the mentioned changes
proposed

by

the

Commission

charged with the 2014 IRS Reform

was approved.

high value added activities of a

scientific, artistic or technical nature
qualify

employment

there

have

been

and

non-exempt
independent

personal services income for the

special 20% flat rate does not

basis.

changes to more general aspects of

This means that it is now possible to

the IRS Code which may impact the

have income from one category

NHR regime. The most relevant is

taxed under the IRS progressive

the

NHRs

rates, with the credit method being

deriving foreign-sourced income

applicable, and the remaining ones

that will be IRS exempt to opt for

still benefiting from the applicable

progressive rates (of up to 48%, plus

exemptions or special rates.

option

granted

to

2,5% on taxable income above

80.000 and 5% on taxable income
above 250.000, during 2015) in its
regard.

However, additions to the list of

which

Additionally,

The main advantage of this option

is that the application of the
progressive rates enables the carryforward of losses (between 5 and 12

In fact, whereas in the past this

years) in the categories of income

option had to be exercised on an all-

where it is applicable. As the

or-nothing basis, meaning that if

application of the progressive IRS

exercised in regard of one category

rates to a category of income in

of income all remaining categories

which losses are registered in a

would be subject to the said

given year and in regard of which

progressive rates, with the credit

the carry forward of losses is

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

21
available in general terms no longer

on its nature. This option also

implies

implies that the credit method will

the

forfeiting

of

the

exemption method in regard of the

be

remaining categories of income, this

categories

option, together with an also new

method completely forfeited.

possibility to carry forward existing

excess foreign tax credit (during 5
years), may prove beneficial with
regard to income not encompassed
by the NHR exemptions.

applied

to
and

income
the

of

Option for the

credit method

all

Exemption lost
on all categories
of income

exemption

The consequences of the options for

Special
rates
retained
on
remaining
categories,
whenever
applicable

the IRS progressive rates and for the

credit method may be summarized
as follows:

The option for the credit method

with regard to exempt income
remains available, but it is still
applicable on an all-or-nothing
basis, meaning that, when exercised
in regard of one category of income,
income of all categories will be
taxed under the standard IRS
regime,

being

liable

either

to

progressive rates of up to 48% (plus

2,5% on taxable income above
80.000 and 5% on taxable income
above 250.000, during 2015) or to
special lower flat rates, depending

Option for the

IRS progressive
rates

Per-category
basis

All-or-nothing
basis

Finally, the State Budget Law for

2015

(Law

nr.

83-C/2013,

of

Credit method
applicable
to
categories
where
the
option
was
made

December 31) has once again

Exemption and
special
rates
retained
on
remaining
categories

12. Other

approved a 3,5% extraordinary

surtax, applicable in the exact same
terms as the one in force during
2013 and 2014.
tax

features

and

planning opportunities
Law nr. 15/2010, of June 26, has
abolished a long standing IRS

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

22
exclusion for capital gains on

OECD Model Tax Convention

shares held for more than 12

establish in this case that the

months.

residence

This has relevant consequences for

the

NHR

regime,

as

its

tax

state

has

exclusive

competence to tax.
Additionally,

several

other

exemption for capital gains had

attractive features remain for the

been built with that exclusion in

Portuguese taxation of individuals.

mind and in such a way that it is

only applicable if the income may
be taxed in the source State under
the rules of a tax treaty entered into
by Portugal (or, if no treaty exists,
according to the rules of the OECD

Firstly, several capital gains are

excluded from IRS taxation, such
as those on:
a) shares and quotas, acquired
before 1 January 1989;

Model Tax Convention on Income

and on Capital, as interpreted in
light

of

the

Portuguese

reservations on its articles and of

the

observations

on

its

commentary).

b) real estate, except land for

construction, owned before 1
January 1989;
c) a

taxpayer's

personal

and

permanent residence insofar as

This implies that most capital gains

the sale proceeds are reinvested

(maxime on foreign shareholdings

in another personal residence in

and other securities) will remain

the

taxable

both

Union or European Economic

Portuguese tax treaties and the

Space territory (in the latter case

in

Portugal

as

Portuguese,

European

Most capital gains

(maxime on
foreign
shareholdings and
other securities)
remain taxable in
Portugal.

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

23
if there is an instrument providing

residents (such as the disposal of (i)

for

information

shares in companies whose head-

between the tax authorities of both

office, effective management or

States in terms similar to the ones

permanent establishment is in the

in force within the European

Portuguese territory, and of (ii)

Union).

credit and other patrimonial rights

exchange

Contributions

of

made

by

the

employer to pension funds and life

and health insurance schemes are
not

regarded

income

as

employment

provided

that

certain

conditions are met.

(spouses,

grandchildren,
is

Stamp

on

inheritances.

children,

parents

grandparents)
Tax

resident, with head-office, effective

management

or

permanent

establishment herein) are not liable

to this type of taxation.
B. Endnotes on the current status

Finally, since 1 January 2004 close

family

over individuals or companies

of the regime and on its

predictable developments

and

The tax regime for NHRs seems to

exempt

from

be effective in the attraction to

gifts

and

Other

Portugal

of

high

net

worth

situations

individuals, increasing demand in

involving the gratuitous disposal

the domestic market, and fostering

of Portuguese assets are taxed

increased fiscal revenue, namely in

through a 10% Stamp Tax.

regard

However, the disposal of foreign

assets (even towards Portuguese

of

consumption

real

estate

taxes,

and
from

individuals that otherwise would

not be taxpayers in Portugal.

The NHR regime

seems to be effective
in the attraction to
Portugal of high net
worth individuals.

The Portuguese Non-Habitual

Tax Resident Regime
Julho 2014

24
The current Government, in office

In this regard, as from January 1,

please e-mail us (Pedro Ribeiro de

since June 2011, announced the

2014 no relevant doubts remain on

Sousa): pedro@rpba.pt

intention to attract investors and

the application of the NHR regime,

qualified workers and researchers

which means that it may be fully

into Portugal in the Government

and unrestrictedly enjoyed by

Programme, although this has not

those wishing to move to Portugal.

been specifically linked with the

NHR regime

and, as far

March 25, 2015

Ricardo da Palma Borges

Pedro Ribeiro de Sousa

***

as

investors are concerned, may be

Proper

is

Disclaimer: Although great care

tied more clearly to the Golden

recommended before any decision

has been taken when drafting this

Visa Program. It also announced

is taken to become a Portuguese tax

Information Note, Ricardo da

the intention to implement a

resident, and more so if one wants

Palma

Borges

specific program to boost the

to profit from the NHR status.

(RPBA)

attractiveness of Portugal as a

RPBA has an in-depth knowledge

Advogados, R.L. does not accept

destination for northern European

and expertise on this regime.

any responsibility whatsoever for

legal

advice

retirees - the Retirement in the Sun

Program.

Visit our microsite to know more

Although this Program never came

about the NHR regime. You can

to light, the NHR regime gathers

also

political support, also aimed at the

presentation on this subject.

(Reforma

return

ao

of

Portuguese

Sol)

highly

qualified

nationals

currently

domiciled abroad.

check

our

concise

&

Associados

Sociedade

de

any consequences arising from

the

use

contained

of

the

information

herein.

The

information is provided solely for

general

purposes,

cannot

be

To book a consultation or to obtain

regarded as legal or other advice

our professional fees on this subject

and was last revised on the stated

date.