Non-Habitual Resident Tax Regime – NHR Questions & Answers
Initial questions about the NHR (Non-Habitual Resident) regime are extremely important to clarify what should you investigate further.
The legal regime may look very simple at first sight, however you may find big surprises down the road.
To help you avoiding very common mistakes, we have prepared 7 simple answers to the most frequently asked questions, with our Non-Habitual Resident Tax Regime – NHR Questions & Answers:
- Q1: What are the CONDITIONS to apply for the NHR status in Portugal?
In order to apply and be granted the NHR status you mainly must register as a resident in Portugal for tax purposes and not have been deemed as a resident in the previous five years.
Please note that having been partially resident in Portugal in one of the five previous years is sufficient to get your application denied.
Therefore, it is of crucial importance to guarantee you are properly registered as non resident for tax purposes in Portugal for the full period, when you have had a tax number in Portugal before.
- Q2: Does the NHR grant RESIDENCE rights?
No. The NHR is only tax regime, it does not replace a residence permit for non EU citizen, neither a residence certificate as an EU citizen.
You should seek legal assistance in order to determine what steps you need to take as a European citizen moving to Portugal and what type of visa and residence permit you should apply for as a non European citizen. You can find more information about Immigration here.
- Q3: WHEN should the application be done?
The legal deadline to apply for the NHR tax regime is the 31st of March the year following to becoming a resident in Portugal.
Therefore being registered correctly is of major importance. Make sure you are properly registered in Portugal in accordance to the rules determining the beginning of tax residency in Portugal.
A tax residency analysis to determine the best date for your relocation may be extremely useful and should be done in accordance to the legislation of your country of origin, specially when it does not recognise partial year tax residency.
- Q4: Is it required to LIVE in Portugal?
Yes. In order to be eligible and to keep the NHR status you must be deemed as a tax resident in Portugal. For that, you must stay in Portugal for more than 183 days OR have in Portugal your place of abode. Other specific conditions to special cases may apply, therefore legal advice should be seek.
- Q5: Which are the BENEFITS of having the NHR status?
The tax benefits from the NHR special tax regime are defined per type of income and consist in potential exemptions or reduced tax rates for a period of ten years.
Each benefit depends on the requirements established in the Portuguese law, most of them depend dependant also on the specific taxation rules determined by double tax agreements signed by Portugal.
You can find general guidelines: here.
We must alert that it may be extremely complex to address the exact consequences of the NHR tax regime – and the applicable tax rules in Portugal – when the applicant’s sources of income derive from companies and structures abroad, remote work, funds, pensions schemes, and similar.
- Q6: Is all income obtained worldwide EXEMPT under the NHR?
No. A case by case analyses is highly advisable. Even within the same category of income, the country of source of the income and the specific conditions of the beneficiary or its structure of income may determine the applicability of different rules and solutions from a tax point of view.
It is important to note that the NHR does not suppress other tax laws applicable in Portugal and therefore a comprehensive analyses from a tax professional is highly recommended.
- Q7: Under the NHR do I have tax COMPLIANCE obligations?
The NHR application is done once and, except if you intend to suspend the status, it should remain in force for ten years.
However, as any tax resident in Portugal you must submit annual tax returns.
The NHR resident will be required to comply with all other compliance requirements related to other taxes in force in Portugal, related to property ownership, vehicle ownership, VAT, etc.
Non-Habitual Resident Tax Regime – NHR Questions & Answers by Raquel de Matos Esteves.
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