Tax Law

Practising tax law allows us to provide comprehensive assistance on legal matters in Portugal.

“

You must pay taxes. But there is no law that says you must leave a tip.
– Morgan Stanley

Individuals deemed as residents for tax purposes in Portugal are subject to taxation on their worldwide income. It is important that they fully comply with all Portuguese tax rules and the applicable international rules, so as to avoid a situation of double taxation, as well as to explore the applicability of potential exemptions under the NHR (Non-Habitual Resident) tax regime.

Consultancy and professional advice regarding the new challenges and tax rules applicable to situations of mobility within a context of globalisation.

TAX CONSULTANCY

Tax consultancy takes on a crucial role in all processes of change. Identifying risks and opportunities will be decisive for success.

TAX SYSTEM

The Portuguese tax system lays down that residents for tax purposes in Portugal shall be taxed on their worldwide income, i.e., regardless of whether the income sources are Portuguese or foreign, unless an exception applies.

RESIDENCE FOR TAX PURPOSES

Portugal has a tax system based on residence for tax purposes. Residents in Portugal for tax purposes are taxed at progressive rates ranging from 14.5% to 48%, to which an additional solidarity levy of between 2.5% and 5% is added in the case of taxpayers whose taxable income exceeds 80,000 euros. Special tax rates may apply to specific types of income, such as income from equity investments, annuities and capital gains.

Portugal has no wealth tax or inheritance tax and recognises tax exemption on donations to close family members.

NON-HABITUAL RESIDENTS (NHR)

In 2009, Portugal introduced a tax regime for “Non-Habitual Residents” (NHR), with the aim of persuading highly qualified professionals, pensioners and high net worth individuals to live in the country, offering special tax conditions for specific types of income.

The tax benefits of the NHR special tax regime are defined by type of income and consist of potential tax exemptions or reduced rates for a period of 10 years.

The NHR tax regime works on the basis of the interaction between Portuguese tax legislation, double taxation agreements (DTAs) signed by Portugal, the OECD Model Tax Convention and the tax rules of the country of origin of the income, if necessary.

What is required to apply for NHR status?

Registration as a resident in Portugal for Immigration and Tax purposes is required, and the applicant cannot have been considered a resident for tax purposes in the five years preceding the year in which he or she becomes a tax resident in Portugal. Once the eligibility requirements are met, an application is made online.

Citizens of the EU/EEA/Switzerland must obtain a residence certificate by the end of the fourth month after having established their residence in Portugal. Citizens of non-EU/EEA countries and Swiss citizens must obtain a residence permit to reside in Portugal under one of the existing legal options, e.g.: D7 visa, golden visa or under the family reunification system.

After 5 years of legal residence in Portugal, it is possible to apply for permanent resident status or citizenship, which is compatible with the NHR tax regime.

Does NHR grant residency rights?

No. NHR is a tax regime. It does not replace a residence permit or a certificate of residence as an EU citizen.

When should I apply for NHR?

The legal deadline to apply for the NHR tax regime is 31 March of the year following the year in which you should be considered a tax resident in Portugal.

Is it mandatory to live in Portugal to apply for the NHR status?

Yes. To be eligible and maintain NHR status, the applicant must be considered a resident for tax purposes in Portugal. For this, you must stay in Portugal for more than 183 days or have your place of residence in Portugal under such conditions as to be considered your permanent residence. There are specific conditions for special cases that may apply. Contact us for advice.

Benefits of NHR status

The benefits of NHR status depend on the requirements set out in Portuguese law. Most depend on the specific taxation rules determined in the double taxation agreements signed by Portugal and are related to tax exemptions, royalties, dividends and interest, capital gains from the sale of securities, real estate income and pension income.

Tax exemption

Tax exemption in Portugal for income from employed work should be applied to income from a foreign source effectively taxed at source (considered the country of source of the income under the Portuguese rules and double tax agreement rules), regardless of the rate and whether the country of origin is a country or territory subject to more favourable taxation arrangements, when considered obtained outside Portugal, under Portuguese law. It may be necessary to analyse the applicable Social Security rules, in particular when working remotely.

The tax exemption in Portugal for income from self-employment should apply to income considered to be from foreign sources in accordance with Portuguese legislation, provided that it is related to a high value added activity and provided that it can be taxed at source under a double taxation agreement or, in the absence of the latter, under the OECD model tax convention, namely because they are obtained through the fixed establishment of the natural person in the other country. When the country of origin is included on the Portuguese list of countries, territories or regions with privileged and more favourable tax arrangements, the NHR tax benefits may not be applicable.

When the conditions for exemption are not met, or when the income is considered earned in Portugal, under the terms of national law, income from employed and self-employed work may be taxed at a fixed rate of 20%, if derived from an eligible professional occupation.

Royalties, Dividends and Interest / Capital Gains on the Sale of Securities / Real Estate Income and Capital Gains

The tax exemption should apply to income deemed to be of foreign origin that may be taxed at source under a DTA or under the rules of the OECD model convention.

When the country of origin is included on the Portuguese list of countries, territories or regions with privileged and more favourable tax arrangements, the NHR tax benefits may not apply, and the income may be subject to an increased tax rate in Portugal.

Pension income

Taxation at a reduced tax rate of 10% shall apply to pension income that is not considered earned in Portugal, in accordance with national law. The same taxation rules may apply to pre-retirement income, income from pension funds and retirement savings funds, advance payments or principal repayments, and a case-by-case analysis is advisable.

TAXES IN PORTUGAL

Like any tax resident in Portugal, non-habitual residents must submit annual tax returns. Within a single income category, the country of origin of the income and the specific conditions of the beneficiary, or his or her income structure, may determine different taxation rules.

RESIDENCE PERMITS

There are different types of residence permit, namely:

Golden Visa;
Family reunification;
“D7 Visa”
“D2 Visa”
Long-term residence permit issued by another EU member state;
Residence permit for study, unpaid internship and voluntary work;
EU Blue Card;
Residence permit for work;
Residence permit for activities in higher education and research and highly qualified;
“Startup” Visa.

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