Portugal’s tax advantages are partly responsible for the country’s popularity among investors. Non-Habitual Tax Regime (NHR) started in 2009. The regime is initiated to lure high net worth investors into the country. It leads qualified investors to advantageous taxation scenarios. Currently, more than 10,000 residents in Portugal are taxed according to the NHR.
Requirements for Being a Tax Resident Under the NHR
The first requirement for the NHR is a valid residence permit in Portugal. EU, EEA, and Swiss citizens automatically have the right to reside in Portugal. Other citizens may obtain residence permit through the Portugal Golden Visa Program.
Also, the applicant must not have been a Portuguese tax resident in the last five years before the issuance of the permit.
To obtain a residency status, the applicant must have a home in Portugal that is well-maintained and ready to reside in.
The Portugal Golden Visa Program Paves the Way to the NHR
EU, EEA, and Swiss citizens may take advantage of the regime without any additional step. Non-EU/EEA/Swiss citizens, however, need to apply for a residence permit. The Portugal Golden Visa Program is the best way to receive a residence permit.
The scheme grants residency to the investors who meet the requirements of the program. Investors who follow this path have the chance to gain returns on their investments apart from the advantages of the NHR.
The Current Form of the NHR and Updates
The NHR did not change -almost- at all in the last three years. So, some updates were expected. Most of these changes are slight. The most drastic change is the 10% tax on pension. Here is the more elaborate classification of the updates.
- Income Tax
Portugal made some small changes in this area. The updates affected only the income thresholds which did not change since 2018. With the new format, the lowest tax rate (14.5%) is imposed up to EUR 7,112 of income. The amount was EUR 7,091 before the update. The highest tax rate (48%), on the other hand, is imposed on the income of over EUR 80,822. The amount was EUR 80,641 before the update.
- Investment Income Tax
The default option of the investment income tax did not change. Taxation on the interest and income on investments on bonds, securities, and shares is 28%. Yet, now, investors have the right to choose the scale rates as the taxation medium.
The location of the investments is also important. Gibraltar, Jersey, and the Isle of Man are regarded as tax havens. If the investment is in these locations, the flat rate goes up to 35%.
- Pension Tax
The most significant update to the NHR is the introduction of a 10% tax on pension. Although it is a considerable change, it is still lower than in most countries. Also, the program’s ten-year period applies to residents before April 2020. If the applicants are eligible for the NHR, they may take advantage of the former version.
Another important note is that these changes do not work retrospectively. It means that if the process of a resident already started before the update, their ten-year period will be completed in accordance with the pre-update version.