The Portuguese government approved a new tax regime for non-habitual residents, as an incentive to attract foreign investors and highly skilled professionals as well as people having considerable net worth.
The income of non-habitual residents may thus not be subject to taxation, if applicable, or benefit from a flat tax rate of 20%, when derived from employment and self-employment.
This could offer significant tax savings to non-habitual residents, since the actual marginal income tax rates (IRS) may exceed 45%.
In concrete terms, the income of non-habitual residents may be taxed in the following ways:
The active income, which means, income derived from employment or high added value self-employment activities in the scientific, artistic or technical field are taxed at a flat rate of 20%, whether it was earned in Portugal or abroad. Those activities encompass a wide range of professionals, such as architects, engineers, accountants, doctors, academics, senior business managers, among others.
In regard to passive income, such as interest, dividends, capital gains and other income from investments, properties and pensions from abroad, non-habitual residents may enjoy tax (IRS) exemption in Portugal, since taxation in the source State is possible, considering the Convention to avoid double taxation between Portugal and the State in cause.
This new regime is aimed at non-resident taxpayers, wishing to establish permanent or temporary residence in Portugal.
To acquire the non-habitual resident status, taxpayers must become resident for tax purposes in Portuguese territory and must provide evidence that they haven´t been taxed as residents during the five years prior to the application. Accordingly, taxpayers become entitled to the status of non-habitual residents and are taxed under this regime, which extends for a period of 10 consecutive years.
Taxpayers considered to be a resident in Portuguese territory are:
– Those who remain for more than 183 days in Portuguese territory (consecutive or not), on December 31 of that year;
-Those who are in possession of a property home in Portuguese territory under circumstances that lead to the presumption of an intention to hold and occupy it as usual residence (if the stay is shorter than 183 days);
– Crew members of a ship or aircraft in the service of an entity with residence, head office or effective management in Portugal, on 31 December of that year;
– Members of a household in which one element is considered a Portuguese tax resident, on December 31 of the year relative to the income;
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