Non-Habitual Residence tax regime in Portugal

Withthe introduction of the Non-Habitual Residence (NHR) tax regime, Portuguese authorities enticed wealthy individuals and families to relocate to Portugal using significantly beneficial tax treatment for the first ten years that they live in Portugal.

What is Non-Habitual Residency (NHR) status?

The Non-Habitual Residence status was introduced in Portugal to offer people a legitimate way for people to earn, save and invest in a jurisdiction without paying tax on things like inheritance, the disposal of assets and pension income. Being granted NHR status ensured that, for ten years, people who were tax resident in Portugal (and accepted for Non-Habitual Residence status) could essentially receive certain incomes free of tax both in Portugal and in the country of the income source.

The Non-Habitual Residence regime was especially beneficial for retirees as income received from pensions overseas is not taxed in Portugal on the basis that it has normally be taxed at source (i.e. the location of the pension).

Non-habitual residence status also meant that people living, working and receiving an income in Portugal were subject to only 20% tax on their entire Portuguese based income, meaning they could potentially claim 25% of this tax as a cost for acquiring their income. This could effectively bring the rate of income tax down to a NET of just 15%.

When did NHR end?

The NHR came to an end in January 2024.

Portugal’s new Tax Incentive for Scientific Research and Innovation (NHR 2.0) introduces a focused approach to attracting highly skilled professionals. Unlike the old Non-Habitual Resident (NHR) regime, which was broad and open to various income sources, NHR 2.0 takes a much more targeted approach. This incentive is designed for professionals in strategic sectors that align with Portugal’s economic goals—particularly in Tech, Research, and Sustainable Development.

The new incentive offers a combination of foreign-sourced income exemptions and a flat 20% tax rate on qualifying job income. This is significantly advantageous for skilled professionals looking to work in Portugal.

Find out more about NHR 2.0 here.