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Non-Habitual Resident Status (RNH) in Portugal – A road map

Non-Habitual Resident Status (RNH) in Portugal – A road map

27 Jul 2023

Non-Habitual Resident Status (RNH) in Portugal – A road map

Portugal’s Non-Habitual Resident (NHR) program offers a tax incentive to individuals who become residents in Portugal. This program is designed to attract foreign investment and skilled workers to Portugal.
To qualify for the NHR program, an individual must not have been a resident of Portugal for the past five years and must be a resident for tax purposes.
Once granted NHR status, an individual can benefit from a 10-year tax exemption on foreign source income and a flat income tax rate of 20% on Portuguese source income. Additionally, certain professions such as engineers, artists, and scientists can benefit from a reduced tax rate of 10%.
It’s important to note that NHR status does not exempt an individual from all taxes in Portugal, and it’s crucial to seek professional advice to understand the full implications of obtaining NHR status.

How to get RNH status

To obtain Non-Habitual Resident (RNH) status in Portugal, an individual must contact Tax Authority and:

Prove they have not been a tax resident in Portugal in the preceding 5 years prior to applying;
Intend to reside in Portugal for at least 183 days per year;
Not be considered a tax resident in any other country under the terms of a tax treaty between Portugal and that country.

Here are the steps to apply for RNH status:

Obtain a tax identification number (NIF) in Portugal.
Fill out the “Modelo 3” form, which is the application for RNH status.
Submit the form along with the required documentation to the Portuguese tax authorities.
Wait for the tax authorities to process the application and issue a certificate of RNH status.

It’s important to note that the application must be made within the first six months of the calendar year, otherwise the application will be considered for the following year. Also, it’s advisable to seek professional help from a lawyer or accountant to ensure that all the requirements are met, and the application is filled out correctly.

See here the information from the official website of the Tax Authority.

Advantages of becoming a non-habitual tax resident in Portugal

There are several advantages to becoming a non-habitual tax resident (NHR) in Portugal, including:

10-year tax exemption on foreign source income

NHRs can benefit from a 10-year tax exemption on foreign source income, which includes pensions, dividends, rental income, and capital gains.

Flat income tax rate of 20% on Portuguese source income

NHRs only pay a flat income tax rate of 20% on their Portuguese source income, which can be a significant tax saving compared to other countries.

Reduced tax rate for certain professions

Certain professions such as engineers, artists, and scientists can benefit from a reduced tax rate of 10% on their Portuguese source income.

Access to Portugal’s double taxation treaties

NHRs can benefit from Portugal’s double taxation treaties, which can reduce their tax liability on foreign source income.

No wealth tax

Portugal does not have a wealth tax, which means that NHRs with substantial assets can benefit from significant tax savings.

Attractive lifestyle and climate

Portugal offers a high quality of life with a pleasant climate, affordable cost of living, and access to excellent healthcare.

Easy residency requirements

Portugal offers easy residency requirements for NHRs, and it’s possible to obtain residency in just a few months.

Overall, becoming an NHR in Portugal can offer significant tax benefits and a high quality of life, making it an attractive option for individuals seeking a favorable tax regime and a desirable lifestyle.

10 FAQ about Non-Habitual Resident Status (RNH) in Portugal

1. What is Non-Habitual Resident (NHR) status in Portugal?

NHR status is a tax incentive program for individuals who become residents in Portugal, designed to attract foreign investment and skilled workers to the country.

2. Who can apply for NHR status?

Individuals who have not been a tax resident in Portugal for the past five years and become tax residents in Portugal can apply for NHR status.

3. What are the benefits of NHR status?

Individuals with NHR status can benefit from a 10-year tax exemption on foreign source income and a flat income tax rate of 20% on Portuguese source income. Certain professions can also benefit from a reduced tax rate of 10%.

4. What kind of income is eligible for the 10-year tax exemption?

The 10-year tax exemption applies to foreign source income such as pensions, dividends, rental income, and capital gains.

5. How does the reduced tax rate for certain professions work?

Professions such as engineers, artists, and scientists can benefit from a reduced tax rate of 10% on their Portuguese source income.

6. What are the requirements to maintain NHR status?

To maintain NHR status, an individual must spend at least 183 days in Portugal each year and have a genuine link to the country.

7. Are there any taxes that NHRs must pay in Portugal?

NHRs must still pay taxes on any Portuguese source income, such as income from a job in Portugal.

8. How can I apply for NHR status?

You can apply for NHR status when you register as a tax resident in Portugal.

9. Can NHRs benefit from Portugal’s double taxation treaties?

Yes, NHRs can benefit from Portugal’s double taxation treaties, which can reduce their tax liability on foreign source income.

10. Is it necessary to seek professional advice when considering NHR status?

Not essential but would have advantages to seek professional advice before applying for NHR status as the tax implications can be complex and vary depending on an individual’s circumstances.