Updated: July 3, 2024

 

property tax gains portugalPortugal’s NHR Program has been a popular tax regime for expats since its launch in 2009. The tax regime has provided key benefits to expats from around the world who have applied to the program to unlock significant tax advantages.

However, under the State Budget Law of 2024, the NHR program is coming to an end.

In this article, we’ll provide you with the latest updates on the current program, plus introduce the Tax Incentive for Scientific and Innovation program, regarded by many as the NHR 2.0. and as the replacement to the current NHR scheme.

The End of the Non-Habitual Residence Program

In October 2023, the Portuguese Prime Minister announced that he intended to close the NHR program, stating that “maintaining this measure for the future is prolonging a measure of fiscal injustice.”

As such, the State Budget Law for 2024 determined the end of the NHR regime. By the end of May 2025, the program will be closed completely to new applicants. However, individuals who had already registered under the program before this date will be able to take full advantage of the program under the existing terms for the ten-year period.

Transitional Period for the NHR

contact-usWhile the NHR program is coming to an end, there is a transitional period presenting a window of opportunity for individuals to qualify for the existing program.

Individuals who had registered as tax residents in the country in 2023 and had not been taxed in Portugal for the previous five years could still apply for the existing NHR program, provided they did so by 31 March.

While this deadline has passed, it’s also possible for individuals to apply up until 31 March 2025, but the eligibility requirements for this deadline are stricter.

Individuals will only have to fulfil one of the following criteria to be eligible.

  • Having a promissory or employment contract signed by December 31, 2023
  • Having a lease agreement or other contract for the use/possession of property signed by October 10, 2023
  • Having a reservation or promissory contract to buy property in Portugal signed by October 10, 2023
  • Having children enrolled or registered in a school in Portugal by October 10, 2023
  • Having a residence visa or a residence permit valid from December 31, 2023
  • Having an application for a residence visa or residence permit initiated by December 31, 2023
  • Being a member of the household of someone who meets the above criteria

For those who qualify for the program under these conditions, they will have NHR status from the date that they become a tax resident until December 31, 2033.

NHR 2.0.: Tax Incentive for Scientific Research and Innovation

Although the Tax Incentive for Scientific Research and Innovation has not been coined as the NHR 2.0., the tax program does have some similarities with the NHR program and is being referred to as the NHR 2.0 by many.

Below you’ll find the requirements for the program, in addition to the key benefits of applying to the program.

Requirements

To be eligible for the Tax incentive for the Scientific Research and Innovation program, requirements are as follows:

  • Become tax residents in Portugal
  • Have not been residents of Portugal in the previous five years
  • Earn income in certain professional categories

The main differentiator between the original NHR program and the Tax Incentive for Scientific Research and Innovation is that individuals will need to earn income from certain professional categories.

Eligible professional categories

documents signingThe professional categories in question include the following:

  • Teachers and scientists
  • Those in qualified jobs, as specified in the Tax Code
  • Activities carried out within the scope of the extractive industry and manufacturing industries
  • Tourism, including activities that are of interest to tourism
  • IT and related activities and services
  • Agricultural, aquaculture, fish farming, farming and forestry activities
  • Research and development, in addition to high technological intensity activities
  • Audiovisual and multimedia production
  • Defense, environment, and energy
  • Telecommunication and activities of shared service centers
  • Highly qualified professionals: This refers to individuals or entities engaged in one or more of the activities mentioned above within a qualifying organization.
  • Members of corporate bodies that carry out economic activities
  • Those employed by companies that are recognized by relevant government agencies, such as AICEP, EPE, IAPMEI, and IP, or that are relevant to the national economy (e.g., working with investment, etc.)
  • Research and development personnel who meet the definitions of the tax code
  • People working for startups, certified by law as such
  • Individuals who work in Madeira or the Azores who meet the criteria set by these regions

Note: Exclusions include NHR beneficiaries and Regressar Program beneficiaries.

Main benefits of the program

Individuals eligible for the new program can enjoy a flat tax rate of 20 percent on their professional income, along with an exemption on the majority of income earned internationally, such as dividends, interest, capital gains, and rents. Importantly, pensions are not covered under this scheme, unlike the original NHR program. However, as with the original NHR program these advantages are applicable for a duration of ten years.

In the upcoming months, further information regarding qualifying jobs in Madeira and the Azores is expected to emerge, along with a clearer timeline for when the new tax regime will be available.

Stay Up to Date on the Latest Developments

Alongside our residency and citizenship division, Global Citizen Solutions, we will keep you up to date on the latest developments related to the end of the NHR program and the implementation of the new Tax Incentive for Scientific Research and Innovation Program.

Should you be looking to see how to get Portuguese residency, reach out to them, and they will be able to discuss which residency option is best suited to your needs. 

Frequently Asked Questions about the NHR 2.0

Yes, the Non-Habitual Residency (NHR) program is coming to a close. There is the possibility to be eligible for the current program up until March 31, 2025, but this is based on their tax residency status and fulfilment of other criteria.

The program will be succeeded by the Tax Incentive for Scientific Research and Innovation Program, offering comparable advantages but to a more limited segment of expats.

The Tax Incentive for Scientific Research and Innovation Program will replace the current NHR scheme. To apply for the new program, individuals will need to generate income in specific professional fields like teaching, scientific research, and development to qualify. Under this program, there’s a uniform tax rate of 20 percent applied to professional income earned within Portugal, alongside exemptions on most foreign-derived income types like dividends, interest, capital gains, and rents.