Non-habitual Residency in Portugal (NHR) And Beyond – Part 2

Registration as a Non-Habitual Resident in Portugal confers the right to be taxed as such for a duration of 10 years as from the year of registering as a tax resident in Portuguese area. You may consider transferring to Portugal for a way of life modification or to soak up some sunshine in your retirement years.

As Soon As Non-Habitual Local Status has actually been acquired, what is the taxation rate and incidence relevant to domestic source income? In the case of dependent or independent work, the appropriate tax rate is 20%.

Tax applies to income originated from high added value activities of a clinical, creative or technical nature:

• Designers
• Engineers and comparable technicians
• Fine artists, stars and musicians
• Auditors
• Physicians and dentists
• Teachers
• Psychologists
• Liberal occupations, professionals and similar
• Senior managers
• Investors, directors and managers

You need to operate in one of the pre-defined scientific, artistic or technical professions to qualify. By offering the chance to get foreign earnings totally without further Portuguese tax, NHR can likewise substantially lower the tax bill for senior citizens and others who are not employed in Portugal. Under NHR, most earnings from a foreign source is exempt from Portuguese tax for ten successive years, as is earnings that is taxable in another nation.

For example, UK dividends (excluding gains on UK shares) get away Portuguese tax under NHR due to the fact that they are taxable in Britain under the UK/Portugal double tax treaty. In practice, however, the UK’s ‘disregarded income’ rules can eliminate UK tax liability for non-residents. As a result, you could wind up paying no tax in either nation on UK dividend income.

The excellent news is that, if you already have Non-Habitual Resident in Portugal status or requested Portuguese house prior to the brand-new program initiated on 1 April 2020, you can still come under the previous guidelines. This implies you will stay qualified for exemptions on foreign pension earnings for the rest of your ten-year NHR duration.

Note that UK government service pensions including local authority, army, police, mentor, fire service and some NHS pensions are the exception. These pensions do not come under NHR guidelines as they stay taxable in the UK just. For the best results, take expert, cross-border advice before making any major pension decisions.

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Further Reading Regarding Non-Habitual Residency in Portugal and The Golden Visa Programme:

Non-habitual Residency (NHR) And Beyond

Golden Visa Portugal 101