Portugal´s tax incentives in 2024

With the ending of the 10 year tax incentivised Non-Habitual Residence scheme (NHR) as at 31st December 2023, many are now reassessing their plans to move to Portugal and existing residents are also asking how the changes affect their plans.

Existing NHRs unaffected
Individuals with NHR status will not be affected and will continue to enjoy the benefits under the scheme until the 10-year period ends. But these individuals should taking advantage of the unique opportunity and tax plan for the future, even if Portugal is not a permanent move there are opportunities to wash out capital gains or draw lump sums at potentially lower rates than other countries.

Transitional NHR rules
NHR is still open to individuals who qualify under the transitional rules and applications are open until the end of 2024. The criteria are:

1. On 31st December you meet the conditions to qualify as a Portuguese tax resident, or

2. You become Portuguese resident by 31st December 2024 and have either:

• work contract or agreement dated prior to 31st December 2023, the duties under which are carried out in Portugal
• property lease signed prior to 10th October 2023
• promissory contract for Portuguese property signed before 10th October 2023
• enrollment of a dependant in education in Portugal by to 10th October 2023
• residence visa or permit valid up until 31st December 2023
• initiation of the process for visa or residence before 31st December 2023

If you are eligible but are not sure whether to push forward with the application, the benefits are very attractive. The main benefits being:

• 0% tax on certain types of foreign source income and capital gains
• 10% tax on foreign pension income
• Lower rates of employment and self employment tax on “high value activities”

NHR 2.0 – the new regime
Although qualifying for the new tax regime is more difficult than the old NHR, the major benefit is that for 10 years there is 0% tax on all foreign source income and gains. The only exceptions to this are income from backlisted jurisdictions or pension income.

The new regime is open from 1st January 2024 and the main qualifying criteria are:

• Not tax resident in Portugal in the previous 5 years
• Must become a tax resident in Portugal
• Not have benefited from the NHR regime
• Exercising a qualifying role/activity in Portugal. These are aimed primarily, but not exclusively, in the fields of scientific research and higher education

Expats & the standard regime
If you cannot qualify for either of the two tax schemes, Portugal can still be a financially attractive place to live – there is no wealth tax, inheritance tax or tax on transfer of capital into or out of the country.

Standard rates of income and capital gains tax can be comparable or better than the UK, depending on each person’s situation. It is also possible to establish investment and pension structures as a Portuguese tax resident to benefit from lower rates of tax.

Irrespective of which position you are in, planning is required to put yourself in the best position and it is never too late to start planning. Speak to several suitably qualified professionals, compare fees, and do not be afraid to get a second opinion or a sense check.