Here is what you need to know
If you are approaching the end of your 10-year Non-Habitual Residence (NHR) status in Portugal, it is important to understand the financial transition ahead.
Coming to the end of your NHR?
By Portugal team
This article is published on: 23rd July 2025
Without careful planning, you could face significantly higher tax liabilities but with careful planning and maybe some strategic financial adjustments, you can protect your wealth and future lifestyle.
Why NHR has been so attractive?
Portugal’s NHR regime offers a valuable 10-year window of tax advantages. Under this status:
- Most foreign income, including interest and dividends, is tax-free in Portugal, provided it does not originate from “blacklisted jurisdictions” like Jersey, Guernsey or the Isle of Man.
- Gains on foreign real estate are exempt from Portuguese tax.
- Overseas pension income is taxed at a flat 10% or even exempt, depending on when your NHR began.
It is a powerful incentive for expatriates relocating to Portugal but one with a clear expiry date.
What NHR does not cover
NHR is not a blanket exemption for everything:
- Gains from investments such as UK ISAs, overseas portfolios, and directly held shares are taxable when realised i.e. when sold or switched, at 28% or 35% if arising from a blacklisted jurisdiction.
- Short-term capital gains (on assets held for less than 365 days) are taxable at Portugal’s progressive income tax rates if your income exceeds a set threshold — a costly surprise for active investors or fund managers unfamiliar with Portuguese rules.
- Portuguese-sourced income and gains e.g. from property, interest on local bank deposits or Portuguese company dividends are taxable throughout your NHR period.
The cost of doing nothing
Once your NHR period ends, you will be subject to Portugal’s standard tax rules:
- Interest, dividends and capital gains from whitelisted jurisdictions are taxed at 28% or 35% if arising from blacklisted jurisdictions. Again, this is on an arising basis, which means it is taxable when it occurs, not necessarily only when you make a withdrawal, unless held within a Portuguese-approved tax wrapper.
- Pension income is generally taxed at progressive rates up to 48% (plus solidarity tax), unless it meets the criteria for the 85/15 taxation. In this case, only 15% of the income is taxed and the remaining 85% is deemed return of capital and not taxed.
- Overseas real estate income becomes taxable. Capital gains on sale also become taxable, with 50% of any gain added to your other income and taxed at scale rates.
Without pre-emptive action, these changes could substantially erode your investment returns and retirement income.
Planning options before and after NHR
With considered planning you can mitigate the impact of the end of NHR:
- Restructure directly held investments (such as GIAs, ISAs and share portfolios) before gains compound further.
- Sell overseas property while still under NHR if a disposal is likely during your lifetime — gains are tax-free in Portugal during NHR (though local taxes in the property’s jurisdiction may still apply).
- Consider withdrawing from defined contribution pensions before NHR ends to benefit from the favourable 0% or 10% rates.
Even if your NHR has already expired, or if you are a standard resident, planning is key to improving your tax position and ultimately, the money in your pocket. The first step is to look at what you have and where it is based. Can you change how you hold your assets or move them into another jurisdiction?
Structuring for tax efficiency
Whilst the prospect of paying up to 48% on income (excluding solidarity taxes) and 28% capital gains tax is unpleasant, it is possible to rearrange your finances over time to reduce this tax burden.
- International investment bonds remain one of the most effective tools. Widely used across Europe and the UK, these allow for tax-free growth and defer tax on withdrawals. When income is taken, it’s often subject to low, single-digit effective tax rates.
- A Qualifying Non-UK Pension Scheme (QNUPS) can also provide tax-deferred growth but income from pensions is generally taxed at scale rates in Portugal post-NHR, and such arrangements carry higher costs due to trustee requirements. Additionally, even if a pension fund makes a loss, income drawn is still fully taxable — so this route needs careful evaluation.
Final Thoughts
Effective, early planning makes all the difference. Whether your NHR is nearing expiry, or you have already transitioned to standard residency, reviewing your assets, their location and tax treatment is crucial — and the sooner you act, the more options you will have.