Portugal Non-Habitual Residence regime comes to an end

, ,
Non-habitual residence regime will end

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Portugal’s non-habitual residence (NHR) programme will end on 31 December 2023.

Prime Minister, Antonio Costa first made the announcement on 2 October and it has now been included in the 2024 Portugal State Budget.

The budget proposal was presented to parliament on 11 October.  It will now go through parliamentary approval.

Portugal Non-Habitual Residence closing date

The budget confirmed that the last date for the non-habitual residence applications is 31 December 2023.

From 1 January 2024, a new – but very limited – regime will start if approved.  This aims to attract professionals who specialise in certain scientific, teaching, and research occupations. The new regime will only provide the reduced 20% rate for employment/self-employment income, and no other tax benefits are offered.   Successful applicants will be subject to full worldwide taxation on income and capital gains, the same as other residents of Portugal.

This sudden announcement, in such close proximity to the closing date, will make it hard for people to become tax resident in Portugal and apply for NHR status before 31 December 2023. Since Brexit, UK nationals wishing to move to Portugal have to apply for a visa in advance. The expected three-month processing time means arriving before this date is unlikely to be possible, unless someone had already submitted an application.

Current non-habitual residents are not impacted

If you already have non-habitual residence status, you are not affected by this news.

The budget confirmed that residents who are currently benefitting from the NHR programme will continue to do so, until the expiry of their ten-year term.

It is, however, a good prompt for you to confirm if you are taking full advantage of your NHR benefits – for example, taking the opportunity to dispose of foreign assets before your 10-year term ends.

Portugal continues to offer significant tax benefits

Abolishing the NHR is unwelcome news to many and particularly disappointing to those who are not yet in a position to move to Portugal.

But Portugal remains a very attractive place for people to retire to – both in terms of lifestyle and the tax regime, even after NHR.  People were attracted to the Algarve, Lisbon, and Porto areas long before the NHR was conceived – indeed we have had an office here for over 25 years – and this won’t change.  Few countries can rival what Portugal has to offer.

From a tax perspective, there is no inheritance tax between families and for more distant relatives it is only on Portuguese assets.  Portugal’s limited equivalent of wealth tax only applies to high-value Portuguese property.  Investment income can be taxed very efficiently, with some arrangements offering very beneficial tax treatment.

This reform, however, does emphasise the need for experienced, professional advice, in order for you to fully benefit from all of the tax advantages.

Blevins Franks has decades of experience advising people moving to and living in Portugal and providing effective tax and wealth management solutions.  The taxation system has evolved considerably in that time, and will continue to do so, but our teams of Portugal-based advisers and tax specialists monitor the changes and provide the in-depth personalised solutions our clients need.

Please do not hesitate to contact us if you, or someone you know, has any questions about how to structure your investment portfolio and assets to maximise the benefits of Portuguese taxation going forward.  We are happy to arrange a no-obligation consultation with one of our qualified advisers if you wish to learn more about Portugal’s tax benefits.

The attraction of retiring to Portugal is undiminished.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.