Retirees can benefit from the NHR tax regime in certain countries, reducing taxes on foreign income, pensions, and assets.
Yes, retirees can significantly benefit from the Non-Habitual Resident (NHR) tax regime in Portugal. The NHR regime offers favorable tax treatment for foreign pension income and other sources of income, making it an attractive option for retirees considering relocating to Portugal. Here’s how it works:
1. Favorable Tax Rate on Foreign Pensions
- 10% Flat Tax Rate: Under the NHR regime, foreign pension income is subject to a flat tax rate of 10%. This is a considerable advantage for retirees, especially those from countries where pension income may be taxed at higher rates. The 10% rate applies to pensions received from foreign sources.
2. Other Income Sources
- Tax Exemptions or Reduced Rates: In addition to pension income, retirees who receive income from investments, dividends, or real estate outside Portugal may also benefit from tax exemptions or reduced tax rates under the NHR regime. Certain types of foreign-sourced income can be exempt from Portuguese taxation if they are taxed in the source country or could be under a double taxation agreement (DTA).
3. Eligibility for NHR Status
- Retirees Qualifying for NHR: To qualify for NHR status, retirees must become tax residents in Portugal, which generally involves spending at least 183 days in the country during a calendar year or having a permanent home in Portugal by December 31st of that year. Once they establish tax residency, they can apply for NHR status and benefit from its favorable tax regime for up to 10 years.
4. Tax Planning and Compliance
- Tax Planning: Retirees should carefully plan their finances and consult with a tax advisor to maximize the benefits of the NHR regime. Proper reporting of foreign income and understanding how the NHR regime interacts with double taxation treaties are crucial for maintaining compliance and optimizing tax obligations.
Summary
Retirees can benefit from the NHR tax regime in Portugal through a favorable 10% tax rate on foreign pension income and potential tax exemptions or reduced rates on other foreign income sources. To qualify, retirees must establish tax residency in Portugal and apply for NHR status, which provides these benefits for a period of 10 years.