Self-employment income under the NHR regime varies based on circumstances. Generally, income from high value-added professional activities or intellectual property is eligible for special tax treatment
Under the Non-Habitual Resident (NHR) regime in Portugal, self-employment income can benefit from favorable tax treatment, depending on the nature of the services provided and the source of the income. Here’s how it works:
1. Tax Rate for Self-Employment Income
- Reduced Tax Rate: If your self-employment income is derived from a high-value-added activity, which is considered to be of significant scientific, artistic, or technical nature (as defined by the Portuguese government), you may benefit from a reduced flat tax rate of 20% on your Portuguese-sourced income. This is significantly lower than the standard progressive income tax rates in Portugal.
- Foreign-Sourced Income: If your self-employment income is sourced from outside Portugal, it may be exempt from Portuguese taxation under the NHR regime, provided that the income is either taxed in the source country or could be taxed under the double taxation agreement (DTA) between Portugal and that country.
2. High-Value-Added Activities
- Eligible Professions: The Portuguese government maintains a list of professions considered high-value-added, which includes roles in fields such as science, technology, engineering, IT, creative arts, and medical services. If your self-employment falls within one of these categories, you can apply the favorable 20% tax rate to your income.
- Certification Requirement: To qualify for the reduced tax rate, you may need to demonstrate that your self-employment activity falls within one of the eligible professions, possibly requiring certification or proof of qualifications.
3. Other Considerations
- Social Security Contributions: While self-employment income under the NHR regime benefits from reduced income tax rates, you are still required to make social security contributions unless you are exempt under specific circumstances, such as if you continue to contribute to a social security system in another EU country.
- Regular Income Reporting: Even if your foreign-sourced income is exempt from Portuguese taxation under the NHR regime, you still need to report this income in your annual tax returns in Portugal. Proper documentation and adherence to reporting requirements are crucial to maintain NHR status and avoid any issues with Portuguese tax authorities.
Summary
Self-employment income under the NHR regime in Portugal can benefit from a reduced tax rate of 20% if it is derived from a high-value-added activity. Foreign-sourced self-employment income may be exempt from Portuguese taxes if it is taxed in the source country or could be under a DTA. However, you must still meet reporting obligations and contribute to social security where applicable.