The NHR regime in Portugal offers tax incentives, including exemptions on foreign income, capital gains, and inheritance taxes.
The Non-Habitual Resident (NHR) regime in Portugal offers a range of tax benefits that are particularly attractive to foreign nationals, retirees, investors, and professionals in high-value-added fields. Here are the primary benefits:
1. Favorable Tax Treatment on Foreign Income
- 10% Flat Tax on Foreign Pension Income: Under the NHR regime, foreign pension income is subject to a flat tax rate of 10%, which is significantly lower than the tax rates in many other countries.
- Tax Exemptions on Certain Foreign-Sourced Income: Certain types of foreign-sourced income, such as dividends, interest, and royalties, may be exempt from Portuguese taxation if they are taxed in the source country or could be under a double taxation agreement (DTA). This exemption applies to income from countries with which Portugal has a DTA.
2. Reduced Tax Rate on Portuguese-Sourced Income
- 20% Flat Tax on High-Value-Added Professions: Income derived from employment or self-employment in high-value-added activities (such as IT, engineering, medicine, and other scientific or technical professions) is taxed at a flat rate of 20%. This rate is much lower than the standard progressive income tax rates, which can reach up to 48%.
3. Duration of Benefits
- 10-Year Period: The tax benefits under the NHR regime are granted for a period of 10 consecutive years. This allows for long-term financial planning and stability, making Portugal an attractive destination for retirees, expatriates, and professionals.
4. No Wealth Tax
- Wealth-Friendly Environment: Portugal does not have a wealth tax, which can be a significant benefit for high-net-worth individuals. Additionally, there are no inheritance or gift taxes on assets passed to direct family members.
5. EU Residency
- Residency in the European Union: By obtaining NHR status in Portugal, you also gain residency in an EU country, providing you with the ability to travel freely within the Schengen Area. This is an added benefit for individuals who value mobility within Europe.
Summary
The NHR regime in Portugal offers numerous benefits, including a flat 10% tax on foreign pension income, potential exemptions on other foreign-sourced income, a reduced 20% tax rate for high-value-added professions, and the absence of wealth, inheritance, or gift taxes. These benefits are available for a period of 10 years, making Portugal an attractive option for retirees, professionals, and investors looking for favorable tax treatment in Europe.