Residents under NHR regime enjoy tax exemptions on foreign income, including rental income from properties abroad, with varying real estate tax implications by country.
Under the Non-Habitual Resident (NHR) regime in Portugal, real estate tax implications primarily involve income tax on rental income and capital gains tax on property sales. Here’s a breakdown of the key considerations:
1. Income Tax on Rental Income
- Tax Rate: For non-habitual residents, rental income from real estate is taxed at a flat rate of 28% in Portugal.
- Exemptions: If you are a resident in a country with which Portugal has a Double Taxation Agreement (DTA), you may be able to offset or exempt some of the rental income tax. The specific tax treatment depends on the terms of the DTA between Portugal and your country of residence.
- Deductible Expenses: You can deduct certain expenses related to the property, such as maintenance costs, property management fees, and mortgage interest, which can reduce your taxable rental income.
2. Capital Gains Tax on Property Sales
- Tax Rate: Capital gains from the sale of real estate are generally taxed at a flat rate of 28% for non-habitual residents.
- Exemptions: There are potential exemptions or reductions if the sale proceeds are reinvested in a new primary residence within Portugal or another EU country. The reinvestment must occur within a certain timeframe to benefit from these exemptions.
- DTA Considerations: As with rental income, if you are a tax resident in a country with a DTA with Portugal, you may benefit from reduced tax rates or exemptions based on the terms of the agreement.
3. Wealth Tax
- No Wealth Tax: Portugal does not have a wealth tax, so there are no additional taxes based on the value of your real estate holdings.
4. Municipal Property Tax (IMI)
- Applicable: The Municipal Property Tax (IMI) is applicable to all property owners in Portugal, including NHRs. The tax rate varies by municipality and property type and is calculated based on the property's taxable value.
- Rate: IMI rates generally range from 0.3% to 0.45% for urban properties and up to 0.8% for rural properties.
5. Additional Considerations
- Property Transfer Tax: When purchasing property in Portugal, there is a Property Transfer Tax (IMT) that applies to all buyers, including those under the NHR regime. IMT rates are progressive based on the property's purchase price and type.
- Inheritance and Gift Tax: Portugal does not have inheritance tax, but there may be Stamp Duty on gifts and inheritances, which can apply to real estate transfers.
Summary
Under the NHR regime, real estate tax implications primarily involve income tax on rental income and capital gains tax on property sales. The NHR regime does not alter the fundamental tax structure related to real estate in Portugal but may offer some benefits or reliefs depending on your specific circumstances and the applicable Double Taxation Agreements. It is advisable to consult with a tax professional to navigate these implications effectively and ensure compliance with all tax obligations.