Who will this be the most beneficial for? Fully Nomadic, Location Independent & Remote Workers that have the right to live and work in the Schengen Area, or have a long-term residency in Portugal.
Difficulty of applying from 1-5: 3
Are there any citizens of specific countries that can’t apply? There are no restrictions on who can apply to this program, however, it is targeted more towards the EU/EEA/Swiss citizens and those able to obtain the ‘Golden Visa’. Anyone who cannot live and work within the Schengen area may find the process significantly harder.
What % of the process can be done online? 70% - 80%
The Non-Habitual Resident visa/NHR allows you to become a tax resident of Portugal and benefit from their unique tax regime for ten years. Essentially, with the NHR, all Portuguese-sourced income made by:
working at a Portuguese company
providing services within Portugal as an employee of a foreign company or as a self-employed individual
is taxed at a flat rate of 20%, with a social security contribution placed on top (see technicalities below).
As mentioned, you will be taxed at a flat rate of 20% unless you don't qualify for the preferential tax regime (depending on the categories listed above). Luckily, most remote workers should qualify and are generally placed into the brackets of a computer programmer, consultant, designer, manager or a provider of other information and service activities. The latter term is extremely broad and can be made to include almost any remote profession.
What about foreign-sourced revenue? The good news is that a lot of income generated abroad is generally tax-free; however, there are a few caveats to this that are important to understand:
If the income you’ve generated from a foreign company as an employee or by working remotely is liable to Personal Income Tax (PIT) in your country of origin, this income will likely be tax-exempt in Portugal.
Suppose no Personal Income Tax (PIT) has been applied to the income you’ve generated in foreign countries through employment or self-employment. It will be taxed at 20% as long as it falls into the categories of work mentioned above.
If your generated external income has not been taxed abroad and does not fall into the listed categories of work, then it will likely be taxed under the normal tax brackets (see below).
Foreign business owners can benefit from a 0% tax rate on dividends. People earning foreign dividends do not pay social security contributions.
A social security contribution is also applied to the NHR and is placed on top of the 20% flat tax described above. This social security contribution is payable by employees at a rate of 11%. Employers are expected to make a 23.75% contribution on top of this. This social security amount is retained monthly if your company is in Portugal; otherwise, the monthly repayments will need to be made personally. If you work for a company in a foreign country that already imposes a social security tax on your salary, you can claim an exemption on this.
If you are paid 1000 Euros a month, the NHR applies to 70% of that, totaling 700 Euros. This amount would then be taxable at a rate of 21.4%, making the taxable amount 149.8 Euros.
🟢 You are liable for tax exemption on almost all foreign sources of income. 🟢 If you earn foreign dividends you do not pay social security contributions, truly allowing you to pay 0% tax in Portugal. 🟢 You have the opportunity to gain tax residency within the EU in a white-listed country. 🟢 This program does not apply a wealth tax. 🟢 There is free cash remittance to Portugal. 🟢 After 5 years of tax residency in Portugal, you can become a permanent tax resident and claim citizenship.
🔴 Anyone who can’t work in the Schengen area already will find the process a lot more difficult. 🔴 All applicants will need to go to Portugal to register physically. 🔴 If the income you earn doesn’t fall into the specific categories of work, you may not be able to take advantage of the special tax rate. 🔴 It’s a fairly complex process. Many people hire lawyers or agencies to smooth the process out, which is an extra cost.
You have not been a Portuguese tax resident for the past 5 years.
You have the right to reside in Portugal by being either: a European Union, European Economic Area or Swiss citizen.
You have a Golden Visa.
Have gone through a successful migration application for non-EU citizens.
Ideally, you would reside in Portugal for more than 183 days a year. If you don’t, that is still acceptable as long as you have the right to live there permanently (EU/EEA, Swiss Citizens, and Golden Visa holders have this right.) You will need to prove your intent to reside within Portugal by having a fixed address.
It’s important that you do not stay for 183 or more days in any other country within a year. By doing so, you would risk your NHR getting canceled, or you would be liable for double taxation.
You will need to prove that you have the legal right to reside within Portugal.
Non-Eu citizens will first have to receive a residence permit allowing them to settle in Portugal. After that, they can obtain the permit in various ways, the most popular being via the Golden Visa Program or by proving their passive income. These processes can be done either online via the SEF website here or in their country's Portuguese embassy.
While non-residents can obtain this number through a representative, agency or lawyer within Portugal, residents who are based within the country can get it directly from the finanças or local tax office. If you’re going in person, make sure you bring your proof of residency and official identification documents.
Once you’ve obtained your Portuguese Tax Identification Number, you need to register as a tax resident in the finanças/tax office in person.
Finally, you will need to register here. You’ll be expected to provide your NIF number, email address, phone number and a fiscal address. You will get a password by mail in around two weeks. Once you receive the letter, you can complete the application here.
Although there are no specific costs involved in applying for the program, you will likely need to hire someone to help you through the process. This will be roughly around 200 EUR+ and could rise dramatically for Non-EU nationals.
An accountant will also set you back around 200 EUR a year for bookkeeping to keep your finances in order.