In a previous article we already discussed the Non-Habitual Resident Regime in detail. However, it became clear that Portugal ends NHR Regime soon. We’ll discuss here everything you need to know.
What is the NHR Regime?
The Non-Habitual Residence or NHR regime allows you to save on taxes when you become a taxpayer in Portugal. It enables you to pay a flat tax of 20% over qualifying professional income and exempts foreign earned income. If you receive a pension from abroad, a tax rate of 10% applies. You can enjoy these tax benefits for maximum ten years.
If you compare this to the general tax rules that apply if you don’t apply the NHR regime, you’ll notice that this is way more beneficial. However, this will no longer be the case if Portugal ends NHR regime.
All good things come to an end
As the famous Portuguese singer Nelly Furtado would say: “All good things come to an end“. Unfortunately, time has also come for the NHR regime. The Portuguese Prime Minister announced recently that the regime would end in 2024. Luckily, people already benefiting from the regime will still be able to do so. Therefore, if you are already in the NHR Regime or successfully apply before the cancellation takes effect, nothing will immediately change for you.
Hence, if you are looking into moving into Portugal to benefit from the NHR Regime, now is the time.
UPDATE 2024: The NHR regime was effectively changed as from 2024. Yet, a grandfathering was foreseen for certain people. Furthermore, Portugal launched a NHR 2.0. Unfortunately, the scope of the new NHR regime is more limited than the previous one. Hence, most digital nomads will not qualify. Furthermore, the tax benifits have also been altered and became less favourable.
Portugal ends NHR Regime: alternatives
Although Portugal ends NHR Regime, you still have another option to limit your taxes in Portugal. You could still opt to register as a freelancer in Portugal. This will enable you to deduct some lump sum costs and give you a tax cut for the first two years.
Another option is, of course, to make sure you don’t become a tax resident in Portugal and to set up tax residency in another country. Nevertheless, it depends on your situation if this is feasible or not.
Conclusion: Portugal ends NHR Regime
You know Portugal ends NHR Regime. However, if you get in before the regime ends, you can still keep benefitting from it. Also, there are some alternatives out there that might even be more tax efficient. Feel free to reach out if you have further questions.