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Madeira

TAX REGIME FOR NON-HABITUAL RESIDENTS

On September 23, 2009, Decree-Law 249/2009 was published, establishing a new tax regime, in lieu of the Personal Income Tax (IRS), applicable to non-habitual residents. The above referenced Decree-Law has been in effect since January 1, 2009.

Non habitual resident - Concept

The non-habitual tax regime is available for those who have not been deemed resident on Portuguese territory during the five years prior to the year they intend to change residence to Portugal and be taxed as a non-regular resident taxable person. An individual should register this status with the Taxpayer Registry of the Tax Services. Under these terms, the non-habitual resident acquires the right to be taxed as a non-habitual resident for the period of 10 consecutive. For each of those years, the individual is to be considered a resident for fiscal purposes. However, if during this 10 year period, the taxpayer did not choose to file as a non-habitual resident (or was not considered to be a resident for fiscal purposes) for one or more of the consecutive years, they may resume this status for the remainder of the established period.

Regime and Benefits

The net income in categories A (Employees) and B (Self Employed), corresponding to high added value activities, of a scientific, artistic or technical nature (see below), obtaines in Portugal by non habitual residents shall be taxed at 20%. Income in category A (Employment) of non habitual residents, obtained abroad, is tax exempt, if alternatively:

a) Such income is taxed by the source State, according to the double taxation treaty in force between Portugal and the source State;

b) Such income can be taxed in another country, in cases where there is no double taxation treaty in force between both countries, as long as the income obtained is not considered to have been obtained in Portuguese territory, according to the Personal Income Tax (IRS) Code. 

Income in category B (Self Employment), obtained through high added value activities of a scientific, artistic or technical nature (see below), or from intellectual or industrial property, as well as, from providing information regarding an experiment carried out in the commercial, industrial or scientific areas, and those in category E (Capital Income), F (Real Estate Income) and G (Increase in Wealth), obtained abroad by non habitual residents, are exempt if alternatively:

a) They are taxed by the source State, according to the double taxation treaty signed between Portugal and the source State;
b) They can be taxed in another country, in cases where the double tax treaty has not been entered into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as (i) it is not a territory subject to privileged tax systems (defined by an ordinance) and (ii), as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory, as per the Personal Income Tax (IRS) Code.

Regarding category H (Pensions) income obtained by non habitual residents abroad, which were, for the same portion which was considered taxable, not considered tax deductable in Portugal, is exempt if alternatively:

a) They are taxed by the source State, according to the convention to terminate double taxation entered into by Portugal and the source State;

b) They cannot be considered to have been obtained on Portuguese territory as per the Personal Income Tax (IRS) Code. Income which is exempt from Personal Income Tax (IRS) under the above stated terms, are mandatorily included for the purposes of determining the taxable amount on remaining income, except in the case of:
  • Capital Gains from Securities;
  • Dividends and interest owed by non-residents, when not subject to withholding at source;
  • Income from employment or self-employment, subject to the above referenced special tax rate of 20%.

Non-habitual residents, whose income is not taxable under the Personal Income Tax, per the above referenced terms, may opt to use the method of tax credit provided for by the international double taxation (in lieu of exemptions), and in this case, income is mandatorily included for the purposes of taxation under the general terms of the Personal Income Tax (IRS) code, except:

  • Gratuities earned for services rendered or due to the performance of work, when not attributed by employer;
  • Capital Gains from Securities;
  • Dividends and interest owed by non-residents, when not subject to automatic withholding;
  • Income from employment or self-employment, subject to the above referenced special tax rate of 20%.

Table of activities considered to be of high added value, for the purposes of application of the non habitual resident regime (Ordinance no. 12/2010 January 7):

1 - Architects, engineers and similar:
101 - Architects
102 - Engineers
103 - Geologists

2 - Visual artists, actors andmusicians:
201 - Theater, ballet, cinema, radio and televisionartists
202 - Singers
203 - Sculptors
204 - Musicians
205 - Painters

3 - Auditors:
301 - Auditors
302 - TaxConsultants
4 - Doctors and dentists:
401 - Dentists
402 - Medical Analysts
403 - Clinical Surgeons
404 - Ship’s doctor
405 - General Practitioners
406 - Dentists
407 - Clinical dentists
408 - Medical physiatrists
409 - Gastroenterologists
410 - Ophthalmologists
411 - OrthopedicSurgeon
412 - ENT(Ear Nose and Throat) specialists
413 -Pediatricians
404 - Radiologists
405 - Doctors from other specialties

5 - Teachers:
501 - Professors

6 - Psychologists:
601 - Psychologists

7 - Liberal Professionals, technicians and alike:
701 - Archaeologists
702 - Biologists and life sciences experts
703 - Computer Programmers
704 - Software consultant and activitiesrelated to information technology and computing
705 - Computerprogramming activities
706 - Computer consultancy activities
707 - Management and operation of computer equipment
708 - Dataservices
709 - Data processing, hosting and related activities;Web portals
710 - Data processing, hosting and relatedactivities
711 - Other data service activities
712 - Newsagencies
713 - Other information service activities
714 - Scientific research and development
715 - Research andexperimental development on natural sciences and engineering
716 - Research and development in biotechnology
717 - Designers

8 - Investors, Managers and Directors:
801 - Investors, Directors and managers of companies that promote productive investment, as long as they are connected to projects and concession contracts that are eligible for tax benefits per the Investment Tax Code (Código Fiscal)
802 - Upper Management

Personal Income Tax (IRS)

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