10 common myths about Non-Habitual Residents in Portugal
The non-habitual resident (NHR) tax regime, created in 2009, is one of the most sought-after benefits for those who want to live or return to live in Portugal.
There is much information online about the advantages and requirements of this regime, which applies to anyone who becomes a tax resident in Portugal in any given year, having not been one for the previous 5 years.
However, the abundance of information regarding this topic does not make it clearer or easily understandable to those unfamiliar with the Portuguese tax regime.
This can lead to misunderstandings and misinterpretations.
Discover in this article the 10 most frequent myths about the non-habitual resident regime in Portugal - and the correct answer for each one.
10 Myths about the NHR Regime in Portugal
I don't need to be a tax resident in Portugal to benefit from the NHR regime
FALSE. One of the mandatory conditions to benefit from the NHR regime is to be a tax resident in Portugal in any given year, not having been one in the previous 5 years.
For example, someone who was a Portuguese tax resident in 2019, left Portugal and came back as a tax resident in 2023 cannot register as an NHR in 2023 because only 4 years have passed since they left Portugal and came back.
I can register as an RNH at any time of the year
IMPRECISE. You can obtain Non-Habitual Resident status until 31 March of the year following the year you became a tax resident in Portugal.
For example, if you become a tax resident in Portugal in 2023, you will have until 31 March 2024 to obtain your NHR status.
To be considered an NHR, I must provide a high-value-added activity
FALSE. The only requirements to benefit from the non-habitual resident regime are:
- Be over 18 years old
- Have tax residence in Portugal
- Not having been a tax resident in Portugal in any of the previous 5 years.
The benefits of the NHR regime for high value-added activities apply only to income obtained through services provided to entities not resident in Portugal.
FALSE. Income from high value-added activity (HVA) is:
- Taxed at the reduced rate of 20% if obtained in Portugal;
- Exempt from taxation if derived from dependent work provided outside Portugal and subject to taxation in the other country under the applicable double taxation treaty;
- Exempt from taxation if derived from self-employment provided outside Portugal and subject to taxation in the other country under the applicable double taxation treaty;
As an NHR, I am entirely exempt from taxation in Portugal.
FALSE. This special tax regime only offers exemption from taxation on the following income and conditions:
- Self-employment income earned outside Portugal, which has been effectively taxed in the other country with which Portugal has entered into a double taxation treaty;
- Self-employment income earned in high value-added service activities, if it can be taxed in another country with which Portugal has entered into a double taxation agreement.
- Income derived from intellectual or industrial property, capital income, property income and asset increases if taxed in another country with which Portugal has concluded a double taxation agreement.
Previously, pension income earned abroad was also exempt in Portugal. However, following a legislative change applicable since the beginning of 2020, they are now taxed in Portugal at a rate of 10%.
Be aware that all your income must be declared in Portugal, even income exempt from taxation in Portugal.
With the NHR status, I do not have to declare any income in Portugal or fulfil any tax or reporting obligations.
FALSE. Non-habitual residents are tax residents in Portugal. As such, they must declare all income earned in Portugal or abroad, even if this income is exempt from taxation in Portugal.
They must also identify the IBAN, BIC or account number of their bank accounts abroad.
This obligation is restricted to the identification of the accounts and does not imply the reporting of their balance.
The NHR status will influence the status of my residence permit
FALSE. The Non-Habitual Resident regime is a special tax regime and therefore does not influence obtaining a residence permit.
Only non-Portuguese citizens can benefit from NHR status
FALSE. Portuguese citizens can benefit from the non-habitual resident status if they fulfil the mandatory requirements.
For example, a Portuguese citizen who returns to Portugal (registering as a tax resident in Portugal) after being a tax resident in another country for the last 5 years can benefit from NHR status.
I will lose my NHR status if I apply for Portuguese citizenship.
FALSE. As reiterated above, the non-habitual resident is a special tax regime that does not interfere with obtaining your residence permit or citizenship.
A tax resident who - not being a Portuguese citizen - registers as NHR benefits from this status for 10 years but can apply for citizenship after 5 years of residing in Portugal.
Having NHR status is always more beneficial than not having it.
TRUE! There is no situation in which having non-habitual resident status is less beneficial than not having it.
Do you still have questions about the NHR regime in Portugal?