Tax Incentives for New Residents

Portugal has become an attractive investment destination for foreign individuals and companies because of its natural beauty, quality of life, and tax incentive programmes for new residents.

With a growing economy and a favourable regulatory environment, Portugal offers a variety of tax regimes designed to attract foreign investors and non-habitual residents. On this page, we briefly explore the advantages and requirements of each.

What tax incentives exist in Portugal?

Portugal has several tax incentive programmes. Below, we highlight the three most popular:

• Tax Incentive for Scientific Research and Innovation - also known as “IFICI” or “NHR 2.0"
• Youth PIT Tax Regime
• Return Programme

To benefit from any of these incentive programmes, you must become a resident of Portugal.

Who is considered a tax resident in Portugal?

When discussing tax incentives for new residents in Portugal, it's crucial to explain the concept of "tax residence".

Generally, an individual is considered a tax resident in Portugal if they stay 183 days (consecutive or interpolated) in Portuguese territory for 12 months.

A person may also be considered a tax resident if, on any day during those 12 months, they own a home in Portugal under conditions that suggest that they intend to keep it and occupy it as their habitual residence.

This is a somewhat ambiguous requirement. Even if you don't stay more than 183 days in Portuguese territory but own a house in Portugal in habitable condition, you can be considered a tax resident.

Tax Incentive for Scientific Research and Innovation - The "NHR 2.0"

The Tax Incentive for Scientific Research and Innovation (IFICI) is a new tax incentive for new residents in Portugal that came into force on 1 January 2024.

This tax incentive resembles the old Non-Habitual Resident tax regime (NHR 1.0) for high-value-added activities. For this reason, it has also been dubbed "NHR 2.0" or "New NHR".

IFICI is primarily directed at people working in Portugal for a Portuguese company.

What are the advantages of the NHR 2.0?

NHR 2.0 offers the following advantages:

• A single tax rate of 20% on Portuguese-sourced income from employment (category A) or self-employment (category B);
• Exemption from tax on foreign-source income: income from employment, interest, dividends, property income, and capital gains.

Portuguese-sourced income must be earned in one of the eligible activities (see next section) to be covered by the single rate of 20%.

These benefits are valid for 10 consecutive years.

Who can benefit from the NHR 2.0?

Any individual can benefit from NHR 2.0, provided they earn income from one of the following professional activities:

• Higher education lecturers and scientific researchers;
• Qualified professionals and members of the governing bodies of organisations that have benefited from tax incentives for productive investment;
• Highly qualified professionals working in companies that export (or have exported in the last 2 years) at least 50 per cent of their turnover;
• Qualified professionals and members of governing bodies in entities that carry out economic activities recognised as relevant to the Portuguese economy;
• Professional research and development staff whose costs are eligible for the purposes of the system of tax incentives for research and business development under the terms of the Investment Tax Code;
• Professionals and members of the governing bodies of start-ups;

We emphasise that companies in which the scheme's beneficiaries exercise the relevant profession must have effective management in Portuguese territory, carrying out their activity in Portugal.

Our Guide to Tax Incentives for New Residents in Portugal provides a detailed list of professional activities eligible for IFICI.

Disadvantages of "NHR 2.0"

The IFICI does not provide any benefits for pension income, and it should also be noted that income from jurisdictions on the Portuguese list of tax havens will be subject to an increased rate of 35%.

This special regime cannot be extended beyond the initial 10 years and is not available to taxpayers who benefit or have benefited from the NHR regime or the tax regime applicable to former residents (Return Programme).

Youth PIT tax regime

Youth PIT (“IRS Jovem”) is a tax regime created to support young workers starting their careers, which allows for a significant reduction in personal income tax (PIT).

This benefit has undergone significant changes as of January 1, 2025, with its scope broadened and the exemption amount increased.

The Youth PIT regime offers a partial exemption from PIT on income from employment (category A) and self-employment (category B) for a maximum period of 10 years.

What are the advantages of Youth PIT?

The main benefit of Youth PIT is the progressive PIT exemption, applied as follows:

• 100% exemption in the first year of income;
• 75% exemption from the second to the fourth year;
• 50% exemption from the fifth to the seventh year;
• 25% exemption from the eighth to the tenth year.

This exemption has an annual limit of 55 times the IAS (the Social Support Index, a reference value calculated annually).

The maximum period of 10 years is counted from the first year of income.

Who can benefit from Youth PIT?

All people under 35 who earn income in categories A or B are eligible for Youth PIT, regardless of their academic background or nationality. However, those who have benefited from the non-habitual resident tax regime (NHR 1.0), IFICI (NHR 2.0), or the Return Program are excluded from the Youth PIT program.

Return Programme

The Return Programme is a tax incentive in Portugal that aims to attract individuals who, although they have been tax residents in Portugal in the past, or even Portuguese citizens, are currently living abroad.

To this end, this tax incentive provides for an exclusion from taxation of 50% of income from dependent work and self-employment up to an annual amount of €250,000.

Who can benefit from the Return Programme?

To benefit from the Return Programme, you must comply with the following access conditions:

1. Become a tax resident in Portugal until 31 December 2026;
2. Not be considered resident in Portuguese territory in any of the five years prior to the year in which you become resident in Portuguese territory;
3. Have been resident in Portuguese territory before the five-year period mentioned in point 2;
4. Have their tax situation regularised;
5. Not having applied for registration as an NHR.

The benefits of the Return Programme are valid for 5 years

The benefit of this regime is automatic and does not require prior recognition.

Sometimes it happens that a former resident of Portugal moves abroad without ever having changed their address to their new country of residence. In these situations, the solution is to apply for a change of tax residence with a retroactive effect. Our team has experience preparing these requests and has worked on several successful cases.

Portugal also offers new residents other advantages, such as exemption from inheritance tax and a favourable regime for setting up businesses - the International Business Centre of Madeira.