The Non-Habitual Resident (NHR) regime has been, since 2009, one of the main drivers for attracting talent and investment to Portugal. However, this benefit has a fixed and non-extendable term of 10 years. With the arrival of 2025, many of the first beneficiaries of this regime are now facing its conclusion.
At FA ACCOUNTING, we understand that the transition from the NHR regime to the standard tax regime can represent a significant financial shock if there is no proper planning. In this article, we detail what changes and how you can mitigate the tax impact.
What happens when the NHR status ends?
Once the 10-year period expires, you will no longer benefit from special rates (such as the 20% flat rate for high value-added activities or exemptions/reduced rates on foreign income). From the 11th year onwards, you will be taxed according to the general rules of the IRS Code, which implies:
- Progressive IRS Rates: Your global income (domestic and foreign) will be aggregated and taxed at rates ranging from 13.25% to 48%, depending on the income bracket.
- Taxation of Capital Income: Income such as dividends, interest, and capital gains, which were often exempt under NHR, will normally be taxed at a flat rate of 28% (or aggregated if more advantageous).
- Real Estate Capital Gains: If you sell a property abroad, you will no longer benefit from the exemption that NHR allowed in many cases. In Portugal, 50% of real estate capital gains are generally subject to taxation at progressive rates.
The “Cost of Inertia”
The difference between timely planning and inactivity can translate into thousands of euros in additional taxes. For example, a pensioner who enjoyed a 10% rate could see their tax burden rise drastically when integrated into the general IRS brackets.
Tax Planning Strategies for 2025
For those approaching the end of their status, several measures can be taken:
- Portfolio Restructuring: Evaluate the sale of assets or liquidation of investments before the NHR term to realize capital gains while still under the benefit regime.
- Review of Investment Vehicles: Consider transferring assets to more efficient structures in Portugal, such as life insurance policies (unit-linked), which offer tax advantages on long-term income taxation.
- Income Anticipation: If possible, anticipate the receipt of bonuses, dividends, or pension distributions while still benefiting from the reduced rate.
- New Regime Evaluation (IFICI): For new residents or those in scientific research and innovation fields, there may be a possibility to access the new tax incentive (known as NHR 2.0), although the criteria are much stricter.
How FA ACCOUNTING can help?
The transition to the standard tax regime does not have to be a painful process. At FA ACCOUNTING, we specialize in personalized tax consultancy for expats and investors.
Our team performs a detailed analysis of your income and asset structure, designing an “NHR Exit Plan” aimed at optimizing your tax burden post-10 years. Don’t wait until the last month of your benefit; planning should ideally begin 12 to 24 months before the term ends.
Ensure the protection of your assets in Portugal.