Article taken from Doutor Finanças April 22, 2024
Find out how the Non-Habitual Resident regime works
Are you registered or do you intend to register as a Non-Habitual Resident (RNH)? In this article we explain what the RNH tax regime consists of, the changes to the law and how to declare income to the IRS.
The RNH regime was revoked with effect from January 1, 2024, but until March 31, 2025 it is still possible to submit an application for registration and benefit from this tax regime.
Definition of Non-Habitual Resident
The figure of the Non-Habitual Resident (RNH) was created with the aim of attracting qualified professionals in activities with high added value, foreign pensioners and high-net-worth individuals to Portugal.
The special tax regime for NHR allows exemption or taxation at more favorable rates of income earned by these taxpayers for a period of 10 consecutive years, including the year of registration.
If during the 10-year period you have not benefited from the right to taxation as an NHR in one or more years, you can benefit from the regime again until you reach 10 years, as long as you are considered resident in Portugal for tax purposes.
This regime was created with the aim of contributing to the development and modernization of the Portuguese economy, to increase consumption and tax revenues (IMT, IMI and VAT).
The IRS Code defines the RNH as a natural person who becomes resident in Portuguese territory and has not been taxed by IRS as a resident in Portugal in the previous 5 years.
To become a resident in Portugal it is necessary (n. 1 of article 16 of the CIRS):
Have stayed in Portuguese territory for more than 183 days, consecutive or interpolated, in a period of 12 months beginning or ending in the year in question; or
If you stayed less than 183 days in Portugal, have a home that you can maintain and use as your habitual residence.
The RNH regime is a right that is neither mandatory nor automatic. If the taxpayer is interested in taking advantage of this status, he or she must request it from AT, thus exercising the option for the special regime. If you do not apply for RNH status, you will be taxed as a tax resident in Portugal under the general regime.
Read also: Buying a house by Non-Residents: Tax regime, requirements and impacts
Income taxation under the RNH tax regime
High added value activities
One of the objectives of creating the RNH regime was to attract highly qualified professionals in activities considered to have high added value that would contribute to the development of the Portuguese economy.
The table of high added value activities, approved by Ordinance No. 12/2010 and amended by Ordinance No. 230/2019, includes activities such as directors, physicists, mathematicians, doctors, engineers, university professors, ICT specialists, artists , journalists, among others.
Within this group, there are activities with high added value carried out on behalf of others (category A income) or as part of professional and business activities (category B income).
How is income taxed under the RNH tax regime?
Category A income:
If obtained in Portugal, they are taxed at an autonomous rate of 20%;
If they are obtained through an entity abroad and taxed abroad, the exemption method applies. Otherwise, the autonomous rate of 20% applies.
Category B income:
If obtained in Portugal, they are taxed at an autonomous rate of 20%;
If they are obtained through activity in a permanent establishment abroad, the exemption method applies.
Pension Income
The RNH regime also emerged with the aim of attracting foreign or Portuguese pensioners residing abroad, with the aim of having them take up residence in Portugal and thus contribute to the Portuguese economy through the acquisition of real estate, essential and non-essential goods, services, leisure activities , etc.. In this way, tax revenues would increase through IMT, IMI and VAT.
Pension income, category H, is taxed at the autonomous rate of 10%. For those who registered as an RNH until 2020, income from this category is exempt.
Pension income, when exempt, is obligatorily included, without prejudice to the tax credit for international double taxation (no. 1 of article 81 of the CIRS).
Other income
Income obtained by RNH in categories E (capital), F (property) and G (capital gains, including real estate) are subject to:
Exemption method, if they are from a foreign source and taxed abroad;
Taxation at a rate of 35% on income from capital and capital gains, if from a foreign source paid by an entity domiciled in a country subject to a more favorable tax regime.
International Double Taxation
To eliminate double taxation, i.e. for the same income is not taxed abroad and in Portugal, the taxpayer can choose between:
Exemption Method;
Tax credit method.
The exemption method is applied in the progressive exemption modality, that is, the income is exempt from taxation, but is included with other income of other types to determine the IRS rate to be applied.
The tax credit, simply put, is a mechanism to eliminate double taxation which consists of deducting the tax paid abroad from the tax calculated in Portugal.
Read also: Non-resident but with income in Portugal: What are my obligations?
RNH tax regime – Transitional Provision
The tax regime for Non-Habitual Residents was revoked by the 2024 State Budget (al. b) of art. 317 of Law No. 82/2023 of December 29), with effect from January 1, 2024, however, the same law provides for a transitional provision that allows the application of this regime beyond that date.
The regime continues to be applicable until the end of the 10th consecutive year from the year of registration (inclusive) as RNH. For the purposes of counting time, the beginning is considered to be the date on which the taxpayer becomes resident in Portugal.
Who has the possibility of continuing to benefit from the old regime?
According to article 236 of Law no. 82/2023, the Non-Habitual Residents tax regime continues to be applicable to taxpayers who:
If you were already registered with the AT on January 1, 2024, but the 10-year period in which you are entitled to be taxed as an RNH has not yet expired;
Meet the conditions for qualification as an RNH (article 16 of the CIRS) for tax purposes in Portugal on December 31, 2023 and have submitted the application for registration as an RNH on the AT Portal by March 31, 2024.
The RNH tax regime is also applicable to taxpayers who become resident for tax purposes by December 31, 2024 and submit the application for registration as RNH on the AT Portal by March 31, 2025 (with effect from the year 2024).
To qualify for this situation, the taxpayer must have one of the following elements:
Promise or employment contract, promise or secondment agreement signed by December 31, 2023 and to be exercised in Portugal;
Lease contract, or other contract that grants the use or possession of a property in Portuguese territory, concluded until October 10, 2023;
Reservation contract or promise to acquire real rights over property in Portuguese territory concluded by October 10, 2023;
Enrollment or registration for dependents, carried out by October 10, 2023, at an educational establishment located in Portugal;
Visa or residence permit valid until December 31, 2023;
Procedure for granting a visa or residence permit initiated with the competent authorities by December 31, 2023;
In these circumstances, it is important that the taxpayer maintains all the evidence justifying inclusion in the RNH tax regime to present to the AT whenever it requests them.
Members of the taxpayer’s household covered by the transitional provision can also benefit from the RNH tax regime.
The taxpayer who becomes resident by December 31, 2024 and the members of his household must, firstly, register in the AT database as residents in Portuguese territory (no. 10 of art. 16. º of CIRS) changing tax residence, and only then proceed to register as RNH.
If the application for registration as an RNH for 2024 is submitted after March 31, 2025 and is approved, taxation as an RNH will only apply from the year in which the registration is made and until the end of the 10-year period from from 2024. Thus, a taxpayer registered as RNH in August 2025, for example, will only benefit from the tax regime for 9 years.
Note that if the taxpayer becomes a tax resident in Portugal in 2025, the request submitted in 2025, or later, will be rejected if it does not meet the conditions set out in the temporary provision.
You can submit your application for registration as an RNH here, entering your authentication details on the AT Portal.