Gold, D2, D7 Visa and NHR

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For 15 years, the Non-Habitual Resident (NHR) tax regime in Portugal has attracted thousands of residents by offering reduced tax rates and even full tax exemptions for the first ten years of residence. NHRs are taxed at a flat rate of 20% on their income and are exempt from paying taxes on global income. 

However, in late 2023, it was announced that the Non-Habitual Resident (NHR) tax regime was coming to an end as parliament argued it was no longer beneficial to the country.

If you were not lucky enough to enjoy the NHR regime before it ended, you might still have a chance of enjoying some tax benefits with the new NHR regime, known as NHR 2.0. The benefits remain almost the same, but the pool of those who can apply has become a lot smaller. Moreover, the new regime focuses on employment, primarily scientific research, and innovation, while no longer benefiting retirees and other high-value jobs.

Benefits of the Non-Habitual Resident (NHR) Tax Regime in Portugal

Bear in mind that the following benefits only last for 10 years. After that, you will become a regular tax resident like other citizens and will have to abide by the traditional fiscal regime.

Personal Income Tax (IRS): 20% Flat Tax

Those who work in Portugal (freelance or regular employment) under the NHR tax regime only pay a 20% flat rate on personal income tax (IRS). 

Global Income

You will also not pay any tax on dividends, interest, royalties, capital gains, rental income from real estate outside Portugal, and income from employment in another country. These will be paid in the source country if your country has a Double Taxation Agreement (DTA) with the country. The UK, USA, and many more countries have a DTA with Portugal where this is the case. 

Other Taxes

If your pension income happens to be taxed in Portugal as you are not eligible under a DTA, it will only be taxed at a flat rate of 10% which includes retirement savings and insurance. Those with non-habitual residency status pay pension tax like income tax, which can go up to 48%. You will also not pay any inheritance or wealth tax.

Company Taxes

Keep in mind that the non-habitual resident tax regime applies to your personal income tax, personal capital gains, pension allowance, etc, but your company will still have to pay the normal corporate tax (21% in mainland Portugal) and social security fees (23.75% on top of each employee monthly wage).

Who Qualifies for Non-Habitual Resident (NHR) Status in Portugal:

Keep in mind that you must have the right to be in Portugal through a long residency visa such as the Portugal Golden Visa, the Portugal D7 Visa, or the Portugal D2 Visa. Here’s a list of who qualifies for the new NHR in Portugal:

* Educational activities in higher learning institutions and scientific investigation, including employment in scientific roles within entities, structures, and networks affiliated with the national science and technology system. This also includes positions and individuals serving on governing bodies within entities acknowledged as technology and innovation centers in Portugal.

* Employment positions and individuals serving on the boards of organizations that receive contractual tax incentives in Portugal through agreements with IAPMEI or AICEP. These incentives are applicable to substantial investments exceeding €3 million. 

* Highly qualified professionals working for entities benefiting from the Investment Promotion Tax Regime (RFAI)…

* Or in industrial and service companies that export at least 50% of their turnover in the year of starting work or the prior two years.

* Research and Development personnel whose costs are eligible for the R&D tax incentive system (SIFIDE).

* Job positions and members of entities certified as start-ups under the Portuguese Start-Up Law. A start-up is defined, under Portuguese law as follows:

    * Less than 10 years of activity

    * Less than 250 employees

    * Less than €50 million turnover

    * Not held by a large company

    * Based in Portuguese territory or have more than 25 employees

    * Be an innovative company, have one round of VC financing, or investment from Banco Portugês de Fomento.

In order to become a non-habitual resident, you must have lived in Portugal for more than 183 days in the space of 12 months. You can also have lived in the country for less than 183 days but have bought property in Portugal during those 12 months or performed public functions in the name of the Portuguese state for the last 12 months. If the last two options were not the case for you, you will need to obtain residency in order to be eligible for the non-habitual tax regime. Portugal has some attractive long-stay national visas, also known as residency visas, that allow you to make use of the 10 years of tax incentives of the NHR status.

The Portugal Golden Visa was launched in 2012 to increase foreign investment in Portugal and boost the economy as it requires an investment of at least €350,000. With the Golden Visa, non-EU/EEA/Swiss citizens can live and work in Portugal, as well as travel freely within the Schengen area. The visa leads to permanent residence after 5 years and citizenship after 6 years. However, you do not need to live in Portugal to obtain this visa. You must stay in Portugal for at least 7 days in the first year and 14 days in the subsequent years. The most important thing is that you make an investment with funds from outside of Portugal.

Since 2023, the Golden Visa investment routes have changed and property investment is no longer an option. Instead, the current investment routes include:

* Donation to Arts €250,000

* Venture Capital/Private Equity Fund €500,000

* Donation to Research Activities €500,000

* Company Creation 10 employees or €500,000 + 5 employees

Keep in mind that the Portuguese Golden Visa no longer allows for investment through property since October 2023.

D7 Visa

The Portugal D7 Visa is suitable for retirees, digital nomads, and remote workers with proof of a stable income. The D7 Visa was introduced in 2007 and allows non-EU/EEA/Swiss citizens to obtain permanent residency in Portugal after 5 years and citizenship after 6 years. This might sound similar to the Golden Visa, but unlike it, it does not require an investment. All you need is to prove that you have a solid passive income that can come from a retirement pension, a financial investment, real estate income, or salary.

The minimum income required is €8,460 per year for the main applicant. For a spouse, you must add 50% to this (€4,230) and for a dependent child, you must add 30% to this (€2,538). Therefore, for a couple with one child, you would need around €15,300 a year to be eligible for the D7 Visa.

You must also spend at least 16 months in Portugal during the first 2 years of the visa, as well as have a clean criminal record and show proof of residence address in Portugal (rental or purchase).

D2 Visa

The Portugal D2 Visa caters to entrepreneurs, freelancers, and independent service providers who wish to reside in Portugal. Non-EU/EEA/Swiss citizens who want to start a business in Portugal or relocate their existing business to the country can make use of this visa. Another option is choosing to invest in a Portuguese business. Like the Golden Visa and D7 Visa, the D2 visa allows for permanent resident status after 5 years and citizenship after 6 years.

To be eligible, you must prove that you have the financial resources to sustain your business. Although there is no number set in stone, the recommended minimum is at least €5,000. You will also have to show that you can financially sustain yourself

You will also have to present a business plan that demonstrates your business is economically viable and that will be reviewed for its social, economic, and cultural impact.

We hope this helps you to take informed decisions about the best alternatives to live and invest as an individual in Portugal.

Written By Lara Silva