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PORTUGUESE NON-HABITUAL RESIDENTS TAX REGIME
The Portuguese tax regime for non-habitual residents was introduced in 2009 to attract individuals and their families to live in Portugal.
WHO MAY APPLY
To become a non-habitual resident it is necessary to fulfill one of the following conditions:
- Stay more than 183 days in Portugal during the tax year (consecutive or not) or
- Have a dwelling in Portugal in conditions that suggest the intention to maintain it as the habitual residence.
The applicant can not have been considered a Portuguese tax resident in the previous 5 years.
The status of non-habitual resident is not awarded automatically: In fact, it depends of a prior analysis and approval of the Portuguese tax authorities.
DURATION OF THE REGIME
Taxpayers acquire the right to be taxed as non-habitual residents for a period of 10 years whether consecutive or not. After that period, taxpayers will be taxed in accordance with the general personal income tax rules as set in the Portuguese Personal Income Tax Code.
TAXATION OF PORTUGAL SOURCED INCOME
As long as the individuals are taxable as non-residents, Portuguese sourced income from employment and self-employment activities that are considered “high value added activities” are subjected to a special withholding tax at a rate of 20%.
Under Portuguese law “high value added activities” are those of a scientific, artistic or technical nature and include the following activities:
- Architects, engineers and similar
- Visual artists, actors and musicians
- Auditors and consultants
- Doctors and dentists
- University teachers
- Liberal professionals, technicians and similar
- Company’s high level professionals; Investors, Managers and Directors
Other types of income sourced in Portugal are subjected to the ordinary Portuguese tax rules.
TAXATION OF FOREIGN SOURCED INCOME
- Pensions: This income is exempted from taxation in Portugal as long as it is taxed in the source state in accordance with a Double Tax Treaty (DTT) concluded between Portugal and the respective state. Alternatively, this income will also be exempt if, under the rules in the Portuguese Personal Income Tax Code, it is not deemed to be earned in Portugal. In practical terms, this often results that pensions are exempted from any taxation. For this reason many retired people are choosing Portugal to live.
- Employment income: It will be exempted from Portuguese taxes if it is taxed in the source country under the applicable DTT or in the absence of a DTT if it is taxed on the country of origin and not considered obtained in Portugal under Portuguese tax rules.
- Self-Employment income from high added value activities, royalties, interests, dividends, rental income and capital gains: It will be exempted from Portuguese taxes if it can be taxed in the source country under the applicable DTT or in the absence of a DTT if it can ben taxed on the country of origin under OOCD DTT model, if the source country is not included on the Portuguese “black list” and the income is not considered obtained in Portugal under Portuguese tax rules.
TAXATION ON DONATIONS AND INHERITANCES AND WEALTH TAX
Gifts and inheritances to spouses (includes non-marital partnership), descendants or ascendants are exempted from paying taxes. Gifts and inheritances in favor of other individuals will be subjected to a flat tax stamp of 10%. Portuguese tax system does not establish any wealth tax.
Although great care has been taken when drafting this information, we do not accept any responsibility whatsoever for any consequences arising from the use of the information herein contained. This information is provided for general information purposes only and does not intend nor should be considered as legal or any other professional advice