Non-Habitual Resident (NHR) Regime

According to several sources, the NHR - Non-Habitual Resident in Portugal will end.

The end of the Non-Habitual Resident (NHR) regime in Portugal is expected to have a significant impact on the country's economy. The NHR regime, which has been in place since 2009, has attracted expats and investors due to its tax benefits, including tax-free transactions and low taxes on pension income and wealth.

The Prime Minister of Portugal, António Costa, has announced that the NHR regime will come to an end in 2024, claiming that it no longer fulfills its initial purpose. The State Budget Proposal for 2024 includes provisions for the closure of the NHR regime, with the final vote on the budget law scheduled for November 29, 2023.

The exact impact of this decision on the Portuguese economy is still uncertain, but there are expectations that it will significantly affect the real estate market, which has benefited greatly from the NHR regime. In addition, the end of the NHR regime may lead to a reduction in foreign investments in Portugal.

What it looked like:

The Non-Habitual Resident (NHR) regime is a beneficial tax regime that offers people who have not been tax residents in Portugal in the last 5 years a more favourable Personal Income Tax (IRS) rate for a period of 10 years. Benefits of the scheme include:

1. Taxation at a flat rate of 20% on income obtained in Portugal from employment and self-employment. However, the benefit only applies to income generated by high value-added activities of a scientific, artistic or technical nature carried out in Portugal, as listed in a Ministerial Order (examples include directors and executives of production, industry, services and business companies, doctors, dentists, engineers, computer scientists, communication specialists, scientists and related technicians, university professors, artists, among others).
2. Taxation at a flat rate of 10% on pension income earned abroad; and
3. Income earned abroad may be exempt from tax.

Other types of domestic income received by Non-Habitual Residents (NHR) are subject to IRS according to the rules applicable to ordinary tax residents.

To qualify for the NHR scheme, the following requirements must be met:

1. Not have been taxed as a resident in Portugal in the 5 years prior to the application;
2. Have residence in Portugal, either through a lease agreement or possession of a residential property;
3. Becoming a tax resident in Portugal, which can be achieved through:
   • Stay in Portugal for more than 183 days (continuously or not) during a 12-month period, which begins or ends in that tax year (from January 1st to December 31st); or
   • Have a residential dwelling in Portugal used as a habitual dwelling on any day of the 12-month period.

It is important to take all of these aspects into consideration when valuing your property. Real Easy is attentive to government changes, and this is one of the very important topics, as well as the "More Housing" package of measures.