NHR 2.0? The new Non Habitual Residence regime (2024)

The Non Habitual Residence (NHR) was closed with effect from the end of 2023, and a new tax incentive scheme introduced.

Existing NHRs unaffected

Those with NHR status can rest assured that their NHR status will not be affected.

You can still apply for NHR – the transitional regime

You are still able to qualify for NHR if:

1. on 31st December you met the conditions to qualify as a Portuguese tax resident

2. become Portuguese residents by 31st December 2024 and have either:

• work contract or agreement dated prior to 31st December 2023, the duties under which are carried out in Portugal
• lease for property signed prior to 10th October 2023
• promissory contract for Portuguese property signed before 10th October 2023
• enrolment for dependant in education in Portugal completed by to 10th October 2023
• residence visa or permit valid up until 31st December 2023
• the initiation of the process for visa or residence before 31st December 2023

If you cannot meet any of the above criteria, then you may consider the new tax regime created with effect from 1st January 2024.

NHR 2.0 - the new regime

The conditions that applied for NHR also apply, namely:

• Can’t have been tax resident in the last 5 years
• Must become a tax resident in Portugal
• Not have benefited from the NHR regime

Qualifying for the new tax regime is more difficult as it is reliant on your exercising one of several qualifying roles/activities in Portugal, as follows:

• Teaching in higher education and scientific investigation
• Employment technology and innovation centres
• Employment in organisations benefiting from incentives for productive investment
• Highly qualified professions
• Positions in entities recognised by AICEP, EPE, IAPMEI or IP as being deemed relevant for the national economy
• Research and development
• Positions in start ups
• Positions carried out by tax residents in Azores and Madeira - still to be defined under legislation

0% tax…..?

Although qualifying for the new tax regime is more difficult, the major benefit is that for 10 years there is 0% tax on all foreign source income and gains. The only exceptions to this are income from backlisted jurisdictions or pension income.

Standard tax residency

Even if you cannot qualify for NHR or NHR 2.0, Portugal can still be an attractive place to live from a tax perspective.

Quick wins in Portugal compared to the UK

o Wealth tax – 0%
o Inheritance tax – 0%
o Succession tax – 10% but not for direct line ascendants or descendants and only applicable on Portuguese assets if it does apply
o Income tax similar to UK
o Structuring investments – it is possible to live on very low tax rates using structures such as the Portuguese Compliant Investment Bond (PCIB).

Standard rates of income and capital gains tax can be comparable or better than the UK, depending on each person’s situations and asset sources.

Employment and self employment income
UK - 20%, 40% or 45%
Portugal - 14-48%

Interest
UK - 20%, 40% or 45%
Portugal - 28% (35% blacklisted jurisdictions)

Dividends
UK - 8.75%, 33.75% and 39.35%
Portugal - 28% (35% blacklisted jurisdictions)

Pension income
UK - 20%, 40% or 45%
Portugal - 14-48%

Trust income
UK – 38.1% or 45%
Portugal - 28% (35% blacklisted jurisdictions)

Capital gains tax – non property

UK – 10% or 20%
Portugal – 28%, if held more than 365 days

Capital gains tax –property

UK – 18% or 24%
Portugal – 50% of gain added to income and taxed at progressive rates

Visas and tax

No relationship

Planning needed

Irrespective of which position you are in, planning is required, ideally before your leave your current country of residence.

IMPORTANT – PLEASE READ REGARDING THIS CHANNEL

The content on this channel is for educational and information purposes only. It should not be relied on as advice, and you should always take qualified advice before making any changes to your personal position.

Whilst I have experience in the financial and tax industry, this channel is for recreational purposes and is not an advertisement for my business or services. Its purpose is to share quality information.

Whilst every care is taken as to the accuracy of the information in these videos, the information provided is based on the understanding of the rules at the time, and rules can change with little or no notice.

Whilst I cover a wide range of issues on the channel, in my professional role I specialise in tax efficient investments, UK and overseas pensions, estate planning, and wealth management for expatriates based in Portugal. Unfortunately, I do not offer visa or tax return services, nor can I assist US nationals.

*Thank you for your support and understanding. I hope to continue to provide you with valuable information to help you with your life in Portugal. If you have any suggestions for content you would like to hear, please let me know*