Portugal - Business & Investment - Non-Habitual Residency Status in Portugal

More and more clients are choosing to move to Portugal for a tax-free retirement plan. This is also availble to those entrepreneurs or business people who are internationally mobile. Benefits of life in Portugal include its low capital cost of entry, geographically close to the UK and the rest of Europe, great weather and a low cost of living.

Non-Habitual Residence Tax status

The Non-Habitual Residence (NHR) programme was introduced in Portugal in 2009 with the aim of attracting wealthy foreigners to the country by making it beneficial to become a tax resident there. The programme offers a 10-year tax break on qualifying foreign income if you move your residence to Portugal. What’s more, Portugal doesn’t have an inheritance tax regime, so all your assets can eventually be passed down to your family tax-free.

To qualify as a non-habitual tax resident in Portugal, you need to have a valid residency right in Portugal. This can be done either through a retirement visa, or through the Golden Residence Permit Programme (also known as the Golden Visa).

As a non-habitual tax resident, you will be exempt from tax on certain types of qualifying foreign income in Portugal if it is subject to tax in the country of origin under an existing double taxation agreement (DTA). Income from dividends, royalties and interest all qualifies for exemption from tax provided that:

• Such income may be taxed in the country of source under the rules of the DTA; or
• Such income may be taxed in the country of source under the rules of the OECD Model Tax Convention on income and on capital (if no DTA exists) and it does not arise from a Portuguese source.

For example, South African dividends will be tax-free in Portugal. However, these dividends may be taxed in South Africa at either 10% or 15% depending on the relevant shareholding agreements. Pension income in Portugal is taxed at a low rate of only 10%, making the programme highly beneficial for retirees.

There are four main residency statuses that achieve this:

1. Retirement Visa

This visa allows you to live in Portugal (and your spouse can accompany you). You will have to demonstrate that you can support yourself financially and you do not engage in direct employment in the country.

2. Passive Income Visa

You will need to demonstrate your interest in Portugal, goals for when you reside and have proof that you have enough money to provide essential needs for yourself and your spouse. To be eligible for the visa, you must be based in Portugal for up to eight months of the year (or six consecutive months) and have proof of sufficient funds to support the life in Portugal. These funds must be available for use in Portugal. This permit is renewable every two years, and after five years you can change it to a permanent residence permit.

3. Golden Visa

This visa is based on making in investment (usually into property) in Portugal.

4. European Citizenship

Any client holding a European Union (EU) citizenship qualifies for residency in Portugal through the principle of the free movement of people. After 2020, this would exclude British citizens.

This service is offered by our Sable Wealth team on wealth@sableinternational.com.