NHR tax status applications must prove intent before the December 2023 deadline

The Portuguese government announced in their state budget for 2024, that anyone who has applied to secure NHR tax status in Portugal by December 31st, 2023, must be able to prove they have taken serious steps of intent to reside in Portugal.

Minimum requirements for NHR tax status to new entrants

To be eligible for NHR tax status, you must meet the following requirements:

• You must not have been a Portuguese tax resident for the previous 5 years.

• You must have a residence in Portugal on December 31st of the year in question or have made an appointment with the immigration office.

• You must have proof that you intended to establish your habitual residence in Portugal. This could include proof of address such as property ownership in Portugal, a rental agreement, utility bills, a Portuguese bank account, as well as a NIF tax ID.

If you are a non-EU citizen, you need to prove that you have an immigration appointment, or a visa residency card, or alternatively an 'expression of interest' letter.

These would need to have been in place in good time before the end of December application deadline for the authorities in Portugal to consider your application as demonstrating proof of intent.

What happens if you don't have your visa yet as a non-EU citizen?

As a non-EU citizen, if you don't have your Portuguese residence visa yet, but can provide evidence that you have an appointment with the immigration office or a visa residency card, this will demonstrate your proof of intent in time for the December 31, 2023 deadline to new entrants to NHR tax status. And you will then be able to still qualify for NHR tax status in time for the 31st of March 2024 tax period.

You will need to provide the Portuguese tax authorities with documentation that proves your intention to reside in Portugal, such as a lease agreement, utility bills, schools, or visa appointments. You will also have to ensure that you have your NIF tax ID, Portuguese bank account, and if you have children, evidence that you have registered them in a school in Portugal.

What will replace the NHR tax regime?

The Portuguese government has not yet fully announced the full details of the replacement for the NHR tax regime, which was tentatively named the Incentivised Tax Scheme (ITS) in draft announcements.

However, it is likely that the new tax regime will have similar benefits as the current NHR tax status, but there will inevitably be some impact to people's individual circumstances from these changes.

This will always be wholly dependent on the structure of your professional or personal income and assets, investments, and most likely your profession or retirement status where applicable.

Exact benefits of the NHR tax regime

The NHR tax regime offers a number of tax benefits, including:

• 0% tax on passive income from non-Portugal derived income such as dividends, royalties, and 10% on overseas pensions.

• Exemption from capital gains tax, gift tax, and on the sale of assets, such as property and investments, under Portuguese tax law. However, please seek professional tax advice depending on where your assets are held.

• A flat tax rate of 20% on Portuguese-source employment income.

What this means to new NHR tax status applicants who are already expediting their application and evidencing their intent.

If you are already in the process expediting your application for NHR tax status, you will need to have already demonstrated serious intent to do so, or it will likely be too late, and you will need to apply for the new tax scheme that replaces the NHR tax regime next year.

There are very few professional supply chain partners who are taking on brand new applications before the end of December. Non-EU passport holders must have a residency card or an appointment already in place with the immigration office along with a NIF tax ID, proof of address in Portugal, and other items that demonstrate proof of intent before the December deadline. Existing EU passport holders must have proof of address in Portugal and other items that showed they had proof of their intent to do so before the December deadline.

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Contact Portugal Pathways if you are in the middle of expediting your application or you wish to apply for the new tax scheme that replaces NHR in 2024

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Impact on existing NHR tax holders in the future

For affluent expats currently benefiting from Portugal’s Non-Habitual Residency (NHR) tax regime, understanding how their position may evolve over time is an important part of long-term planning. While NHR benefits apply for a fixed 10-year period, what happens afterwards depends on individual circumstances, income sources, asset structures, and the law in force at the relevant time.

Research into wealthy expats in Portugal suggests that many NHR tax holders do not review their position until the later years of the regime. Those who begin exploring post-NHR considerations earlier in the NHR period often have more time to understand how different types of income and assets — such as dividends, investments, property, or overseas income — may be treated once NHR comes to an end.

Engaging with appropriately qualified cross-border professionals during the earlier years of NHR can help individuals assess their situation, understand potential considerations, and plan the transition into Portugal’s standard tax framework with greater clarity. Even for those already in the later years of their NHR period, a review may still be worthwhile, although available options and timelines can become more limited.

As with any tax or financial matter, outcomes vary by individual circumstances. Decisions should always be made based on independent professional advice, taking into account personal objectives and the applicable legal and tax framework.

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Contact Portugal Pathways if you are a current NHR tax holder and want to mitigate progressive tax rates and arrange a free consultation with one of our professional advisors and make sure you’re protected and structured to optimise your income, assets and tax for the next 20 years.

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DisclaimerInformation on the Portugal Pathways website and in email communications is for general information only and does not constitute legal, tax, financial, or investment advice. Tax treatment, investment outcomes, and residency requirements depend on individual circumstances and applicable law and are not guaranteed. Professional independent advice should always be obtained before taking action.