How Portugal’s IFICI tax regime has widened its scope

He spoke on a panel at the Portugal Investment Forum in Estoril about how Portugal is incentivising investors and value creators.

Santos said the regime was originally designed to attract highly skilled talent, but its scope has since been broadened through regulation. Many of the IFICI tax holders he now works with are directors of Portuguese companies providing consulting services.

“You don’t need to be a scientist anymore to benefit from this regime,” he said.

To qualify, an applicant must not have been a Portuguese tax resident in any of the previous five years. They must also hold an employment or self-employment relationship with an eligible Portuguese company operating in specific sectors.

Income from those eligible activities is taxed at a flat 20%. Income from outside Portugal is fully exempt from Portuguese tax for 10 years.

Santos described this as the main advantage over the original NHR. “The new regime does not tax capital gains provided they come from abroad and not from blacklisted jurisdictions,” he said.

The application process is slower, as other public bodies must now validate the eligibility of the employing company. Santos said any favourable decision applies retroactively to the day the person became a Portuguese tax resident.

Pension income is not protected under the IFICI tax regime, even when it comes from abroad. Santos said, however, that not everything a pension scheme pays is classed as pension income under Portuguese law.

He gave two examples relevant to UK pension holders. Payments from a scheme mostly funded by a former employer, and not taxed on the way in, are typically classed as employment income. Lump sum withdrawals are typically treated as investment income. Where either comes from outside Portugal, he said, it may be exempt under the IFICI tax regime.

“When you read that the regime does not apply to pensions, don’t assume that everything that the pension scheme pays is qualified as a pension income,” Santos said.

Paul Stannard, chairman and founder of Portugal Pathways and the Portugal Investment Owners Club, said his own view of the regime had changed since it launched.

“When the IFICI first came in, I thought, oh well, that doesn’t seem as good. Now I look back a year later and I think I wish I was on IFICI,” he said.

Portugal Pathways works with specialist tax and legal partners to help international clients understand their residency and tax options in Portugal. To find out more, arrange a free discovery call with Portugal Pathways.

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About Portugal Pathways

‍‍Portugal Pathways has supported hundreds of Golden Visa residency-by-investment applications and provides expert guidance through its professional supply chain network on estate planning, wealth management, Golden Visa and tax optimisation, including post-NHR / IFICI tax regime planning, as well as private healthcare, money transfers and bespoke relocation and luxury real estate solutions to enhance life and investment in Portugal

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