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Portugal briefing: Changes to non-habitual resident tax regime

The non-habitual tax resident (NHR) is a regime created to enhance Portugal's international competitiveness. It is aimed at non-resident individuals who are likely to establish a permanent or a temporary residence in Portugal.
7th October, 2019

The NHR regime establishes IRS exemptions on foreign source income, as well as a limited 20 per cent taxation of income from employment and independent personal services derived from listed activities.

The High Value Added Activities list has been amended and comes into force on January 1 2020. Only the activities included on the list may benefit from the NHR regime.

The list is as follows:
1. General manager and executive manager
2. Manager of administrative and commercial services eg financial, HR and strategy
3. Production managers and specialised services eg farming, livestock, forestry, fishery, mining industry, transports and others
4. Managers of hotel business, restaurants/catering, trade and other services
5. Experts in physics, mathematics, engineering and similar techniques eg chemistry, statistics, urban planning, design, and others
6. Doctors both generalists and experts
7. Dentists and clinical dentists
8. University and Higher Education teachers
9. IT and communication experts eg software apps, web, etc
10. Authors, journalists and linguists
11. Creative artists and performing arts eg musicians, cinema producers, actors, dancers, etc
12. Technicians as well as science and engineering professions of intermediate level eg mining industry, life science and others
13. Technicians of information and communication technologies eg telecommunications and radio
14. Farmers and market-oriented skilled agriculture and livestock production workers
15. Market-oriented skilled forestry, fishery and hunting workers
16. Skilled industry, construction and craft workers, including skilled workers of metalwork, food processing, woodwork, clothing, handicraft, printing, manufacture of precision instruments, jewellers, artisans, electricians and electronics professionals
17. Facility and machinery operators and assembly line workers, namely operators of fixed installations and machinery
18. Directors and managers of companies carrying out productive investment activities, to the extent such personnel is engaged in projects for which contractual tax benefits have been granted under the Investment Tax Code.

The changes are particularly relevant for general managers and executive managers, as well as managers of administrative and commercial services, as these activities are now clearly included in the list.

Another significant change is the introduction of a new requirement whereby individuals must also comply with one of the following alternative criteria:
• Level 4 of the European Qualifications Framework – meaning that high school education is required
• Level 35 of International Standard Classification of Education (ISCED) – meaning upper secondary vocational education or
• Having five years of working experience, duly demonstrated.

For individuals already granted NHR status, both the old and the new lists of activities may be considered for the application of the reduced employment and business income tax rate, until the end of the NHR status 10 years period.

For further information on living and working in Portugal please contact Managing Director Paulo Réfega at paulo.refega@ils-world.com or read more about Living and working in Portugal.

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Please note: ILS World does not offer tax advice. If you are not professionally qualified to give tax advice we will be happy to make an appropriate introduction.

Managing director Portugal

Paulo Réfega
Paulo Réfega
Managing Director Portugal