10 Years NHR in 10 Topics

Now that 10 years have passed from the introduction of the non-habitual tax regime (“NHR”) in Portugal it is time to look back and understand some cornerstones of a regime that significantly altered the positioning of Portugal as one of the top countries to reside in Europe.

The exercise is merely to tackle 10 key points that characterize the NHR regime and close with a view into the future of this successful tax regime.

The regime that started its application back in 2010 sets a favourable tax regime for inward expatriates. The regime essentially separates the tax treatment of a non-habitual tax resident from a standard tax resident for purposes of certain items of income. The standard taxpayers resident in Portugal are generally taxed on their worldwide income at progressive rates up to 53 percent (with flat rates of 28 percent applied for certain passive income), with a foreign tax credit to eliminate any double taxation on foreign-source income. On the other hand, non-habitual tax residents may access for 10 years a favourable 20 percent flat tax rate on certain active qualifying domestic-source income, combined with the exemption method applied for certain categories of foreign-source income.

The agenda for the next weeks will be the following:

• The first article will be addressing the tax residence test that NHR need to meet whilst in Portugal and the concept of habitual residence. Read here.

• The second topic will be the interaction with emigration procedures, namely the fast-track golden visa program for non-EU nationals. Read here.

• The third issue addressed will cover the partial residence rules upon arrival and what does mean in practice for an inward expatriate. Read here.

• The fourth point will cover a selection of 10 tax rulings issued in Portugal that provide some insights on the inner working of the NHR regime and help understand also when the ruling request may prove useful. Read here.

• The fifth topic will deal with 10 Tax Arbitration Court decisions that directly or indirectly involved the NHR regime which help understand some examples of tax controversy and how they were resolved. Read here.

• The sixth section will deal with digital nomads and the NHR regime by dclarify the application of NHR regime to self-employed remote workers. Read here.

• The seventh point will address practical issues of foreing capital gains derived by NHR with a focus on the application of tax treaties.  Read here.

• The eight issue to be addressed deals with tainted income under the NHR and general tax rules in Portugal for income from blacklisted jurisdictions and its shortcomings. Read here.

• The ninth point will address the taxation of pensions on the international setting and the application of the NHR to such type of income. Read here.

• The final section will draw a conclusion with an outlook on the future of the NHR tax regime. We will try to draw-up where we belive the NHR regime has room of improvement and how post-covid focus will be. Read here.

The articles result from a journey of 10 years of practice by the Kore Partners team in advising clients from multiple range of jurisdictions relocating to Portugal and is designed to identify the key cornerstones of the regime, the controverted issues still arising in practice and set some positions regarding some tax-related technical issues.

This 10 articles will be part of a book to be published in September to mark the 10 years of the regime.

Stay tuned!

© 2021 Kore Partners.