Photo of Blacktower Financial Management Group's team in the Algarve where they advise clients on the benefits of the non-habitual resident special tax regime

The benefits of Non-habitual Resident special tax regime

Text by Blacktower Financial Management Group

This special tax regime presents several fiscal advantages.

Over the past few years, Portugal has developed a reputation as the new tax haven for affluent and high net worth individuals, all of whom wish to achieve tax optimisation by relocating to a friendly, discreet and safe EU country. They are able to do so through a special tax regime, for non-habitual residents (NHR), that presents many attractive fiscal benefits…

The programme offers tax relief on some foreign income sources. For example, you may receive your pension income paying only 10% tax; be exempt from tax on earnings from dividends and royalties; be entitled to a 20% flat rate on certain foreign sourced incomes, this to mention just the main benefits. It is also worth bearing in mind that there is no wealth or inheritance tax under the Portuguese system.

In order to apply for the NHR scheme, an individual needs to become a Portuguese resident, therefore a Portuguese taxpayer – having not already been so in the five years prior to the application and another requirement is that they are able to spend at least 183 days per fiscal year in Portugal. Having fulfilled these and a couple other requirements, they are then free to enjoy the benefits of this taxation for a consecutive 10-year period – true fiscal stability.

The regime was first introduced in Portugal in 2009, with its principal objective being to attract wealthy individuals and their families to Portugal by making it financially beneficial to become tax resident. As a result Portuguese NHRs have the ability to grow their wealth in a white listed jurisdiction, earn income in a tax friendly environment, dispose of their assets and benefit from tax exemptions, and also enjoy their retirement.

The Golden Visa is a much-vaunted attraction to Portugal, especially the Algarvian coast and the Golden Triangle — but as non-habitual taxation demonstrates there are many other financial incentives to entice an affluent individual. Offshore strategies are not as reassuring as they once were — all of which makes Portugal a highly desirable alternative for the future.

Besides the benefits under the NHR regime, Portugal as a jurisdiction has a very favourable tax regime, here are some highlights:

  • No gift and inheritance tax for assets outside of Portugal. Inheritances or gifts of Portuguese assets to spouse, descendants or ascendants are tax exempt.
  • Gifts to other individuals are subject to a flat 10% stamp tax rate.
  • No wealth tax and free remittance of funds either to Portugal or abroad.
  • Beneficial treatment for pensions and other life insurance products may also significantly reduce the effective tax burden on capital invested.
  • Portuguese companies may take advantage of EU non-discrimination rules and EU directives on mergers, dividends, interest and royalties, as well as Double Taxation Treaties (DTT) signed by Portugal.
  • Dividends and capital gains obtained by Portuguese companies can benefit from a participation exemption regime, thus making Portugal an interesting location for investments abroad.

At Blacktower, we can advise on how Non-Habitual Residency can work for you. We are specialists in wealth management, tax planning and more. Our focus is your future financial security.

This communication is based on our understanding of current taxation legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.

(+351) 289 355 685

Photo of Manuela Robinson, Associate Director at Blacktower Financial Management Group in the Algarve, where they advise clients on the benefits of the non-habitual resident special tax regime

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