NHR in Portugal

11th of March 2022

For those looking for a new life in the sun, Portugal has seen a marked increase in popularity in recent years. This is driven not only by its all-year-round good weather, safety and friendly locals but by the generous tax breaks the government offers new residents.

Non-Habitual Residence (NHR) is well entrenched and was introduced in 2009, with modifications in 2020. It aims to attract new residents to Portugal who can contribute to the country’s economic health by spending or bringing high-valued skills.

Here we will cover the main aspects of NHR but as with most things, careful planning is necessary to make the most out of the opportunity. 

Planning: before, during and after NHR

You should plan well in advance, even before your move to Portugal. There could be tax breaks and exemptions in your home country that are not available in Portugal. Poor planning might result in unnecessary tax e.g. UK tax residents can withdraw/surrender ISAs free of tax, but Portuguese residents will have to pay 28%.

During NHR you should ensure that your income and wealth is structured in a way that will allow you to take advantage of all the tax break NHR has to offer. This might involve some restructuring and careful timing, so it is best to start planning well in advance. 

After NHR, you will be subject to taxes under the ‘normal’ rules. This can be a shock to some who might see their tax rates soar – the standard scale rates are between 14.5% and 48%. 

The effectiveness of your position is determined by the planning you have implemented during the first two periods. 

Having said this, Portugal is st