Tax regime for non-habitual residents
For a period of 10 years, taxation related to IRS (personal income tax) on labour income in Portugal is at a fixed rate of 20%.
No double taxation for pensions or for employment and self-employment income obtained abroad.
How can you acquire Non-Habitual Resident Status?
Having not been a resident in Portugal for the last 5 years;
Register at the local tax office as a tax resident in Portugal (to do so you must have remained in Portugal for more than 183 consecutive or non-consecutive days, or having remained for less time, having, at 31st December of that year, a home in such conditions that would lead to the assumption that it is intended to be kept and occupied as your habitual residence);
Request that the status of Non-Habitual Resident be attributed at the time of registering as a tax resident in Portugal, or by 31st March of the year following that in which you become a resident in Portugal.
Once Non-Habitual Resident Status has been obtained, what is the taxation rate and incidence applicable to domestic source income?
In the case of employment or self-employment, the applicable taxation rate is 20% (with an additional 3.5% surcharge in 2014).
Taxation applies to income derived from high added value activities of a scientific, artistic or technical nature:
- Architects, engineers and similar
- Fine artists, actors and musicians
- Auditors Doctors and dentists, teachers and psychologists
- Liberal professions, technicians and similar
- Senior managers
- Investors, directors and managers, when part of companies covered by the contractual regime provided for in the Investment Tax Code.
Registration as a Non-Habitual Resident confers the right to be taxed as such for a period of 10 years as from the year of registering as a tax resident in Portuguese territory.
Once Non-Habitual Resident Status has been obtained, in which cases is foreign income obtained by Non-Habitual Residents in Portugal exempt from taxation?
In the case of pensioners and retired people when:
- Income is taxed in the source State, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or
- Income is not considered to have been obtained through a Portuguese source, according to the criteria provided for in the IRS Code (personal income tax).
In the case of income derived from employment, when:
- Income is taxed in the State of origin, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or
- That income is taxed in another State with which Portugal has not signed any convention to eliminate double taxation , as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS Code (personal income tax);
In the case of income from self-employment (through the provision of services of a high added value, of a scientific, artistic or technical nature, or through intellectual or industrial property, investment income, rental income, capital gains income or other increases in equity), when
- The income may be taxed in the source country, territory or region, in accordance with the convention to eliminate double taxation, or;
- When no convention to eliminate double taxation has been signed, the OECD model convention may be applied (taking into consideration the observations and reservations made by Portugal) and as long as the source country, territory or region does not have a privileged tax regime, and as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS (personal income tax).
RESIDENCE PERMIT FOR INVESTMENT ACTIVITIES (ARI)
1. What is the special legal mechanism for obtaining a Residence Permit for Investment (ARI)?
The ARI mechanism allows third country nationals to apply for a temporary residence permit to conduct an investment activity with residence visa waiver to enter national territory.
2. What are the advantages of the ARI programme?
In return for the investment made in Portugal, the beneficiary of ARI is entitled to;
• Resident visa exemption to enter Portugal;
• Living and working in Portugal, while maintaining residence in another country;
• Visa exemption for travelling within the Schengen Area;
• Family reunification;
• Obtain permanent residence (after 5 years and in the terms and conditions set out by the legislation in force);
• Acquiring Portuguese citizenship (after 6 years and in the terms and conditions set out by the legislation in force);
3. Who is entitled to be a beneficiary of ARI?
All third country citizens who conduct an investment activity, as an individual businessperson or through a company set up in Portugal or in another EU Member State and who, in addition, is stably settled in Portugal, provided that these citizens fulfill the quantitative requirements and the time requirements set out by the relevant legislation.
The ARI legal mechanism does not apply to individuals with Portuguese citizenship and to EU and EEE citizens.
4. What quantitative requirements must be fulfilled by an investor to enable him / her applying for an ARI?
The minimum quantitative requirement is deemed fulfilled when one of the following conditions is met in national territory:
a) Capital transfer with a value equal to or above 1 million Euros, including the purchase of shares in companies;
b) The creation of, at least, 10 job positions; or
c) Purchase of real estate property with a value equal to or above 500 thousand Euros.
Where the investment is made through a company, only the proportion of the capital actually invested by the applicant of ARI shall be ascribable to him / her.
Applicants may apply to swap from one requirement to another, subject to the condition of reinvesting the capital within a maximum period of three months, from the moment where they formally abandon the first investment.
5. What are the minimum time requirements for the investment activity (i.e. how long does it have to continue?)
The minimum time requirement for maintaining the investment is five (5) yeas, from the date of issuance of the Residence Permit.