The non-habitual residency scheme is a popular residency option for those wishing to live in Portugal. It allows international residents an opportunity to pay a lower, flat tax rate on their Portuguese income and no tax on foreign income, including pensions.
However, the Portuguese prime minister, António Costa, announced in October plans to scrap the non-habitual residency (NHR) regime in 2024.
António Costa, Portugal’s prime minister – image: Alexandros Michailidis via Shutterstock
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What is the non-habitual residency scheme?
The NHR scheme was launched in 2009 and provided new arrivals to Portugal with a preferential option that allowed them to pay less tax to live in Portugal. It was particularly popular with international retirees who saw it as a way to keep a lot more of their money than possible back home.
It was aimed at two key demographics:
- International retirees with foreign pension income.
- Working people in “high-added value” professions.
The NHR scheme allowed these individuals, one approved, to pay a fixed 20% tax rate on all money earned in Portugal – a considerable saving from the usual rates which is currently as high as 48% for those earning over €79,935.
The Non-Habitual Residency scheme has been a favourite among foreigners retiring to Portugal since 2009
What’s changed in relation to the NHR?
The proposed change was part of the government’s State Budget Proposal for 2024 and, while still subject to a debate and votes, should not be ignored.
Should the proposal come into effect, the scheme will no longer be available. The conditions are as follows:
- Anyone who is already registered in Portugal as NHR, and remains within the 10-year period foreseen for the regime to be applicable; and
- Anyone who, on 31 December 2023 meets the conditions to obtain the status as an NHR holder, and is in possession of a valid residence visa on that date. This is allowed permitted they complete the correspondent registration by 31 March 2024.
This is clearly a big shock for anyone with plans to move or emigrate to Portugal by the end of the UK tax year. Should these changes impact you, we urge you to speak to a visas & residency specialist for guidance on your requirements and alternate residency options.
