In 2009 the Portuguese Government approved a special tax scheme for non-habitual residents, aiming to attract international talent in high value added activities and wealthy individual and their families to the country. With recent improvements to this regime, it has now been rated one of the most attractive in Europe.

Under this system non habitual residents will be exempt from tax on: (i) salaries; (ii) pensions; (iii) business and professional income relating to high value added services of a scientific, artistic or technical nature; (iv) income from intellectual or industrial property or from industrial, commercial or scientific information; (v) rental income; (vi) investment income and (vii) capital gains, provided that such income has a non Portuguese source and could have been taxed[1] under an existing Double Tax Treaty or, if no such treaty with the concerned jurisdiction exists, under the rules of the OECD Model Tax Convention (black listed jurisdictions excluded).

But if the income has its source in Portugal, non-habitual residents are then entitled to a flat rate of 20% on employment, self-employment and business and professional income, relating to high value added services as mentioned above.

To qualify for non-habitual resident status individuals shall: (i) have remained in the country for a continuous or intermittent period of more than 183 days in the relevant fiscal year, or if they have spent less time shall have a dwelling in Portugal at 31 December of such year, which they intend to use as their habitual residence; (ii) have not been taxed as a resident in Portugal in the five years prior to that qualification; (iii) apply for the non-habitual resident condition when obtaining a tax identification number or until 31 March following to the relevant fiscal year.

The status is granted for a renewable period of 10 consecutive years. If during this term qualified individuals cease to use the scheme for some time, they do not lose the right to use it in the remaining period.

At its origin the non-habitual residents tax regime was designed mainly as an incentive to R&D activities and new technologies and to the return of highly qualified Portuguese nationals domiciled abroad, but because the Portuguese general tax system offers other interesting tax planning opportunities (no inheritance and gift tax[2] and no wealth tax) it is becoming increasingly popular among high net worth and wealthy individuals and families alike in and outside Europe.


António Alfaia de Carvalho


[1] No effective taxation is required but just the possibility of being taxed.

[2] Inheritances or donations to consorts, descendants or ascendants are tax exempt, to other individuals may be subject to a 10% stamp rate.