Portugal's NHR tax benefit replaced by ITS: All you need to know (Updated 2024)

The Non-Habitual Resident (NHR) regime is a Portuguese government tax incentive created in 2009 to attract foreign professionals to live and work in Portugal. It offers several tax benefits, including a flat income tax rate, tax-free transactions, and low taxes on wealth and pension income. The NRH is currently being phased out in favor of a new program, the Incentivised Tax Status Program (ITS), also known as the Tax Incentive for Scientific Research and Innovation, launched in 2024.

In this article, we'll explain who is eligible for the old NHR regime and the new eligibility requirements for the new ITS tax scheme.

Who Still Qualifies for the NRH Regime

The NRH tax scheme stopped accepting new applications in January 2024 and will conclude in 2025. The final opportunity for new NHR registrations was March 31, 2024. However, individuals can still apply until March 31, 2025, if they meet the stricter eligibility conditions. These include having proof of the following:

• Children registered or enrolled in a Portuguese school by October 10, 2023
• A contract to purchase a Portugal property signed prior to October 10, 2023
• An employed contract signed by December 31, 2023
• A lease agreement or other contract for the use and or possession of a property signed by October 10, 2023
• A residence visa or permit valid from December 31, 2023
• An application for a residence permit or visa initiated before December 31, 2023
• A household member who meets any of the above conditions

Anyone who qualifies and applies will receive NRH status until December 31, 2033. In addition, anyone already covered by the NRH regime will retain their tax benefits for the entire 10-year period they were initially granted.

What is the Incentivised Tax Status Program?

The Incentivised Tax Status Program (ITS) is replacing the NHR. It offers a 20% flat tax rate on certain professional incomes, including self-employment, and exemptions on most foreign-sourced income — except pensions.

The ITS also provides a five-year 50% tax exemption on professional income, up to a maximum of €250,000. Finally, it offers an exemption from Portuguese wealth tax on any assets outside Portugal. However, the qualifications for the ITS program are narrower than those of the NHR.

Who Qualifies for the ITS Program?

The new ITS program is scheduled to run for ten years and is open to individuals who:

• Become a Portuguese tax resident
• Have not been a tax resident of Portugal for the previous five years

To qualify for the ITS program, you must also meet specific professional criteria, such as working as a teacher or scientist. Other qualified jobs include individuals involved in:

• Industry or manufacturing-related activities
• Tourism or activities related to tourism
• IT and related services or activities
• Agricultural, aquaculture, fish farming, farming, and forestry
• Information technologies, multimedia, and audiovisual production
• Defense, energy, environment, and telecommunication
• Shared service centers' activities

Additional potential qualifying positions include:

• Highly qualified professional working under a qualifying entity
• Professional working for recognized Government agencies (like EPE, AICEP, IP, or IAPMEI)
• Professional working for a company that is relevant to the Portuguese economy or is related to investments
• Professional working for a startup as defined by the ITS
• A person working in Madeira or Azores, meeting the requirements set by either region

At the 10-year point, ITS participants will become regular tax residents who must abide by the traditional fiscal regime.

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Editor's note: This article was updated in May of 2024 to reflect the changes in Portugal's tax benefits.