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Taxes in Portugal for the year 2024 have undergone significant changes, particularly with the phasing out of the Non-Habitual Resident or NHR Portugal.
The Portugal NHR tax regime, which granted new tax residents a 20% flat rate on personal income tax alongside other attractive benefits, has come to an end.
However, a new regime, NHR 2.0, has been introduced, focusing on employment in scientific research, technology, and innovation. This new regime offers similar benefits, including a 20% flat tax rate on personal income and a tax exemption on passive income such as dividends, interest, royalties, and capital gains.
The differences are small, but they will affect expats who are living in Portugal, or are planning to live there, moving forward.
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This page will delve into the following topics:
- Overview of Taxes in Portugal
- Portugal Tax Rate
- Changes to NHR Portugal Tax
Overview of Taxes in Portugal
Portugal Tax Rate
In terms of tax rates for 2024, residents in Portugal are subject to progressive income tax rates ranging from 13.25% to 48% based on their worldwide income.
Non-residents, on the other hand, are taxed at a flat rate of 25% on their taxable remuneration, with an additional solidarity rate applicable to taxpayers with a taxable income exceeding certain thresholds.
It’s important to note that Portugal remains an attractive destination for affluent expats, offering a high standard of living, investment opportunities, and quality healthcare and education.
Despite the changes to the NHR tax regime, the country continues to be a favored place for retirement and property investment, especially compared to more expensive places in Europe.
For those interested in learning more about the tax regime changes and their implications, it is recommended to seek professional advice when restructuring finances to adapt to the changes in the most tax-efficient manner possible.
Additionally, individuals can seek guidance from expert partners and financial planners to navigate the complexities of the new NHR Portugal tax regime and ensure compliance with the relevant visa residency application deadlines.
Changes to NHR Portugal Tax
For individuals seeking NHR status Portugal for the new tax regime, specific criteria must be met.
This includes having lived in Portugal for more than 183 days within a 12-month period, owning property in Portugal, performing public functions in the name of the Portuguese state, or obtaining residency through long-stay national visas.
Additionally, individuals who qualify under the grandfathering rules, such as those with promissory employment agreements or property lease agreements concluded before specific dates, may still be eligible for the initial non habitual resident Portugal regime benefits.
Since January 1, 2024, the new NHR plan has taken effect and will cover:
- Professors and scientific researchers;
- Research and development activities;
- Job positions and members of the board of certified start-ups;
- Job positions or other activities carried out by tax residents in the Azores and Madeira.
As before, these new NHRs will be free from tax on income derived from foreign sources, but only if that income is already taxed or subject to tax outside of Portugal.
They will be subject to a flat rate of 20% in taxes on their income earned in Portugal.
However, pension income is now subject to ordinary income tax at progressive rates of up to 48% in Portugal, replacing the 10% tax rate that was formerly applicable under the old NHR tax scheme.
While the NHR tax regime has ended, the introduction of NHR 2.0 and the continued appeal of Portugal for expats underscore the importance of tax planning and seeking professional financial advice.
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