Regime for Non-Habitual Residents (NHR) – until 31^stDecember 2023

Tax Incentive for Scientific Research and Innovation (IFICI) – from 1^st January 2024

Transitional Regime – until 31^st December 2024

Applicability

• New tax residents, foreign or Portuguese, who have not been tax residents in Portugal for the last 5 years, can benefit from the regime for 10 years. New tax residents are individuals who have a verifiedresidential address and remain in Portugal for at least 183 days.

• Similarly, new tax residents who have not lived in Portugal for the last five years can benefit from the IFICI for 10 years.

• The IFICI also covers jobs or activities carried out by tax residents in the Azores and Madeira, the terms of which will be defined in a regional decree.

• This new tax incentive is aimed at scientific and research professionals, a much narrower field than that applicable to the NHR regime. Accordingly, income within the following areas is eligible:

1. Higher education teaching and scientific research careers, including scientific employment in entities, structures and networks dedicated to the production, dissemination and transmission of knowledge, integrated into the national science and technology system
2. Qualified jobs within the scope of contractual benefits for productive investment
3. Research and development jobs for staff with a doctorate minimum qualification requirement, whose costs are eligible for the tax incentive system for research and business development.

• All proceedings which take place before 31^st December 2023 will benefit from the NHR regime until the end of the applicable 10-year period.

• With the latest changes to the 2024 State Budget, families who can prove they planned to move to Portugal in 2023 can also benefit from the NHR regime. To do so, they must provide one of the following documents:

1. Actual or promised employment contract entered until 31^st December 2023, whose duties are to be carried out in Portuguese territory
2. Lease agreement or other agreement granting the use or ownership of property in Portuguese territory entered until 10^thOctober 2023
3. Title reservation agreement or promissory contract for the acquisition of a right in rem in immovable property located in Portuguese territory, entered until 10^thOctober 2023
4. Enrolment or registration for dependents in an educational establishment domiciled in Portuguese territory, completed until 10^thOctober 2023
5. Residence visa or residence permit valid until 31^stDecember 2023
6. Evidence that a procedure for granting a residence visa or residence permit has been initiated with the competent authorities by 31^stDecember 2023.

Labour Income

• 20% special flat tax rate on labour and self-employment income from high value-added activities (according to Decree order nº 12/2012) carried out in Portugal.
• No taxation on labour income carried out outside Portugal if it is taxed in the source country.
• No taxation on self-employment income from a high-value activity (according to Decree order nº 12/2012) carried out outside Portugal under applicable tax treaties.

• Income within the above-mentioned areas and derived from dependent work and business or professional activities benefit from an IRS rate of 20%.
• Income obtained abroad is subject to the exemption method and must be included in the taxable income for the purpose of determining the rate to be applied to other income.

Passive Income

• No taxation on dividends, royalties and interests sourced outside Portugal regardless of the taxation in the sourced country.
• Capital gains on foreign property are not taxed.
• Capital gains from movable property are generally taxed at 28%, with exemptions in some cases.

• Foreign source income derived from capital, property and capital gains is not taxed.

Pensions

• Flat 10% tax rate on foreign pensions and Private Pension Funds, with an optional tax credit method to avoid double taxation.
• The same 10% rate applies to income from early retirement, preretirement, or reserve, even without active employment.

• The tax benefits for emigrant pensioners ends and only those who fulfil the respective requirements will be able to take advantage of the transitional NHR regime.