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For foreign investors, particularly Americans and Canadians dreaming of life in Portugal, or crypto enthusiasts seeking a tax-friendly haven, Portugal's Non-Habitual Residence (NHR) program has long been a game-changer. Offering enticing tax exemptions on foreign-sourced income, it became a cornerstone for those entering through the Golden Visa program. However, the NHR program ended last year, and with new regulations set to be announced soon by December 2024, Portugal’s tax landscape is undergoing a seismic shift.
If you're exploring residency options or planning to leverage Portugal's Golden Visa, understanding the past benefits, the reasons behind the NHR's closure, and the proposed changes is critical. This is especially true for digital asset investors who must navigate evolving crypto tax implications. In this article, we provide a high-level overview of Portugal’s tax regimes and unpack what these changes mean for investors like you.
At INGWE, we specialize in Portugal’s Golden Visa and collaborate with a network of global tax experts to help you craft effective planning strategies. Let us provide personalized guidance tailored to your unique needs. Connect with us for a personalized assessment, click here.
The Non-Habitual Resident (NHR) program, introduced by the Portuguese government in 2009, was designed to attract foreign investors, skilled professionals, and retirees through favorable tax incentives. It played a pivotal role in establishing Portugal as a desirable destination for global mobility and investment migration.
Eligibility Requirements: Applicants needed to reside in Portugal for at least 183 days in a tax year and should not have been tax residents in Portugal for the five years preceding the application.
Key Benefits: Foreign-sourced income, such as pensions, dividends, and royalties, was exempt from Portuguese taxes under certain conditions.
Crypto-Friendly Policies: Previously, Portugal did not tax profits from personal cryptocurrency trades, regardless of how long the assets were held.
10-Year Duration: Eligible participants could enjoy these benefits for a full decade.
While the NHR program attracted global investors, it faced criticism from local Portuguese citizens. Many saw it as favoring foreign investors, contributing to rising housing prices due to its connection with Golden Visa-linked real estate purchases. This led to the government discontinuing the program for new applicants as of January 1, 2024. However, individuals already enrolled can continue to benefit until the end of their 10-year term.
This move reflects a broader European trend, with governments revisiting policies on foreign investment to address local concerns, such as housing affordability and economic equity.
The new program, coined NHR 2.0 but officially named the Tax Incentive for Scientific Research and Innovation, takes a more focused approach. It targets highly skilled workers and professionals in innovative sectors, such as technology. This program includes tailored benefits tied to specific occupations, business activities, and geographic regions within Portugal, whether on the mainland or islands.
At INGWE, we specialize in Portugal’s Golden Visa and collaborate with a network of global tax experts to help you craft effective planning strategies. Let us provide personalized guidance tailored to your unique needs. Connect with us for a personalized assessment, click here.
Flat Tax Rate: A 20% flat tax for highly skilled foreign workers residing in Portugal, applicable to active income derived within the country.
Crypto Tax Exemption: Capital gains on crypto assets held for over one year are exempt.
No Wealth Tax: Portugal continues to offer a wealth-tax-free environment.
No Inheritance or Gift Tax: Direct family members and foreign-based assets benefit from these exemptions.
Portugal’s upcoming regulations are set to offer additional tax advantages to applicants under 35. These incentives include:
Employment and freelance work up to 28,000€ per year are exempt from personal income tax, as follows:
- 100% in the first year
- 75% in the second, third, and fourth years
- 50% in the fifth, sixth, and seventh years
- 25% in the eighth, ninth, and tenth years
Exemption on transfer tax and stamp duty on properties acquired for first permanent residence in Portugal, up to 350,000€
At INGWE, we specialize in Portugal’s Golden Visa and collaborate with a network of global tax experts to help you craft effective planning strategies. Let us provide personalized guidance tailored to your unique needs. Connect with us for a personalized assessment, click here.
Madeira, an autonomous Portuguese region, offers full EU access and adheres to its legal and tax frameworks. As an ultra-peripheral EU region, it enjoys unique tax advantages, making it an ideal location for tax residency.
Madeira’s Tax Benefits:
In addition to the flat tax rate and exemptions on foreign income applicable across Portugal, Madeira—one of our favorite destinations for establishing tax residency—offers unique benefits. The new tax regime expected to be announced will further enhance its appeal for foreigners considering residency on the Portuguese islands.
Reduced Tax Rates: A 30% reduction on corporate and personal tax rates compared to mainland Portugal.
Special Tax Regime: Businesses in the International Business Centre of Madeira (MIBC) enjoy exclusive tax incentives.
EU Funding Access: Technology companies based in Madeira can tap into EU funding opportunities.
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