THE PORTUGUESE NON-HABITUAL TAX RESIDENT (NHR) REGIME

Frequently Asked Questions &Reasons to Move to Portugal

Ricardo da Palma Borgesricardo@rpba.pt

www.rpba.pt

Why Portugal?

31th country on the OECD Better

Life Index (1) and 30th on the

Economist Quality-of-Life Index. (2)

As reported by The Telegraph,

Portugal is the 2nd best place to

retire abroad. (3)

Portugal (http://en.wikipedia.org/wiki/Portugal) has a number of attractive characteristics:

REASON #01 Quality of Life

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(1) - http://www.oecdbetterlifeindex.org/countries/portugal/(2) - http://www.economist.com/news/21566430-where-be-born-2013-lottery-life(3) - http://www.telegraph.co.uk/finance/personalfinance/pensions/9677415/The-10-best-places-to-retire-abroad.html

The non-habitual tax resident (NHR) is a tax regime

created to improve Portuguese international

competitiveness. This regime targets non-resident

individuals who are likely to establish a permanent or a

temporary residence in Portugal.

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The NHR regime establishes, under certain conditions, IRS exemptions

on foreign source income, as well as a limited taxation of income

deriving from certain high value added activities.

FAQ #2What are the benefits of the NHR regime?

FAQ #1 What is the NHR regime?

Frequently Asked Questions

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REASON #02Weather

Weather and environment quality

(18th country on the OECD 2014

Better Life Index).

Why Portugal?

REASON #03 Sunshine

Estimated 3300 hours of sunshine

per year, one of the highest rates

in Europe.

Foreign-sourced passive income (interest, dividends, certain royalties, other income from capital, capital gains and

income from immovable property) derived by non habitual residents is exempt (without progression except in the case

of capital gains on real estate) in Portugal, provided that it is potentially liable to taxation in the source State under the

rules of a tax treaty or of the OECD Model Tax Convention (no effective taxation is required).

Foreign-sourced income from pensions is exempt (with progression).

Foreign-sourced employment income is exempt (with progression) in Portugal, provided that it is effectively taxed in

the source State under the rules of a tax treaty or of the OECD Model Tax Convention.

Foreign-sourced employment income is exempt (without progression) in Portugal, provided that it is effectively taxed in

the source State under the rules of a tax treaty or of the OECD Model Tax Convention and that it is income derived

from high value added activities of a scientific, artistic or technical nature.

Foreign-sourced income from independent personal services is exempt (without progression) in Portugal, provided that

it is potentially liable to taxation in the source State under the rules of a tax treaty or of the OECD Model Tax

Convention (no effective taxation is required) and that it is income derived from high value added activities of a

scientific, artistic or technical nature.5

FAQ #3 What types of income are eligible for exemption under NHR regime?

Frequently Asked Questions

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REASON #04 ModernityModern and cosmopolitan country:

Lisbon was elected 2nd best place to travel in

2015 (4) and Porto was the best European

destination for 2014. (5)

Lisbon also ranked 22nd on the Monocle

Quality of Life Survey 2014. (6)

Why Portugal?

(4) - http://www.europeanbestdestinations.com/top/europe-best-destinations-2015/(5) - http://www.europeanbestdestinations.com/top/europe-best-destinations-2014/(6) - http://monocle.com/film/affairs/quality-of-life-survey-2014/(7) - http://en.wikipedia.org/wiki/List_of_World_Heritage_Sites_in_Portugal

REASON #05 Cultural Offering

Portugal has a great list of “wonders” declared a World Heritage Site by Unesco. (7)

Fado (the Portuguese most traditional music genre) was considered by UNESCO Intangible

Cultural Heritage of Humanity, in 2011.

Domestic and foreign-sourced income deriving from high value added activities of a scientific,

artistic or technical nature will be liable to autonomous taxation at a special 20% flat rate and

not to the general and progressive IRS rates (currently of up to 56,5% for yearly taxable

income above € 250.000). In 2015, a 3,5% surcharge is applied in addition to the said 20%

rate, which raises the total tax rate on such income to 23,5%, but this measure is expected to

be abolished soon.

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FAQ #4What types of income are eligible for reduced rates under NHR regime?

Frequently Asked Questions

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Why Portugal?

REASON #07 Other Languages Spoken

A large part of the population speaks

foreign languages, especially English

and French.

REASON #06 Education

There is a significant number of

International Schools throughout

Portugal, attended by both Portuguese

and foreign students.

Ministerial Order nr. 12/2010, of January 7, defined the “high value added activities of a scientific, artistic or

technical nature” qualifying for the regime. It encompasses a wide range of professions and activities, as follows:

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FAQ #5 What are considered high value added activities of a

scientific, artistic or technical nature?

1 - Architects, engineers and similar technicians:

101 – Architects

102 – Engineers

103 Geologists

2 - Visual artists, actors and musicians:

201 – Theater, ballet, film, radio and television Artists

202 – Singers

203 – Sculptors

204 – Musicians

205 – Painters

Frequently Asked Questions: NHR

3 – Auditors:

301 – Auditors

302 – Tax Consultants

4 - Doctors and dentists:

401 – Dentists

402 – Analyst Doctors

403 – Surgeons

404 – Board doctors in ships

405 – General Practitioners

406 – Dentists

407 – Dentist Doctors

408 – Physiatrists

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6 - Psychologists:

601 - Psychologists

5 - Teachers:

501 - University professors

409 – Gastroenterologists

410 – Ophthalmologists

411 – Orthopaedists

412 – Otorhinolaryngologists

413 – Paediatricians

414 – Radiologists

415 – Doctors in other specialties

7 - Professional services, technicians andsimilar:

701 - Archaeologists

702 - Biologists and experts in life sciences

703 - Computer Programmers

704 - Software consultancy and activities related to

information technology and information technology

705 - Computer programming activities

706 - Computer consultancy activities

707 - Management and operation of computer

equipment

708 - Activities of information services

709 - Activities of data processing, hosting information

and related activities/Web portals

710 - Activities of data processing, hosting information

and related activities

711 - Other information service activities

712 - Activities of news agencies

713 - Other information service activities

714 - Scientific research and development

715 - Research and development of science physical

and natural

716 - Research and development in biotechnology

717 - Designers

8 - Investors, administrators and managers:

801 - Investors, administrators and managers of

companies promoting productive investment, if

allocated to eligible projects under tax benefits

contracts awarded under the Tax Code for

Investment, approved by Decree-Law No. 249/2009,

of 23 September

802 - Senior employees of companies

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REASON #08 Daily Flights

About 300 daily flights from Portugal

to foreign countries.

Porto Airport ranks among the best

airports in Europe since 2006. (8)

Why Portugal?

REASON #09Convenient Location

for GlobetrottersPortugal ranked 1st on Globe Spots Top

10 countries in 2013. (9)

(8) - http://www.aci.aero/Airport-Service-Quality/ASQ-Awards/Current-Winners/Best-Airport-By-Region/Europe(9) - http://www.globespots.com/besttravel.php?year=2013

Individuals who become resident for tax purposes in Portugal

without having been so in the previous five years.

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Staying for more than 183 days in the Portuguese territory, whether these days are

consecutive or not, in any 12-month period beginning or ending in a given tax year;

If staying for a shorter period, having in the Portuguese territory, on any day of the

period referred above, a dwelling under circumstances that lead to the presumption of

an intention to hold and occupy it as a place of habitual abode;

Being, on the 31st of December, a crew member of a ship or aircraft at the service of

an entity with residence, head office or effective management in Portugal.

FAQ #7 How do I acquire tax residence in Portugal?

FAQ #6 Who may apply for the NHR regime?

Frequently Asked Questions

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REASON #10Sports

Top conditions for sports (sailing, diving, biking, trekking;

leading European golf destination (10), with some of the best

European golf courses).

Why Portugal?

(10) - http://www.worldtravelawards.com/award-europes-leading-golf-destination-2012

Registering as a tax resident in Portugal is a requirement to obtain the non-habitual resident status,

which means that those wishing to apply for the regime must:

i. register as non-resident taxpayers;

ii. obtain residence permits (for non-EU nationals) and residence cards (for EU nationals);

iii. register as tax residents; and

iv. only then apply for the non-habitual resident status.

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FAQ #8What is the procedure to register as tax resident in Portugal?

Frequently Asked Questions

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Why Portugal?

Value for money in real estate investments (which

have undergone significant decreases since 2008).

REASON #11Investments

In comparison with other major European

countries, Portugal is highly affordable. (11)

REASON #12Cost of Living

(11) - http://www.numbeo.com/cost-of-living/city_result.jsp?country=Portugal&city=Lisbon

An application must be submitted until March 31st of the tax year following that

in which Portuguese tax residence is acquired. This application is addressed to the

Director of the Taxable Persons Registration Service (Serviços de Registo de

Contribuintes).

Moreover, individuals must submit a statement whereby they solemnly declare

that they have not fulfilled the criteria necessary for being considered a

Portuguese tax resident during the preceding five years.

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Non-habitual resident individuals may enjoy such status for a ten-year

period, after which they will be taxed under the standard IRS regime.

FAQ #10For how long may I enjoy the NHR status?

FAQ #9How do I apply for the NHR status?

Frequently Asked Questions

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Portugal has a high quality

health system, offering

both public and

private healthcare.

REASON #13 Health System

Why Portugal?

For instance, according to the 2014

OECD Health Statistics, the

average life

expectancy in Portugal in 2012 was

80.5 years. (12)

(12) - http://www.oecd.org/els/health-systems/Briefing-Note-PORTUGAL-2014.pdf

After obtaining the non-habitual resident status it will be necessary to file annual tax returns in Portugal, stating

the worldwide income and expenses, for which adequate documentation keeping is required.

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The NHR status is granted for a ten-year period. The particular features of the NHR regime may always be

amended by law, for better or for worse. This regime was implemented in 2009 by a Socialist government

(center-left wing), and since then it has remained stable. The current government coalition of Social

Democrats and Christian Democrats / People’s Party (center-right wing) has not materially changed the

regime. The general perception is of its widespread acceptance by the community in general and by the

main political parties. The only relevant adverse change to the regime was the enforcement in 2011 and

from 2013 onwards of a 3,5% surcharge to employment or independent personal services income deriving

from high value added activities of a scientific, artistic or technical nature obtained by NHR residents liable

to autonomous taxation at a special 20% flat rate, a measure which is expected to be abolished soon.

FAQ #12For how long are the benefits of the regime granted?

FAQ #11Once I have the NHR status, what are my tax obligations?

Frequently Asked Questions

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REASON #14Economic Progress

Why Portugal?

Successful conclusion of the Troika’s (International Monetary

Fund, European Central Bank and European Union) financial

assistance program (2011-2014) on May 17, 2014.

REASON #15Political Stability

Portugal is a developed

democracy with political and

social stability.

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REASON #16Peaceful Country

According to the

2014′s Global Peace

Index, Portugal ranks 18th, out

of 162 countries. (13)

Why Portugal?

(13) - http://www.visionofhumanity.org/#/page/indexes/global-peace-index

The Portuguese NHR Regime

For more information on our Residence Planning Services, please visit our

microsite www.nonhabitualtaxresident.com or scan the QR code below with

your smartphone:

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Recent Tax Recognition

Chambers & Partners – Ricardo Band 1 / RPBA Band 3 (2014)

Legal 500 – Ricardo and Pedro are Recommended Lawyers / RPBA Band 3 (2014)

World Tax – Ricardo and Bruno mentioned / RPBA Tier 3 (2014)

Best Lawyers – Ricardo ranked under the "Tax Law" practice area and the "Tax Planning"subspecialty (2014)

World Transfer Pricing – Ricardo mentioned / RPBA Tier 3 (2014)

Tax Directors Handbook – Ricardo mentioned / RPBA Tier 3 (2015)

Who´s Who Legal – Ricardo ranked as a top lawyer in the Corporate Tax Lawyers directory (2013)

Acquisition International Tax Award – RPBA Portuguese Tax Law Boutique Firm of the Year (2015)

Acquisition International Legal Award – RPBA Boutique Law Firm of the Year – Portugal (2014)

Corporate Intl Magazine Legal Award – RPBA Boutique Tax Law Firm of the Year in Portugal (2014)

Global Law Experts - RPBA Portuguese Corporate Tax Law Firm of the Year (2014 / 2013)

Corporate Intl - RPBA Tax Law Firm of the Year in Portugal (2014)

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Although great care has been taken when drafting this Presentation, Ricardo da Palma Borges & Associados (RPBA) - Sociedade de Advogados, R.L.

does not accept any responsibility whatsoever for any consequences arising from the use of the information contained herein. The information is

provided solely for general purposes, cannot be regarded as legal or other advice and was last revised on 27 March 2015.