Tax residence in Portugal, we tell you about the special regime for non-habitual residents (RNH). In recent times, Portugal has become the destination of choice for entrepreneurs, professionals, CEOs or directors of companies. Or even by retirees to establish their tax residence.
The reason is the beneficial tax system for those who decide to live and invest in Portugal. Not only are they not subject to Wealth Tax or Inheritance Tax between spouses, ascendants or descendants, and what is interesting, being 10% for the remaining beneficiaries of the inheritance. In addition, there is the beneficial Special Regime for Non-Habitual Residents (RNH) applicable to persons who meet certain requirements.
Tax residence in Portugal
The main features of the beneficial RNH regime are as follows.
Firstly, earned income and self-employment income are taxed at a flat rate of 20%. This is subject to the condition that they are “high value-added activities”. These are identified in Ordinance 12/2010 of January 7 (as amended by Ordinance 230/2019 of June 23).
In addition, the “High value-added activities” . Which include engineers, doctors, artistic producers, university professors, company directors or CEOs, etc. However, it does not include consulting activities. These workers must have at least a qualification at level 4 of the European Qualifications Framework. Or level 35 of the International Standard Classification of Education. Alternatively, they should have 5 years of duly accredited professional experience.
Also, other income such as dividends, interest or rental income from abroad is also exempt in Portugal. The condition is that they are subject to taxation in the country from which the income originates. In other words, they must not be tax havens, now called “non-cooperative jurisdictions”. For this it is necessary to review each Double Taxation Agreement signed by Portugal and the qualification of the income.
Without forgetting that the retirement pension and private pension plans coming from abroad, although exempt in Portugal, are now taxed at 10%, and are not subject to tax in Spain. This has made Portugal a particularly attractive destination for those who are going to retire.
Finally, once the regime is approved, it will be applicable for 10 years.
Special Regime for Non-Habitual Residents (RNH)
The option for the Special Regime for Non-Habitual Residents (RNH) is subject to certain requirements.
- It is applicable only to new tax residents in Portugal. For which it is required to prove a stay of 183 days in this country, or a property available for living in.
- It is required not to have been a tax resident in Portugal in the previous 5 years.
- Once registered as a tax resident in Portugal, the deadline to apply for registration in the RNH is March 31st of the following year.
- The recognition of this status is not automatic. It requires a formal application to be made on the Portal das Finanças, and may require proof of compliance with all the requirements. This will require a Certificate of Tax Residence in Portugal, and previous tax declarations abroad, among others.
This beneficial regime will last for 10 years. After this period, or even before, if the requirements are not correctly fulfilled, the general tax regime will be applied. And this general regime is not so beneficial, being even more burdensome than the Spanish one, reaching rates of up to 48%, with some additional rate of 2.5% or 5% for incomes exceeding 250,000 euros.
For all these reasons, the change of tax residence to Portugal becomes a very interesting option for those who carry out activities of high added value or those who are going to retire. But it must be planned and managed by experts in order not to end up paying double or excessive taxes.
If you are interested in learning more about this or any other tax regime, contact Arrabe Integra’s team of experts in International Taxation, who will analyze your situation in detail and propose the best option for your case.
