• Non Habitual Residents

    Several fiscal incentives have become available to foreign pensioners and retirees that turn Portugal into their new residence.

    Portugal has lived a difficult time due to the economical crises, something that led the Portuguese Government to implement a already existing law policy into act. In January of 2013, it became possible for those who decide to live in Portugal, for at leat more than half of the year, a total relief from their income tax, and even from taxes applied to pensions from their home country.

    The idea behind this initiative is to attract foreign investment and turn Portugal into a viable destination for those who decide to make it their new home. What initially emerged has a way to avoid foreigners of being taxed in both countries, ended up creating the necessary conditions for a total exemption from taxes for the people who follow certain criteria.

    Benefits in the non habitual resident regime

    The non-habitual resident’s regime is a privileged fiscal treatment applied to foreigners that decide to live in Portugal. Under this regime, individuals qualified as Non-habitual residents are eligible for special tax rates applicable to profits sourced in Portugal, and can benefit from a total tax relief to income of foreign origin.

    An individual is considered a Non-habitual resident once he becomes a Portuguese fiscal resident, as long as he hasn’t done so in the past five years preceding the application, before qualifying as a Portuguese fiscal resident.

    Individuals that fulfil the necessary requirements are eligible to be registered as non-habitual residents and have the right to be taxed as such, for a period of 10 consecutive years, with the possibility of renewal.

    Requisitos para o Regime de Residentes não Habituais:

    • Become a resident for tax purposes in Portugal, according to the rules established by the IRS code, in the following years that Non-habitual regime came into place.

    • The presentation of a declaration by the tax payer affirming that he was not considered a Portuguese resident in the 5 years preceding the year that the Non-habitual residents regime became available.

    • Ask for the application as an Non-habitual resident after the being registered as an Portuguese tax resident, or until 31 of March of the following year.

    The fiscal authorities recognize that the submission of additional documentation (such as a certificate of tax residence from another country for the previous five years), will only be required if there are found any doubts on the elements provided by the expatriate.

    Case study of a retired French person with a annual income of 24.000€.

    • Situation 1, in France: Let’s look at a French retiree who is a fiscal resident in France and receives a monthly income of 2.000€, adding to 24.000€ a year. In this situation, the retiree will be marginally taxed a value of 14% over he’s annual income, a value of 2.020,87€.

    • Situation 2, in Portugal: If the same retiree shows that he lives in Portugal for over 183 days of the year, and that he respects the conditions of the Non-Habitual regime, he may benefit from special conditions. On France, he’s status of Portuguese fiscal resident will not be contested if he truly lives in Portugal. In this condition he’s pension will not be taxed neither in France nor in Portugal, each will lead to a total saving of 2 020,87€ annually.