Non Habitual Resident and the new impatriate regime

The Prime Minister ’s announced last month that the Portuguese Non Habitual Resident (NHR) regime would be abolished.

Following that announcement, the Government proposed to Parliament to end the regime on December 31^st, 2023 in the 2024 State Budget law proposal.

Meanwhile, the Socialist party submitted two proposals to amend the State budget draft law on the matter, as follows:

The first, providing for a grandfathering regime which, in certain cases, will differ the end NHR until December 31^st, 2024  and;

The second, creating a new tax regime to selectively attract talent and foreign investment, which will replace the NHR regime as from January 1^st, 2024 (except in those cases where the NHR can still be applied and the applicants opt for NHR instead of the new regime as they cannot be cumulated)

Those proposals were approved in Parliament on November 28^th. The 2024 Budget law, as amend by Parliament, was approved yesterday and will enter into force on January 1^st, 2024.

1. NHR grandfathering regime for 2024

The NHR regime will end on December 31^st, 2023. However:

• Those who are already under the regime can continue to enjoy it until they complete their 10^th year as NHR;
• Individuals becoming tax residents of Portugal until December 31st, 2023 can benefit from the NHR regime;
• But Individuals who become tax resident of Portugal until December 31^st, 2024, may still apply for the NHR regime, provided they meet the following requirements:

1. If they are non-EU Nationals:

• Initiate their visa application process byDecember 31^st, 2023;
• Secure a promise of employment / employment agreement, or a promise of secondment / secondment agreement in Portugal byDecember 31^st, 2023.
• Signed a promissory purchase agreement or lease a property in Portugal by October 10^th, 2023.
• Enrolled the children in a school in Portugal for the 2024/25 year by October 10^th, 2023; or
• Be a member of the household of a taxpayer covered by the transitory regime.

2. If they are EU Nationals:

• Secure a promise of employment / employment agreement, or a promise of secondment / secondment agreement in Portugal byDecember 31st, 2023.
• Signed a promissory purchase agreement or lease a property in Portugal by October 10th, 2023.
• Enrolled the children in a school in Portugal for the 2024/25 year by October 10th, 2023.
• Be a member of the household of a taxpayer covered by the transitory regime.

Therefore, those who are interested to move to Portugal under the NHR regime must take immediate action as follows:

• For Non-EU nationals, ensure the prompt initiation of your visa application process.
• For EU nationals, move before the year end if none of the outlined criteria for the application of the transitory rule is met.

2. New inpatriate regime as from 2024

Parliament approved also yesterday a new regime aiming at attracting talent and FDI, also proposed by the Socialist party.

The new regime cannot be cumulated with the NHR and will take effect from January 2024 for individuals who, cumulatively:

• have not been tax resident in Portugal for the last 5 years;
• have acquired tax residency in Portugal; and
• obtain income from employment or self-employment within the scope of the new regime, encompassing roles like teaching in higher education, scientific research, positions in technology or startups (including board members), highly qualified professions in companies with significant investment applications and jobs in industry and service companies which turnover results, at least, in 50% from exports and other activities conducted by tax residents in Madeira and Azores (to be legislated by the Regions).

The benefits under this new regime include:

• A flat 20% tax rate applicable to income from employment and/or self-employment provided within the scope previously mentioned.
• Exemption from taxation on foreign-sourced income, covering employment/self-employment income, dividends, interest, royalties, rental income and capital gains in general.
• These benefits will apply for a 10-year period

I hope the above is useful. Please do not hesitate to let me know if you have any question or we can be of particular assistance in respect of any pending or potential file in respect of the above matters.