The Non-Habitual Resident (NHR) regime in Portugal was introduced in 2009 with the aim of attracting qualified professionals, investors, and foreign retirees by offering competitive tax benefits. This regime is particularly appealing to those who wish to establish residence in Portugal without having their worldwide income taxed at high rates.

With the program’s success, the Portuguese government has introduced measures to make it fairer and more suited to the country's reality. Given the growing number of professions related to research, digital markets, technological innovation, and renewable energy, the regime has once again been revised to establish a set of rules, limiting access to the program for those engaged in these specific activities.

The program covers individuals working in higher education and scientific research, including scientific employment within organizations, structures, and networks dedicated to producing, disseminating, and transmitting knowledge integrated into the national science and technology system. It also includes employees or members of the governing bodies of organizations recognized as technology and innovation centers, employees or members of the corporate bodies of organizations that benefit from contractual tax incentives for productive investment, R&D personnel whose expenses are eligible for the SIFIDE tax incentive system, or workers and members of the governing bodies in organizations certified as startups.

The list of high-value-added professions has also been updated, now requiring that these professions be exercised on behalf of:

- Companies that benefit (or have benefited in the last 5 years) from the "Investment Support Tax Regime (RFAI)";

- Eligible industrial and service companies that have exported at least 50% of their turnover in the last 2 years.

Eligibility conditions for IFICI in 2024, concerning the basic requirements for being recognized as a non-habitual resident in Portugal, largely remain unchanged. Thus, the requirements are:

1. Fiscal residence in Portugal: The individual must stay in the country for more than 183 days in the fiscal year or have a residence indicating an intention of habitual residence; and

2. Not having been a tax resident in Portugal in the past five years: This condition aims to prevent former residents from continuously benefiting from the regime.

Moreover, enrolment in the regime with the Tax Authority guarantees access to special conditions for 10 years, with no renewal possibility.

As for the tax benefits of IFICI from 2024 onward, the most significant changes in the NHR regime pertain to exemptions and rates applicable to income earned abroad and in Portugal:

1. 20% rate for high-value-added activities: Qualified professionals engaged in high-value-added activities continue to benefit from a fixed 20% IRS rate on Category A and B income earned in Portugal. However, the list of eligible professions has been revised to include new sectors related to the digital transition and renewable energy, reflecting the country’s strategic priorities.

2. Taxation of passive income: Passive income earned abroad, classified under Categories E, F, and G (such as dividends, interest, and royalties), is subject to an exemption method, provided it is taxable in the country of origin with which Portugal has a double taxation agreement.

3. Taxation of foreign pensions: The pension regime has also undergone adjustments. Since 2020, a 10% tax on foreign pensions had been introduced, which will be lifted in 2024, with these pensions now subject to general rates.

With the changes in effect from 2024, it becomes even more important for IFICI regime beneficiaries to manage their tax obligations rigorously. Fiscal residence and the proper application of international double taxation treaties are critical to avoid penalties or investigations from tax authorities.

Based on our firm’s experience, for instance, an American citizen who is a higher education professor or researcher with active income from royalties could transfer their tax residence to Portugal and, under IFICI or NHR 2.0, see these earnings exempted.

For qualified professionals, the regime remains highly attractive, although the new framework demands a deeper analysis of the nature and origin of the income earned. For passive income obtained abroad, the tax exemption continues to be a significant advantage, highlighting the need for a well-planned approach.

The Non-Habitual Resident regime in Portugal continues to offer substantial benefits to those who qualify, but the changes introduced in 2024 reinforce the need for careful tax planning. The IFICI is eagerly anticipated, and the adjustments, especially in terms of passive income and pension taxation, reflect Portugal’s alignment with international tax practices, maintaining the country’s competitiveness and appeal for foreign nationals and expatriates. Therefore, you can count on the expertise of Belzuz Abogados, S.L.P.'s Tax Law Department in Portugal for guidance in this regard.

 Miguel Paixão

Departamento Direito Fiscal e Tributário | Portugal

Belzuz Abogados SLP

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