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The End of Portugal's Non-Habitual Resident (NHR) Regime for New Arrivals
The 2024 State Budget Law closed Portugal's Non-Habitual Resident tax regime to most new tax residents from 1 January 2024, ending one of the country's flagship expatriate attraction tools.
On 29 December 2023, the State Budget Law for 2024 was published in the Diário da República. Among many fiscal measures, it confirmed the closure of the Non-Habitual Resident (NHR) regime to most new tax residents from 1 January 2024 onwards.
The NHR regime, introduced in 2009, had been one of Portugal’s flagship tools for attracting foreign residents. It granted a 10-year period of favourable tax treatment, including a flat 20% tax rate on certain Portuguese-source employment and self-employment income from high-value activities, and exemptions or reduced rates on many types of foreign-source income, including pensions.
Under the 2024 Budget, individuals who first become Portuguese tax residents from 2024 forward can no longer apply for classic NHR status, save for narrowly defined transitional situations (such as those who had already taken specific steps towards relocation in 2023). Those who already hold NHR status keep their rights for the remainder of their 10-year period.
For Americans, British, Brazilians, Canadians, Israelis and other expatriates considering moving to Portugal, this is a game-changer. The decision to relocate can no longer be based primarily on the generous NHR tax advantages. Instead, the focus must shift to Portugal’s underlying qualities: quality of life, safety, climate, education and business environment – and, where relevant, to any new, more targeted tax incentives that may emerge for specific sectors or returning residents.
The end of NHR does not make Portugal a high-tax outlier in Europe, but it does mean that careful pre-arrival tax planning is even more important. Issues such as pension taxation, treatment of foreign companies and controlled foreign corporations, and exit tax from the country of origin now need bespoke analysis.
In short, the 2024 Budget closes one chapter in Portugal’s attractiveness strategy, while signalling a move towards more selective and possibly more domestically palatable forms of fiscal incentives.
Official source: Diário da República, State Budget Law for 2024, 29 December 2023 (https://dre.pt)