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NHR status cannot be denied due to missed deadline, rules top court

In a landmark decision, the Supreme Administrative Court (STA), the top court in Portugal for administrative and tax matters,ruledthat NHR status is a matter of right and cannot be denied from people who failed to meet the 31 March deadline.

This decision has been anticipated and is a very important decision which could impact thousands of people in Portugal who failed to apply for NHR on time.

Until now, the tax authorities denied NHR status from anyone applying after the formal deadline of March 31 the year after the person becomes a tax resident, a policy that had far reaching impact on people, who could lose a status worth hundreds of thousands of Euros even for a single-day delay.

Fresh Portugal, thetop tax firm for expats in Portugal, has already reported before that arbitration courts have consistently been ruling that NHR is a matter of right and not an administrative issue and NHR benefits should be given to people who missed the deadline. However, such arbitration decisions could only be achieved for a specific tax year, forcing taxpayers to initiate subsequent processes year after year. The tax authorities have been refusing to amend the status of the taxpayer to NHR holder even after losing in such arbitration tribunals.

Now, the ruling has been given by the top court of the country responsible for tax matters.

In line with the arbitration courts, the STA also ruled that the deadline for registration under the NHR regime is declarative rather than mandatory. This means that taxpayers who meet all other criteria for NHR status, but who missed the registration deadline, can still apply and join the NHR scheme and NHR regime should still apply for their taxation going forward.


Some questions and answers following the ruling


Will the tax authorities start accepting “late” NHR applications now?

Almost certainly no. The tax authorities are expected to continue the policy of refusing NHR applications. The decision of the court does not force the tax authorities to change their policy at this point.



Is the decision of the court binding on lower courts?

The decision is not binding, but it is very powerful and it is unlikely that lower courts will not follow it.


What are the options of someone who had their NHR denied?

The decision opens a wide door to the court system. Before this decision, the practical path had been to dispute each assessment one year at the time. Now with this decision, taxpayers may prefer to go directly to court. Court proceedings will still take time, but taxpayers can now have a much stronger expectation to win and it is also possible that the tax authorities will not put up much of a fight (although they will likely continue defending cases at least for a while).


Will people who have been refused NHR get the tax back?

Yes, they should.


What about people who have not applied to NHR at all, knowing they missed the deadline?

The decision states that NHR status is still subject to application. Overpaid tax will not be paid back to taxpayers who have not applied for NHR status. However, it is possible that it would be repaid for multiple years if there had been a rejection.


Will there be a class action now on behalf of all NHR denied people?

The class action law in Portugal does not mention tax matters. A class action is unlikely.


I have been denied NHR status in the past. What are my options?

With the door now open, FRESH Portugal strongly suggests that people who have been denied NHR status or haven’t applied due to missed deadline will now consult an expert and consider their NHR recovery and tax rebate options.

For more info, Fresh Portugalprepared a videowith its experts to discuss the decision and also offerspersonal NHR recovery consultation.

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