The approval of the budget in Portugal confirms that the NHR scheme will end for new applicants. The final version of the law is yet to be published. The budget also introduced a transitional scheme allowing people who started moving to Portugal in 2023 to apply for NHR in 2024.
People with NHR status obtained in the past or until the end of this year
People with existing NHR status obtained until the end of 2023 - there will be no change for people with existing NHR status. There is still a little under a month to try and obtain tax residency in Portugal for 2023 if you don't have it yet. Anyone who became a tax resident in 2023 can still apply for NHR until March 2024.
There has been much confusion around some transitional arrangements (e.g. rental agreement signed before October 10 etc). It is important to understand that none of the limitations of the transitional arrangement apply to people who become tax residents in 2023.
Transitional arrangement - people who started a process of moving to Portugal in 2023 and move in 2024.
The transitional regime proposed by the government has been approved. This means that people who started moving in 2023 can still apply for NHR in 2024.
Transitional categories
There are 7 categories of people subject to the transitional arrangement:
1. Promise of an employment contract signed until December 31, 2023, whose duties must take place within Portugal.
2. Lease in Portugal concluded until October 10, 2023;
3. Reservation contract or promissory contract for the acquisition of real estate concluded by October 10, 2023;
4. Enrolment or registration for dependents, at a school in Portugal, completed by October 10, 2023;
5. Residence visa or residence permit valid until December 31, 2023;
6. Procedure, initiated by December 31, 2023, of granting a residence visa or residence permit, with the competent entities, in accordance with the current legislation applicable to immigration matters, namely through the request for an appointment or actual appointment for submission of the request for the granting of a residence visa or residence permit or, also, by submitting the request for the granting of a residence visa or residence permit.
7. Members of the households of people who meet the criteria above.
What about family of Portuguese tax residents who don't need a residence permit (like Portuguese or EU citizens)?
Oddly, whilst family members of people who applied for a residence VISA are included in the transitional program, family members of people who live in Portugal as a matter of right are not. We were hoping that this would be clarified but so far, this is not the case and therefore, we recommend people in this position to try to obtain tax residency this year.
What if there are no meetings in the consulates?
We don't know. We hope that an email would be enough, but we cannot tell for sure.
How would the transition work?
It is reasonable to assume that the regulations supporting the transitional period will be late and confusing and will be applied inconsistently and unequally. We suggest packing a lot of patience.
New scheme mimicking the NHR benefits
The budget introduces a new tax benefits scheme that also includes a 20% flat rate of tax for income earned from work in Portugal and an exemption on foreign sourced income.
Based on what we know today (ahead of the publication of the new law), there are a few notable differences. The main two are that all pension benefits are out and pensions are to be taxed at progressive rates. Another difference is that the new scheme no longer examines the right to tax in the other jurisdiction. This means that it seems that foreign sourced capital gains are also covered by the new scheme.
Whilst the benefits are pretty similar, the conditions to fit into the scheme are different. A few small groups (Ph.D. research workers, certain people in the financial industry, university professors) continue to be eligible but otherwise the vast majority of people are not automatically eligible.
At the same time, two new categories open up:
(1) Startup workers or board members.
(2) Categories of people working in Madeira/Azores to be defined by the respective local governments.
Startups are subject to certain certification and will not cover merely people creating their own companies but we are excited by this opening - we believe that people making angel investments in startup companies and taking a board seat will qualify and we intend to support such people in the process of identifying and investing in such companies through a newly created wealth department at FRESH.
Working with FRESH's immigration department on a VISA to Portugal and trying to qualify for NHR
Our immigration and tax departments designed a service together that is meant to help those intending to move to Portugal in 2024 to secure a D7/D8 VISA and maximise chances to qualify for NHR. The service starts, like everything at FRESH, with tax advice, is followed by trying to book an appointment with the consulate before the end of the year, and follows up with the submission of a residency VISA, accompanying you to AIMA, enjoying a month-long concierge service when arriving to Portugal and applying for NHR.
To book the NHR gateway package with us, press here.
