frequently asked questions & reasons to move to portugal - updated 14.03.2017

THE PORTUGUESE NON-HABITUAL TAX RESIDENT (NHR) REGIME

Ricardo da Palma [email protected]

www.rpba.pt

Frequently Asked Questions &Reasons to Move to Portugal

mailto:[email protected]://www.rpba.pt/https://www.linkedin.com/company/rpbahttp://pt.slideshare.net/RPBAhttp://www.rpba.pt/

Why Portugal?

29th country on the OECD Better Life Index

2016 (1), 5th on 2015s Internations Quality of

Life Index. (2)

According to The Huffington Post, Algarve was

considered the World's best place to live or

retire in 2016 (3) and as reported by The

Telegraph, Portugal is the 2nd best place to

retire abroad. (4)

Portugal (http://en.wikipedia.org/wiki/Portugal) has a number of attractive characteristics:

#01Quality of Life

2

(1) - http://www.oecdbetterlifeindex.org/countries/portugal/(2) - https://inassets1-internationsgmbh.netdna-ssl.com/static/bundles/internationsexpatinsider/images/2015/topic/quality_of_life_index_full.jpg(3) - http://www.huffingtonpost.com/kathleen-peddicord/best-places-to-retire-overseas_b_8917292.html(4) - http://www.telegraph.co.uk/finance/personalfinance/pensions/9677415/The-10-best-places-to-retire-abroad.html

http://en.wikipedia.org/wiki/Portugalhttp://www.oecdbetterlifeindex.org/countries/portugal/https://inassets1-internationsgmbh.netdna-ssl.com/static/bundles/internationsexpatinsider/images/2015/topic/quality_of_life_index_full.jpghttp://www.huffingtonpost.com/kathleen-peddicord/best-places-to-retire-overseas_b_8917292.htmlhttp://www.telegraph.co.uk/finance/personalfinance/pensions/9677415/The-10-best-places-to-retire-abroad.html

The non-habitual tax resident (NHR) is a tax regime created to improve

Portuguese international competitiveness. This regime targets non-

resident individuals who are likely to establish a permanent or a

temporary residence in Portugal.

3

The NHR regime establishes, under certain conditions, IRS exemptions

on foreign source income, as well as a limited taxation of income

deriving from certain high value added activities.

FAQ #2What are the benefits of the NHR regime?

FAQ #1 What is the NHR regime?

Frequently Asked Questions

4

#02Weather

Weather and environment quality

(9th country on the OECD 2016

Better Life Index).

Why Portugal?

#03Sunshine

Estimated 3300 hours of sunshine

per year, one of the highest rates

in Europe.

Foreign-sourced passive income (interest, dividends, certain royalties, other income from capital, capital gains and

income from immovable property) derived by non habitual residents is exempt (without progression except in the case

of capital gains on real estate) in Portugal, provided that it is potentially liable to taxation in the source State under the

rules of a tax treaty or of the OECD Model Tax Convention (no effective taxation is required).

Foreign-sourced income from pensions is exempt (with progression).

Foreign-sourced employment income is exempt (with progression) in Portugal, provided that it is effectively taxed in

the source State under the rules of a tax treaty or of the OECD Model Tax Convention.

Foreign-sourced employment income is exempt (without progression) in Portugal, provided that it is effectively taxed in

the source State under the rules of a tax treaty or of the OECD Model Tax Convention and that it is income derived

from high value added activities of a scientific, artistic or technical nature.

Foreign-sourced income from independent personal services is exempt (without progression) in Portugal, provided that

it is potentially liable to taxation in the source State under the rules of a tax treaty or of the OECD Model Tax

Convention (no effective taxation is required) and that it is income derived from high value added activities of a

scientific, artistic or technical nature.5

FAQ #3 What types of income are eligible for exemption under NHR regime?


6

Modern and cosmopolitan country:

Lisbon was elected 2nd best place to travel in 2015 (5)

and Porto was the best European destination for

2017. (6)

Lisbon was also ranked the 16th most livable city in

the world in Monocle Quality of Life Survey 2016:

Best Cities to Live. (7)

(5) - http://www.europeanbestdestinations.com/top/europe-best-destinations-2015/(6) - http://www.europeanbestdestinations.com/best-of-europe/european-best-destinations-2017/(7) - https://monocle.com/magazine/issues/95/top-25-liveable-cities/(8) - http://en.wikipedia.org/wiki/List_of_World_Heritage_Sites_in_Portugal

#05Cultural Offering

Portugal has a great list of wonders declared a World Heritage Site by Unesco. (8)

Fado (the Portuguese most traditional music genre) was considered by UNESCO Intangible Cultural

Heritage of Humanity, in 2011.

Why Portugal? #04Modernity

http://www.europeanbestdestinations.com/top/europe-best-destinations-2015/http://www.europeanbestdestinations.com/best-of-europe/european-best-destinations-2017/https://monocle.com/magazine/issues/95/top-25-liveable-cities/http://en.wikipedia.org/wiki/List_of_World_Heritage_Sites_in_Portugal

7

FAQ #4What types of income are eligible for reduced rates under NHR regime?


Domestic and foreign-sourced income deriving from high value added activities of a

scientific, artistic or technical nature will be liable to autonomous taxation at a special 20%

flat rate and not to the general and progressive IRS rates (currently of up to 56,5% for yearly

taxable income above 250.000). A 3,5% surcharge may be applied in addition to the said

20% rate, raising the total tax rate on such income to 23,5%.

8

#06Gastronomy

The Portuguese gastronomy is as rich and

diverse as its heritage and landscapes and has

recently been internationally recognized with

14 Michelin star restaurants in 2016. (9)

Portugal is also one of the best wine tourism

destinations. Our country had 578 prizes at

the 2016s Decanter World Wines Awards

(DWWA) (10) and also achieved 16 Grand Gold,

114 Gold and 227 Silver Medals in the 2016s

Concours Mondial de Bruxelles. (11)

(9) - http://portugalconfidential.com/2016-michelin-star-restaurants-in-portugal/(10) - http://awards.decanter.com/DWWA/2016(11) - http://results.concoursmondial.com/index.php?page=results&formular[ConcoursID]=59

Why Portugal?

http://portugalconfidential.com/2016-michelin-star-restaurants-in-portugal/http://awards.decanter.com/DWWA/2016http://results.concoursmondial.com/index.php?page=results&formular[ConcoursID]=59

Ministerial Order nr. 12/2010, of January 7, defined the high value added activities of a scientific, artistic or

technical nature qualifying for the regime. It encompasses a wide range of professions and activities, as follows:

9

FAQ #5 What are considered high value added activities of a scientific, artistic or technical nature?

1 - Architects, engineers and similar technicians:

101 Architects

102 Engineers

103 Geologists

2 - Visual artists, actors and musicians:

201 Theater, ballet, film, radio and television Artists

202 Singers

203 Sculptors

204 Musicians

205 Painters

3 - Auditors:

301 Auditors

302 Tax Consultants

4 - Doctors and dentists:

401 Dentists

402 Analyst Doctors

403 Surgeons

404 Board doctors in ships

405 General Practitioners

406 Dentists

407 Dentist Doctors

408 Physiatrists


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6 - Psychologists:

601 Psychologists

5 - Teachers:

501 University professors

409 Gastroenterologists

410 Ophthalmologists

411 Orthopaedists

412 Otorhinolaryngologists

413 Paediatricians

414 Radiologists

415 Doctors in other specialties

7 - Professional services, technicians andsimilar:

701 Archaeologists

702 Biologists and experts in life sciences

703 Computer Programmers

704 Consulting and computer programming and

activities related to information and computer

technology

705 Computer programming activities

706 Computer consultancy activities

707 Management and operation of computer

equipment

708 Activities of information services

709 Activities of data processing, hosting

information and related activities/Web portals

710 Activities of data processing, hosting

information and related activities

711 Other information service activities

712 Activities of news agencies

713 Other information service activities

714 Scientific research and development

715 Research and development of science physical

and natural

716 Research and development in biotechnology

717 Designers

8 - Investors, administrators and managers:

801 Investors, administrators and managers of

companies promoting productive investment, if

allocated to eligible projects under tax benefits

contracts awarded under the Tax Code for

Investment, approved by Decree-Law No. 249/2009,

of 23 September

802 Senior employees of companies

11

#08Other Languages Spoken

A large part of the population speaks foreign languages,

especially English, Spanish and French.

Portugal was ranked 13th out of 70th countries in the EF

Global English Proficiency Index 2015. (13)

#07EducationThere is a significant number of International Schools

throughout Portugal, attended by both Portuguese and

foreign students.

Portugal is ranked as the 8th best in the World according

to the U21 Rankings of National Higher Education

Systems 2016. (12)

Why Portugal?

(12) - http://universitas21.com/news/details/220/u21-ranking-of-national-higher-education-systems-2016(13) - http://www.ef.edu.pt/epi/

http://universitas21.com/news/details/220/u21-ranking-of-national-higher-education-systems-2016http://www.ef.edu.pt/epi/

Individuals who become resident for tax purposes in Portugal

without having been so in the previous five years.

12

Staying for more than 183 days in the Portuguese territory, whether these days are

consecutive or not, in any 12-month period beginning or ending in a given tax year;

If staying for a shorter period, having in the Portuguese territory, on any day of the

period referred above, a dwelling under circumstances that lead to the presumption of

an intention to hold and occupy it as a place of habitual abode;

Being, on the 31st of December, a crew member of a ship or aircraft at the service of

an entity with residence, head office or effective management in Portugal.

FAQ #7 How do I acquire tax residence in Portugal?

FAQ #6 Who may apply for the NHR regime?


13

#09Daily FlightsAbout 300 daily flights from Portugal

to foreign countries.

Porto Airport ranks among the best

airports in Europe since 2006. (14)

#10Convenient Location

for Globetrotters

Portugal ranked 1st on Globe Spots

Top 10 countries in 2013. (15)

(14) - http://www.aci.aero/Airport-Service-Quality/ASQ-Awards/Current-Winners/Best-Airport-By-Region/Europe(15) - http://www.globespots.com/besttravel.php?year=2013

Why Portugal?

http://www.aci.aero/Airport-Service-Quality/ASQ-Awards/Current-Winners/Best-Airport-By-Region/Europehttp://www.globespots.com/besttravel.php?year=2013

Registering as a tax resident in Portugal is a requirement to obtain the non-habitual resident status,

which means that those wishing to apply for the regime generally must:

i. register as non-resident taxpayers;

ii. obtain residence permits (for non-EU nationals) and residence cards (for EU nationals);

iii. register as tax residents; and

iv. only then apply for the non-habitual resident status.

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FAQ #8What is the procedure to register as tax resident in Portugal?


15

#11Sports

Top conditions for sports (sailing, diving, biking, trekking,

horse riding, golf - with some of the best World courses (16)).

(16) - http://worldgolfawards.com/award/world-best-golf-destination/2015

Why Portugal?

http://worldgolfawards.com/award/world-best-golf-destination/2015

An application must be submitted until March 31st of the tax year following that in which Portuguese tax residence

is acquired. This application is addressed to the Director of the Taxable Persons Registration Service (Servios de

Registo de Contribuintes).

From August 2nd, 2016 onwards, the applications have to be submitted on the tax authorities website.

Moreover, individuals must submit a statement whereby they solemnly declare that they have not fulfilled the

criteria necessary for being considered a Portuguese tax resident during the preceding five years.

16

Non-habitual resident individuals may enjoy such status for a ten-year period, after which they will be taxed under

the standard IRS regime.

FAQ #10For how long may I enjoy the NHR status?

FAQ #9How do I apply for the NHR status?


17

Value for money in real estate investments (which

have undergone significant decreases since 2008).

#12Investments

In comparison with other major European

countries, Portugal is highly affordable. (17)

#13Cost of Living

(17) - http://www.numbeo.com/cost-of-living/country_result.jsp?country=Portugal

Why Portugal?

http://www.numbeo.com/cost-of-living/country_result.jsp?country=Portugal

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After obtaining the non-habitual resident status it will be necessary to file annual tax returns in Portugal, stating

the worldwide income and expenses, for which adequate documentation keeping is required.

FAQ #11Once I have the NHR status, what are my tax obligations?


The NHR status is granted for a ten-year period. The particular features of the NHR regime may always be amended by law,

for better or for worse, even for those who have been granted NHR status prior to the enactment of any change (although

in such cases the degree of change to the regime which is admissible under Portuguese constitutional law is very

debatable). This regime was implemented in 2009 by a Socialist party (center-left wing) government, and since then it has

remained stable. The last government coalition of Social Democrats party and Christian Democrat / Peoples party (center-

right wing) has not materially changed the regime. The general perception is of its widespread acceptance by the

community in general and by the main political parties. The only relevant adverse change to the regime was the

enforcement in 2011 and from 2013 onwards of a 3,5% surcharge to employment or independent personal services

income deriving from high value added activities of a scientific, artistic or technical nature obtained by NHR residents

liable to autonomous taxation at a special 20% flat rate, a measure which is expected to be abolished in the middle run.

FAQ #12For how long are the benefits of the regime granted?

19

Portugal has a high quality

health system, offering

both public and

private healthcare.

#14Health System

For instance, according to the

2016 OECD Health Statistics,

the average life

expectancy in Portugal in 2014

was 81.2 years. (18)

(18) - http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT

Why Portugal?

http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT

A change to the NHR regime could happen, but it is not likely, as the regime was introduced in 2009 by a government

of the same center-left wing party (Partido Socialista) which is now in government with the support of other

(more) left-wing parties. Additionally, there is currently no public debate or controversy surrounding the NHR regime

and no changes to it have been included in the Government Program approved by parliament (available at

http://www.portugal.gov.pt/media/18268168/programa-do-xxi-governo.pdf, see pages 230 to 234 on tax matters).

The current Socialist party Government has just declared the intention to revise the list of high value added activities.

In any case, if such change happens:

i. Even if NHR status is abolished, it cannot be taken away from those that already have it at the time the change is

approved;

ii. Although the NHR status cannot be taken away, the regime could be made less attractive (reducing the scope of

the exemptions, for instance) even for those that have obtained it in the past. To what extent such change could be

made is very debatable under Portuguese administrative and constitutional law. Some changes would always be

admissible, but in principle a change that would make the NHR regime purely nominal (making NHR and normal

residents taxed in the same way or with only very minor differences) should not be allowed. Assessing the degree of

change that is allowed is very difficult. 20

FAQ #13Can the NHR regime change?


21

#15Economic Progress

Successful conclusion of the Troikas (International Monetary

Fund, European Central Bank and European Union) financial

assistance program (2011-2014) on May 17, 2014.

#16Political Stability

Portugal is a developed

democracy with political and

social stability.

Why Portugal?

22


As of November 2015, the Socialist party, with the parliamentary support of three far-left parties (the Left Block, the

Communist and the Green parties) has formed a new government. The Socialist party has proposed in its electoral

program the reintroduction of inheritance taxation between spouses and direct line descendants for high value estates

(in principle those with a taxable value above 1 million Euros, with a rate of 28% applying to the surplus), but taking into

account the need to avoid phenomena of multiple inheritance taxation. It is therefore likely that a mild form of

inheritance taxation may be re-introduced in Portugal, but it is not clear how it will target NHR residents with non-

Portuguese assets, due to the caveat in commas. Accordingly, changes to inheritance taxation (which is currently very

generous, as inheritance between direct family is exempt, assets outside Portugal are not taxable and when tax is due on

Portuguese assets it is so at a low rate - 10%) seem much more likely than a change of the NHR regime, as the Government

Program intends to tax the cases that are now exempt (most notably in inheritances between direct family). However, the

relevant aspects remain fully uncertain (for instance, if foreign assets will or not be taxed, if donations will or not be taxed

in the same way as inheritances, how should the 1.000.000 be valued, etc.). RPBA will monitor these developments.

FAQ #14What about Gift and Inheritance Taxation in Portugal?

23

#17Peaceful Country

According to the 2016s

Global Peace Index, Portugal

ranks 5th, out of 163

countries. (19)

(19) - http://static.visionofhumanity.org/sites/default/files/GPI%202016%20Report_2.pdf

Why Portugal?

http://static.visionofhumanity.org/sites/default/files/GPI 2016 Report_2.pdf

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#18Portuguese Passport /

Citizenship

If the head of the household qualifies for residency

in Portugal, all the dependents will automatically

qualify so with no any additional costs.

Moreover, Portugal has one of the world's most

valuable passports (20) and the Portuguese

Citizenship was ranked as the 16th most valuable in

the World by Quality of Nationality Index (QNI). (21)

(20) - https://www.passportindex.org/byRank.php(21) - https://nationalityindex.com/#

Why Portugal?

https://www.passportindex.org/byRank.phphttps://nationalityindex.com/

The Portuguese NHR Regime

For more information on our Residence Planning Services, please visit our

microsite www.nonhabitualtaxresident.com or scan the below QR code with your

smartphone:

Should you require further information on this issue please check our Information

Note on this subject, available at http://www.slideshare.net/RPBA/the-non-habitual-tax-

resident-regime-rpba30102014

25

http://www.nonhabitualtaxresident.com/http://www.slideshare.net/RPBA/the-non-habitual-tax-resident-regime-rpba30102014

The Portuguese NHR Regime

Proper legal advice is recommended before any decision is taken

to become a Portuguese tax resident, and more so if one wishes

to take full advantage from the NHR status. RPBA has an in-

depth knowledge and expertise on this regime.

To book a consultation or to obtain our professional fees on this

subject please e-mail us (Ricardo da Palma Borges and Marta

Carmo): [email protected]; [email protected]

26

mailto:[email protected]:[email protected]

Recent Tax Recognition

Chambers & Partners Ricardo Band 2 / RPBA Band 3 (2016) and Ricardo Band 1 / RPBA Band 3 (2015 / 2014 / 2013)

Legal 500 Ricardo and Bruno are Recommended Lawyers / RPBA Band 3 (2016 / 2015 / 2014 / 2013)

World Tax Ricardo mentioned / RPBA Tier 3 (2017 / 2016 / 2015 / 2014)

Best Lawyers Ricardo recognised as "Tax Law Lawyer of the Year (2017) and ranked under the "Tax Law" practice area and the "Tax

Planning" subspecialty (2016 / 2015 / 2014 / 2013 / 2012 / 2011)

Corporate LiveWire - Ricardo da Palma Borges chosen as the winner of the Finance Award for Tax Lawyer of the Year Portugal

(2017) / Ricardo da Palma Borges chosen as the winner of the Finance Award for Excellence in Tax Planning Portugal (2016)

World Transfer Pricing Ricardo mentioned / RPBA Tier 3 (2016)

Whos Who Legal Ricardo ranked as a top lawyer in the Corporate Tax Lawyers directory (2016 / 2013)

Expert Guides Ricardo da Palma Borges recognised in the Tax edition of the Expert Guides, which annually identifies the best tax

lawyers in each country (2016)

Global Law Experts - RPBA Tax Law Firm of the Year in Portugal (2016)

Tax Directors Handbook Ricardo mentioned / RPBA Tier 3 (2015)

Corporate Intl - RPBA Boutique Tax Law Firm of the Year in Portugal (2016)

Corporate Intl Magazine Legal Award RPBA Boutique Tax Law Firm of the Year in Portugal (2014)

Acquisition International Tax Award RPBA Portuguese Tax Law Boutique Firm of the Year (2015)

Acquisition International Legal Award RPBA Boutique Law Firm of the Year Portugal (2014)27

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In the preparation of this presentation, every effort has been made to offer current, correct and clearlyexpressed information. However, the said information is intended to afford general guidelines only. Thispresentation reflects information current at 14 March 2017.

This presentation is distributed with the understanding that RICARDO da PALMA BORGES & ASSOCIADOS,SOCIEDADE DE ADVOGADOS, S.P., R.L. is not responsible for the result of any actions taken on the basis ofinformation herein included, nor for any errors or omissions contained herein.

RICARDO da PALMA BORGES & ASSOCIADOS, SOCIEDADE DE ADVOGADOS, S.P., R.L. is not attemptingthrough this work to render legal or tax advice and the information in this presentation should be used as aresearch tool only, and not in lieu of individual professional study with respect to client legal matters.

Portuguese domestic legislation, foreign legislation, EU Directives and tax treaties have anti-abuseprovisions, and each actual client structure should be analysed taking those into account.

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15

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