NHR Archives - All Finance Matters

CAN YOU STILL MAKE IT ON TIME TO NHR?

November 17, 2023

By Ricardo Chaves

The Portuguese government has made recently a change to their State Budget proposal, concerning the NHR status. The State Budget Proposal will be voted on the 29-11-2023, but as the government has the majority, is likely to be approved.

According to this proposal, all those who started their emigration process to Portugal before the end of 2023, can still apply for the NHR, provided they complete their residency process and become tax residents, before 31-12-2024.

The proof of starting the emigration process can be done through a rental contract, promissory contract, matriculation of children in Portuguese school, employment or self-employment in Portugal, etc.

This alteration aims to protect those who were already in the process of moving but could not complete the residency process before the end of 2023.

Therefore this opens more possibilities for clients to continue the emigration process, or initiate it now and become residents in 2024, it also means that the NHR status will be valid from 2024 until 2033.

At AFM we‘ve created a fast-track residency process to help you. If you wish to move to Portugal, please contact us at: info@allfinance.pt

NHR – Urgent Update

October 10, 2023

By Ricardo Chaves

⚠ 𝐍𝐇𝐑 𝐋𝐀𝐓𝐄𝐒𝐓 𝐔𝐏𝐃𝐀𝐓𝐄 ⚠

Please be aware that the Portuguese Government has filed today the proposal for the State Budget 2024.

This proposal will be voted by the end of November and when approved it announces that the NHR programme finishes at the end of 2023.

Anyone who is registered as a tax resident or has a residency visa on 31-12-2023 will be able to apply for the NHR, providing they submit their request before 31-03-2024.

Please contact us if you require further information.

NHR Regime in Portugal – Update

October 6, 2023

By Ricardo Chaves

The Portuguese Prime Minister announced the termination of the Non-Habitual Tax Resident regime in 2024, grandfathering prior entrants (apparently those that enter the regime until the end of 2023).

The Portuguese Government will deliver the State Budget proposal to the Parliament on October 10th. We will have further information about the Government’s intentions at that point. However, it is also possible that the Government only regulates this at a later stage rather than as part of the state budget.

It is impossible to predict when this regime will finish; we will let you know as soon as there are more developments on this subject.

Our advice at this stage is:

1) If you are already in Portugal and have received your residency permit, consider accelerating your tax residency process to apply to the NHR before 31st December.

2) If you are waiting for your SEF appointment, you need to get the appointment before the end of the year to ensure that you are a resident of Portugal before 31st December.

3) If you are not yet in Portugal but an EU citizen, consider moving before the end of the year to ensure you can still apply for this regime.

4) If you are a non-EU citizen or cannot move to Portugal before the end of 2023, you should remain calm and wait for the Government to release more information on the regime’s termination date. The date may be the end of 2024 and not the beginning.

Always remember that Portugal is still one of the best places to live, with no wealth or inheritance tax. Portugal has signed DTAs (Double Tax Agreements) with more than 70 countries and jurisdictions that provide tax relief from international double taxation.

Are there any further details beyond the Primer Minister statement?

No. It was a mere sentence during an interview, and no other comments were made from any official source.

Will they change the NHR, or will they end it?

There needs to be further information on whether the intention is to close only the 10% tax rate applicable to pensions and keep the 20% rate for active income or to change or close the NHR regime altogether.

What would be the timeline if a new law is presented to change the NHR?

The Budget Law will be delivered on the 10th of October, and then there will be more clarity about this government’s intentions. Please note that even if this is on the State Budget proposal, it will still need to be voted and published and usually, it will only be effective after the 1st of January 2024.

Will they keep the rights of those already in the NHR scheme?

Yes. During the interview, the prime minister mentioned that it was only for new applications. At the last significant change to the NHR regime in 2019, a transitory regime was created whereby the existing registered residents would maintain the regime until the end of the ten years. Therefore, any changes should safeguard the rights of those already in the scheme.

I have NHR do I need to do anything?

You don’t need to do anything for now. There will be much news in the press, but we will keep you informed of any changes that matter to your circumstances.

Dates to save on the calendar 2023

January 23, 2023

By Ricardo Chaves

Tax calendar: dates you need to put in your diary for 2023

We wish all readers a healthy and happy 2023! Below you can find some of the dates that you need to put in your diary, concerning taxes in Portugal.

Please remember that before you submit your Personal Income Tax (IRS) you need to perform some tasks as per the new habits acquired in the previous years: tasks like validating or registering invoices at the tax portal, are now procedures that became part of the routine of any taxpayer. Your role is important in determining your IRS deductions, therefore check the tax calendar, to make sure you don’t lose any deductions or pay any fines.

January

If you have a business activity which was VAT exempt under article 53, but in 2022 you exceeded the VAT threshold, then you need to change your VAT status by the 31^st of January. Likewise, if you were paying VAT but did not exceed the threshold in 2022 and wish to become exempt, the same deadline applies.

If you have a rental contract and are not obliged to issue monthly rental receipts, you have until the 31^st of January to declare the yearly rental income for 2022.

For your info, the VAT threshold in 2022 was 12.500€ and this limit will increase in 2023 to 13.500€. The VAT threshold applies to your business income, irrespective of how many activities you may have.

February

Each taxpayer has until the 25^th of February to query, report and verify invoices. To do this you should access the e-Factura portal and access your personal page, where you should verify if all your invoices have been properly communicated. If you find any failure or any invoice is not recorded, you can add these invoices to your file. It is also important to check in which category your invoices are recorded and move them into the appropriate section (ie health, education, etc) otherwise the deduction will not be accepted. These procedures need to be performed for each household expenditure holder, including dependents.

It is also important to update or register your household for tax purposes, before 15/02. Please note that this can be very important, not only for tax purposes but for other related matters, such as inscription at schools, kindergarten, etc and or other tax benefits you may be entitled to.

March

If you become a resident of Portugal in 2022 and want to apply for the Non-Habitual Residency scheme, you have until the end of March to submit your application at the tax portal.

During March, you also need to check your e-fatura page at the tax portal and if you feel the information is not correct, you can challenge the calculations made by the Tax Authorities. In other words, your tax deductions will be summarized here, under family general expenses, healthcare expenses, training and education expenses, charges with property for permanent residence, invoices VAT and costs with foster homes; if your total invoices are not consistent with the one totals shown in the portal, you have this two weeks window to contest it. Please note that it’s necessary to check this for each taxpayer.

April

You can submit your IRS (Personal Income Tax) declaration for 2022, from the 1^st of April, until the end of June. This means that all declarations can be submitted during these three months, irrespective of your income category (employment income, pension income, self-employment income, rentals, etc.)

Please note that all residents, including Non-Habitual Residents, need to submit a tax return, even if they didn’t receive any income or don’t have any tax to pay. If the information on your foreign source income is not yet available before the 30^th of June, you can file for an extension and submit the tax return later at no cost.

All non-residents that have income from Portuguese sources (ie property rentals, sale of a property, etc) also need to submit the tax return.

May

Payment of the first instalment of the IMI council tax. If in your case, the council tax is lower than 100€, this will be the only payment date you need to remember. If higher, please look for other instalment dates in August and November.

June

Do not forget to submit the IRS (Personal Income Tax) for 2022 by the end of June. Please remember that if you do not deliver your IRS on time, or if you fail to meet some of the deadlines above, you may lose some or all your tax deductions. Late delivery of your IRS may also cancel your IMI (Council Tax) exemption.

July

If you are entitled to a tax refund, the settlement must be made by the 31^st of July. This is the deadline for the Tax Authorities to pay you.

August

If you have IRS tax to pay, you should make the payment no later than the last day of August, provided you have delivered the tax return within the time limits. If the tax return was submitted after the deadline, payment may be made until the 31^st of December (fines and interest will apply).

The second instalment of the IMI council tax is due this month. This is applicable for all those where the yearly IMI payment is higher than 500€ per taxpayer.

September

If you have AIMI (additional council tax) to pay, this needs to be paid by the end of September. Remember that are liable for AIMI payment on all properties owned by companies. Individual owners are only exempt from AIMI, in the first 600 thousand Euros worth of property (based on the tax value and not on the commercial value).

November

Payment of the third and last instalment of the IMI council tax. This is applicable for all those where the yearly IMI payment is higher than 100€ per taxpayer.

Recurring dates

Please remember that if you have a business activity, you are obliged to issue invoices up to five days after providing the service or receiving the funds. And all the monthly invoices need to be reported to the tax authorities (SAFT file) also by the 5^th of each month, although 3 days are tolerant. Please be aware that the limit date used to be the 12^th and the tax authorities will be more strict from 2023 and fines for late issuance of invoices or late submission of the monthly invoice file, will be applicable. This deadline also includes the invoices related to your rentals (AL).

Each month you also need to issue your monthly rental receipts in case you have a rental contract registered.

The car tax needs to be paid by the last day of the month when the car was registered. Please do not forget this as the fines are high in this case.

If you have a business activity, please remember that each quarter you need to submit a social security declaration, to ascertain how much social security you will pay each month in the following quarter.

If you have any questions, please feel free to contact us; tax planning is critical and you and your company, cannot afford surprises. Contact our office to discuss your situation and avoid any unnecessary fines.

Dates to save on the calendar 2022

March 11, 2022

By Ricardo Chaves

Tax calendar: dates you need to put in your diary for 2022

We wish all readers a healthy year of 2022, and it is our desire that the new year is much easier to everyone than the year we just said goodbye to. Below you can find some of the dates that you need to put in your diary, concerning taxes in Portugal.

Please remember that before you submit your IRS you need to perform some tasks as per the new habits acquired in the previous years: tasks like validating or registering invoices at the tax portal, are now procedures that became part of the routine of any taxpayer. Your role is important in determining your IRS deductions, therefore check the tax calendar, to make sure you don’t lose any deduction or pay any fines.

January

If you have a business activity which was VAT exempt under article 53, but in 2021 you exceeded the VAT threshold, then you need to change your VAT status until the 31^st of January. Likewise, if you were paying VAT but did not exceed the threshold in 2021 and wish to become exempt, the same deadline applies.

If you have a rental contract and are not obliged to issue monthly rental receipts, you have until the 31^st of January to declare the yearly rental income for 2021.

February

Each taxpayer has until the 25th of February to query, report and verify invoices. To do this you should access the e-Factura portal and access to your personal page, where you should verify if all your invoices have been properly communicated. If you find any failure, or any invoice is not recorded, you can add these invoices to your file. It is also important to check in which category your invoices are recorded and move them into the appropriate section (ie health, education, etc) otherwise the deduction will not be accepted. These procedures need to be performed for each household expenditure holder, including dependants.

It is also important to update or register your household for tax purposes, before 15/02. Please note that this can be very important, not only for tax purposes, but for other related matters, such as inscription at schools, kindergarten, etc and or other tax benefits you may be entitled to.

March

If you became resident in Portugal in 2021 and want to apply for the Non-Habitual Residency scheme, you have until the end of March to submit your application at the tax portal.

During March, you also need to check your e-fatura page at the tax portal and if you feel the information is not correct, you can challenge the calculations made by the Tax Authorities. In other words, your tax deductions will be summarized here, under family general expenses, healthcare expenses, training and education expenses, charges with property for permanent residence, invoices VAT and costs with foster homes; if your total invoices is not consistent with the one totals shown in the portal, you have this two weeks window to contest it. Please note that it’s necessary to check this for each taxpayer.

April

You can submit your IRS (Personal Income Tax) declaration for 2021, from the 1^st of April, until the end of June. This means that all declarations can be submitted during these three months, irrespective of your income category (employment income, pension income, self-employment income, rentals, etc.)

Please note that all residents, include Non-Habitual Residents, need to submit a tax declaration, even if they’re income is only pensions, and tax exempt, they still must fulfil this obligation.

All non-residents that have income from Portuguese source (i.e. property rentals, sale of a property, etc) also need to submit a yearly declaration.

May

Payment of the first instalment of the IMI council tax. If in your case, the council tax is lower than 100€, this will be the only payment date you need to remember. If is higher, please look for other instalment dates in August and November.

June

Do not forget to submit the IRS (Personal Income Tax) for 2021 by the end of June. Please remember that if you do not deliver your IRS on time, or if you fail to meet some of the deadlines above, you may lose some or all your tax deductions. Late delivery of your IRS may also cancel your IMI (Council Tax) exemption.

July

If you have IRS tax to receive, the settlement must be made by 31^st of July. This is the deadline for the Tax Authorities to refund you.

August

If you have IRS tax to pay, you should make the payment no later than the last day of August, providing you have delivered the tax return within the time limits. If the tax return was submitted after the deadline, payment may be made until 31^st of December (fines and interest will apply).

The second instalment of the IMI council tax is due this month. This is applicable for all those where the yearly IMI payment is higher than 500€ per taxpayer.

September

If you have AIMI (additional council tax) to pay, this needs to be paid by the end of September. Remember that are liable for AIMI payment all properties owned by companies. Individual owners are only exempt from AIMI, in the first 600 thousand Euros worth of property (based on the tax value and not in the commercial value).

November

Payment of the third and last instalment of the IMI council tax. This is applicable for all those where the yearly IMI payment is higher than 100€ per taxpayer.

Recurring dates

Please remember that if you have a business activity, you need to report your sales file by the 12^th of each month. This also includes business income from AL (rental) license holders.

Each month you also need to issue your monthly rental receipts in case you have a rental contract registered.

The car tax needs to be paid by the last day of the month when the car was registered. Please do not forget this as the fines are high in this case.

If you have any questions, please feel free to contact us; tax planning is critical and you and your company, cannot afford surprises. Contact our office to discuss your personal situation and avoid any unnecessary fines.

Answering questions from our readers

March 11, 2022

By Ricardo Chaves

Each month we receive different questions from our readers, although some of these questions are related to specific situations, sometimes the answer may help you to better understand the tax system in Portugal and answer the queries from other readers.

Q: I am a UK citizen and sold my property in Silves last year with a significant gain. This was our holiday home and we never rented it, only used it for our family and friends. How much tax will I pay and when? Should I pay the tax in Portugal, even when I am tax resident in the UK?

Irrespective of your tax domicile, if you sold a property located in Portugal you need to declare it to the Portuguese tax authorities. This is mandatory regardless of if there was a gain or not, so even when you make a loss, you still need to submit an IRS declaration.

The tax declaration is normally made in the months of April to June of the year following to the sale, in case of individual ownership, or within 30 days after the sale, in case of corporate ownership (companies without activity).

Any tax due will be paid in August of the year following to the sale.

As you are non-resident for tax purposes, the tax applicable to your capital gain, will be 28%. However, Portugal is not following the EU rules as tax residents pay tax just on half of the gain. In face of this discrimination, it’s possible to challenge the tax authority’s decision and pay tax just on half of the gain – 14% of total!

Anyone that paid 28% within the last 4 years on a similar situation, can still issue a formal complaint and receive a tax refund on half of the tax paid. If you wish to know how this can be done, please contact us.

Please be aware that any property transaction performed in Portugal is also reported to the Tax Authorities by the notary that executes the deed. This means that when you declare the sale on your tax declaration, the tax authorities already know of it, so if you fail to include this on your declaration, the taxman will be after you. Don’t try to hide from the tax authorities as they will contact you in the country where you live and the collection can be made by the HMRC for instance.

Please feel free to send us the questions you may have to ricardo@allfinance.pt. We will select some of these to be published.

NHR – Non Habitual Resident

February 22, 2022

By Ricardo Chaves

Move to Portugal and pay little or no tax on your income

Portugal is one of the best countries to live or retire and there are several reasons for this: best EU residency program for investors (minimal stay requirements and the possibility of obtaining an EU passport after 6 years), it’s the best EU tax haven for pensioners and high net worth individuals (10-year exemption of most non-Portuguese source income). It is also one of the top countries in the World to buy and own real estate.

In terms of tourism, Portugal was voted the best destination; best country in the World to visit and best European golf and beach destination as per the World Travel Awards. Recently it was also the first European country to receive the “Safe Travels” stamp awarded by the World Travel & Tourism Council. This allows travelers to recognize Portugal as having adopted global health and hygiene standardized protocols to allow visitors to experience ‘Safe Travels’.

Portugal is also the best country in Europe and North America (after cold Sweden) for immigrant integration (MIPEX III). It is a very stable, peaceful and safe country and offers a high quality of life coupled with a low cost of living.

Finally, the Portuguese are highly educated and almost half of them can speak at least one foreign language, mainly English. Portugal can be the gateway to 250 million Portuguese-speaking people.

If you are planning to move to Portugal and the above was not enough, then you probably need to find out more about the non-habitual resident (“NHR”) taxation regime. The NHR is a scheme for new residents that can provide substantial tax benefits, so much that you may discover that Portugal is a tax haven for you.

Although the name makes you feel that you NHR are non-residents, that is not correct. The name can be confusing, but in fact the Non-Habitual Resident (“NHR”) taxation regime is only available to those that become resident in Portugal.

The NHR scheme is proving very successful at attracting individuals of independent means, pensioners and certain skilled professionals to establish residency in Portugal for tax purposes, while not being subject to any minimum or maximum stay requirements.

In addition to the non-existence in Portugal of wealth tax, or of inheritance/gift tax for close relatives, the NHR regime essentially grants qualifying individuals the possibility of becoming tax residents of a white-listed jurisdiction whilst legally avoiding or minimizing income tax on certain categories of income and capital gains for a minimum period of 10 years.

A major feature of the NHR regime lies in its interaction with the double tax conventions signed by Portugal or with the OECD model tax convention in the absence of one. In effect, most double tax conventions (of which Portugal signed 87) grants the possibility to tax most categories of income to the country of source of such income, although in practice, so as to attract foreign investment, many countries will not make use of that possibility to tax non-residents. Since most such categories will not be taxed in Portugal in the hands of a NHR because they may be taxed abroad, in practice most foreign-source income types will be zero taxed in such hands.

Under the NHR regime, the following categories of foreign-source income and capital gains (except if sourced from a blacklisted tax haven which has not signed a double tax convention with Portugal) will be generally exempt from income tax in Portugal since they may generally be taxed in the source country, even though they will not often be taxed in the hands of non-residents in the latter country either:

– Profits derived from eligible occupations
– Royalties and associated income
– Dividends, interest and real estate income
– Capital gains from the alienation of real estate (including shares deriving more than 50% of their value from real estate) and of ships or aircraft operated in international traffic

Capital gains from the alienation of movable property (other than shares deriving more than 50% of their value from real estate or ships/aircraft operated in international traffic) will be tax exempt if the relevant double tax convention states that they may be taxed in the source country, but this is not the case with the OECD model or with the generality of the conventions, and therefore if you buy or sell shares or other financial assets, some basic tax planning may be required.

It should be noted that several countries often deemed “offshore tax havens” do have double tax conventions with Portugal and are therefore white-listed for the purposes of the NHR regime. In addition, all EU member states are white-listed, even though several such states may in many ways be used as “offshore tax havens”, especially by non-residents from that country.

Occupational pensions will be taxed at 10% if they may not be deemed sourced from Portugal, or not taxed at all, if the NHR was resident in Portugal before 31-03-2020.

Foreign-source income from employment (including fees of directors and entertainers or sportsmen) will not be taxed in Portugal if it is taxed (at whatever rate) in the source country.

Portuguese-source income depends on whether or not it is derived from eligible occupations, will be taxed as follows:

– Employment income (including fees of directors and entertainers/sportsmen), business or self-employment profits and royalties (including payments for know-how), if derived from eligible occupations will be subject to a 20% flat rate;
– Other Portuguese-source income will be taxed at the normal rates applicable to regular resident taxpayers;

In conclusion, in order to maximize the advantages of the NHR regime it has to be taken into account not only the Portuguese tax law, but also the tax law of the source country of the income, as well as the double tax conventions applicable to the foreign-source income and advantages to receive as a NHR.

If you are planning to move to Portugal, the first step is to obtain the NIF (fiscal number). After that and once you obtain your EU residency certificate, it is mandatory that you also change your tax residency, which means that you will be liable for tax in Portugal and should declare here your worldwide income. The NHR scheme can be the solution you need to avoid or reduce your tax liability. If you are a Non-EU citizen, the process is the same but it will take longer, as after the NIF you must apply through SEF (emigration office) for one of the Residency VISA’s available. Please notice that if you are retiring you may need to start the VISA process at the local embassy in the country where you are currently living, prior to moving to Portugal.

Please feel free to contact us to discuss your personal situation and see whether you meet the criteria to qualify as a non-habitual resident (NHR). Although the granting of NHR status is not automatic, it will not be refused if all the legally applicable criteria are met.

DISCLAIMER: this text contains description of a generic nature and cannot preclude specialist advice in connection with specific situations.