Non Habitual Residents: Government demands 10%
of IRS from pensions of foreign countries
The state budget for 2020 is currently being discussed and it should only be voted on the 7th of February. Only after publication, which should occur a few days after the vote, we can confirm what changes will be made to the NHR scheme. At this stage the information that we have is that the intention of the government is to subject to a 10% IRS tax, the pension earnings of who, in the future, acquire the NHR status. This means that if you are already Non Habitual Resident, you shouldn’t be affected by this new law.
The idea of setting a limit of 7500 euros taxation per pensioner was on the table but it dropped in the last version has to not harm the Portuguese emigrants that return and bring their pensions from foreign countries, they can also benefit from this exemption but usually have smaller pensions.
The 10% tax is per pensioner; however, it is given the option of using a tax credit, in case it is more favourable to the taxpayer. This means, in case your pension is taxed in a foreign country, these pensioners can deduct that tax on the 10% they would pay here.
The taxation leaves out all those who: “Have already been registered as Non Habitual Residents”, “The request to register has been submitted and is pending for analysis” and also who “at the time the law comes into effect are considered resident for tax purposes and request to register as NHR until the 31st of March 2020 or 31st of March 2021, if you gather the respective conditions in 2019 or 2020.”
However, if the current NHR taxpayers want to be taxed at 10% they can choose to do so. This situation can be especially advantageous for the pensioners that are under the threat of being taxed in their country of origin, like the Swedish and Finnish, given that the 10% tax required here can be more advantageous to them.
On another note, the state budget is also making changes to the following:
- Local Lodging, the tax will increase but only in containment areas, which currently only exist in five neighbourhoods in Lisbon and in the centre of Porto
- Golden Visas, where people buy property to acquire a Portuguese visa, will no longer allow purchases in Lisbon and Porto. This could mean that the investment will be diverted to other regions, which may benefit the Algarve.
As soon as the State Budget is voted, and the law is finally published our team will let you know the final result and advise you accordingly.
If you need any further information, the AFM team will be glad to assist you. Please get in touch trough +351 281 029 059 or [email protected]