Often, when considering emigrating to Portugal, the tax component plays an important role. Indeed, through the so-called "NHR status", there are significant benefits for pensioners and certain categories of professions during the first 10 years. Therefore, in this post you will find the three main rules to be considered tax resident in Portugal.
1. The 183-day rule
Under Portuguese domestic law, you are a tax resident of Portugal if you stay in Portugal for more than 183 days in a 12-month period. This stay does not have to be consecutive.
An example. You will arrive in Portugal on 1 May 2021. The 12-month period then applies from 1 May 2021 to 1 May 2022. If you stay in Portugal for more than 183 days within this period, you will be a tax resident for the purposes of Portuguese law. In this case, you will be a tax resident from the first day of your arrival, i.e. from 1 May 2021.
For subsequent years, you will remain a tax resident in Portugal for as long as you stay in the territory for more than 183 days.
Both full and incomplete days count, including overnight stays.
2. Intention to settle permanently in Portugal
You can also be considered a tax resident of Portugal if the circumstances show that you intend to establish your permanent residence in Portugal. This is considered based on factual evidence. For example, your source of income (working in Portugal), the place where your family settles, e.g. your children go to school there, your only home is in Portugal etc. will be considered.
Here, the number of days of effective residence does not play a role. So you do not have to stay in Portugal for 183 days in a 12-month period if the actual situation shows that you intend to live permanently in Portugal. You are then resident from the moment of your first arrival.
An example. You arrive in Portugal on 1 May 2021. You start a business here together with your partner. Your minor children attend school in Portgal. However, you regularly return to Belgium so you did not stay in Portugal for 183 days during the first 12 months. However, the facts show that you intend to reside permanently in Portugal. Portugal will then consider you a tax resident from 1 May 2021.
Read more about emigrating to Portugal.
3. Tax resident under the NHR system
Under the NHR statute (non-habitual resident), you can become a foreigner resident in Portugal and enjoy a favourable tax regime for a period of 10 years. Besides one of the above conditions (183 days or permanent residence), there are two additional requirements to meet the NHR status. You must not have been a tax resident of Portugal in the past 5 years. And also, you must apply for NHR status with the Portal das Finanças.
Here you can find more explanation about the NHR status for pensioners.
Note: the favourable regime will be abolished. Those who move to Portugal after 31 December 2023 will no longer be able to apply for the NHR regime. Those who move before 31 December 2023 and meet the conditions can still apply for the favourable regime until 31 March 2024.
Consequences of tax residency in Portugal?
Once you become a tax resident, you pay personal income tax according to local legislation. This means that Portugal taxes you based on your worldwide income and assets. In doing so, you also take into account the applicable double taxation treaties. Indeed, certain categories of income remain taxed in Belgium. Think, for example, of a civil servant's pension.
Do you have questions about investing in Portugal? Or are you considering emigrating? Then feel free to contact on.
