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Proposed amendments to Portuguese State Budget - Non-Habitual Residents Regime


On February 6th, 2020, the Portuguese State Budget for 2020 was approved. 

Among the various changes to the Portuguese tax legislation brought by this Budget, the press is confirming that the measure initially presented by the Portuguese Socialist Party (the Party supporting the Government) to modify the Non-Habitual Residents (“NHRs”) regime has been approved. 

The new rules intend at preventing the double non-taxation of foreign pensions obtained by beneficiaries of this regime, by means of applying a 10% tax on those pensions in cases where the source country does not claim tax on the same. 

Alternatively, taxpayers may opt for the aggregation of the foreign pension income with the remaining income for purposes of taxation at general progressive rates, which go up to 48%, eventually accrued of the additional solidarity rate, should they conclude that this treatment is more beneficial. 

Notwithstanding, should those pensioners pay any tax on their foreign pensions, in the source country, they should be able to offset the tax paid abroad, totally or partially, against the tax due in Portugal. 

Furthermore, on what relates to foreign earned and self-employment income obtained by NHRs, it is required that this income is effectively taxed at source, so that it may benefit from the respective tax exemption in Portugal. 

The new rules do not apply to (i) those already registered as NHRs, (ii) those whose requests for registration as NHRs were duly filed and are still pending on the date of entry into force of the 2020 State Budget Law and (iii) those who are already tax residents in Portugal and request their registration as NHRs until March 31st of 2020 or 2021, by meeting the necessary conditions with reference to 2019 or 2020, respectively.  

The taxpayers who are excluded from the scope of the new rules – namely because they fall within one of the above-described exceptions – may opt for the application of the new 10% tax, for instance in cases where the source country of their pensions intends to claim tax on the same if they are not taxed in the country of residence of the respective beneficiaries. In these situations, the 10% taxation in Portugal may avoid a higher taxation in the source country.

Teresa Pala Schwalbach 

Rita Botelho Moniz

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