The 2024 State Budget introduced a new tax benefit aimed at attracting highly qualified professionals and promoting scientific and industrial research in Portugal. This led to the creation of the ‘scientific research and innovation incentive scheme’, known as NHR 2.0.
Surprisingly, this scheme may be more appealing in tax terms than the traditional NHR for individuals considering moving to Portugal, except for income from pensions, which are now excluded.
NHR 2.0 is available, in particular, to members of statutory bodies and employees of start-ups, creating an attractive environment for new start-ups and investors in Portugal.
Requirements:
Regarding eligibility for this programme for start-ups, the tax incentive (NHR 2.0) applies to individuals who:
- Establish residence in Portuguese territory from 1 January 2024;
- Have not been tax residents in Portugal during any of the previous 5 years;
- Have not previously used the NHR (Non-Habitual Tax Residents) regime;
- Have not previously used the tax regime for former residents; and:
- Are part of a Qualified Start-up in Portugal: as employees and members of statutory bodies of entities certified as Start-ups; or
- Create their own start-up in Portugal and qualify for NHR 2.0: as employees and members of statutory bodies of entities certified as start-ups.
Personal Income Tax Regime Applicable to Portuguese Source Income
Type of Income
- Start-up Employment: NHR 2.0 20% | General Regime 0 - 48%
- Qualified Self-Employment: NHR 2.0 20% | General Regime 0 - 48%
- Capital Income (Dividends, Interest and Royalties): NHR 2.0 28% | General Regime 28%
- Capital Gains: RNH 2.0 – 48% or 28% | General Regime 0 – 48% or 28%
- Rental Income: NHR 2.0 25% | General Regime 25%
- Pensions: NHR 2.0 0 - 48% | General Regime 0 - 48%
Personal Income Tax Regime Applicable to Foreign Source Income
Type of Income
- Employment: NHR 2.0 0% exemption | General Regime 0 - 48%
- Self-employment: NHR 2.0 0% exemption | General Regime 0 - 48%
- Capital income (dividends, interest and royalties): NHR 2.0 0% exemption | General Regime 0 - 28%
- Capital gains: NHR 2.0 0% exemption | General Regime 0 - 48% / 28%
- Rental Income: NHR 2.0 0% exemption | General Regime 25%
- Pensions: NHR 2.0 and General Regime 0 - 48%
Enhanced Tax Incentives Under NHR 2.0 for Foreign Source Income in Portugal:
In the context of income from foreign sources, earnings from dependent and independent labor, capital, property, and capital gains are exempt from taxation (0% tax) in Portugal, irrespective of whether they are taxed in the source country or not. However, this income must still be considered when determining the applicable tax rate for other incomes.
The recent changes to the applicable laws regarding exemption methods significantly enhance the attractiveness of this incentive compared to the previous NHR regime. This is particularly evident in the expanded application of exemptions to movable capital gains and income from employment and self-employed work sourced abroad, as effective taxation in the source jurisdiction is no longer required.
The previous restrictions of the NHR based on effective taxation or the competence to tax in the source state have been removed.
Similarly to the previous NHR regime, the heightened tax rate of 35% applies to income from non-resident entities lacking a permanent establishment in Portuguese territory, which are domiciled in a jurisdiction with a notably favorable tax regime (tax havens).
In partnership with:
Beyond Legal | Tax Department OTS-LCCV Law Firm
Dr. Daniela Lopes Costa – Of Counsel Lawyer
Dr. Carlos Afonso – Of Counsel Lawyer
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