Portuguese financial newspaper Jornal de Negócios reported Friday that the government is looking at making changes to its non-habitual residency (NHR) programme.
A key change up for debate is the introduction of a flat rate of tax of either 5% or 10% on pension income for new NHRs, Geoffrey Graham, senior partner at law firm Edge International Lawyers, explained to International Adviser.
“According to the article, this change would not apply to NHRs registered before the law enters into force on, it is suggested, 1 January 2018.”
If the changes are implemented in their current format, “previously registered NHRs would be unaffected”, Graham added.
Double tax
He explained that the reason for the change is to avoid the renegotiation of double taxation agreements (DTAs) regarding pension income.
It is also to “make the [NHR] programme even more robust and credible both domestically and internationally”.
Not guaranteed to come into effect
Graham explained that there were discussions a year ago to change the Portuguese inheritance tax regime, which “exempts spouses, ascendants and descendants”.
“These plans were shelved indefinitely within approximately two months due to, we understand, external pressures.
“The fact that this rumour has been published in one newspaper does not, at all, mean that the rumoured changes will actually come into effect,” he cautioned.
In terms of impact, Graham is unsure how much the change would affect those moving to Portugal, “save for perhaps accelerating the decision-making process”.
“For now, the very successful NHR programme remains as it is and we will be advising clients that, whilst we are seeking more information and are alert to any change, they should not base their decision on one article published in one newspaper,” Graham said.
NHR benefits
The NHR programme was introduced in Portugal in 2009 and is now one of the most successful tax residency programmes worldwide, Graham explained.
“The benefits available under the programme are not exclusive to EU nationals and therefore the programme will continue to be available to British nationals, irrespective of Brexit.
“Applicants only need to become tax resident in Portugal and have been non-tax resident for the previous five years.
“The programme has been supported by successive Portuguese governments and is complemented by the lifestyle that the country offers, often being referred to as the Florida of Europe,” he said.
The key components to success of the programme include:
- No minimum investment required;
- Pension income, drawn down as a lump sum or as a periodic payment, tax free in Portugal irrespective of source;
- Dividends, interest and royalties tax free in Portugal, subject to withholding tax, if applicable, provided that source is white list;
- Salary from a High Value Activity subject to a flat rate of tax of 20%;
- Approval received within five to seven days; and,
- Status available for a period of 10 years.
