According to reports, the Portuguese Revenue issued a circular earlier this month removing constraints which had meant that those applying for the HNWI tax break had to supply stringent information before being eligible.
The regime, which was first introduced in 2009, is aimed at taxpayers deemed by the revenue to be “non-habitual residents”. They would be able to apply for the regime if they were either HNWI or “high value-added” employees or self employed individuals, provided they had not been resident in Portugal for the five years preceding the application.
If eligible, the taxpayer would receive a 10-year tax concession, with a flat rate of 20% on income sourced in Portugal and an exemption on foreign income while maintaining eligibility to tax treaty benefits.
However, in order to receive the tax break, applicants had to supply documentation from a foreign tax authority confirming they had been resident abroad and that their income had been taxed in the source country, both when they were residing in Portugal and before.
In its circular, the revenue has said it is no longer necessary to prove previous residence in a foreign country, only a declaration from the applicant.
The revenue has also said high value-added employees or self employed taxpayers are now no longer required to prove effective taxation in their former country of residence prior to becoming resident in Portugal, although the position for HNWIs has not yet been clarified. The revenue also said applicants will be liable to a final 20% withholding tax while being resident in Portugal, and will no longer pay the regular rate of income tax, forced to claim refunds from the IRS afterwards, as has applied until now.
