Tax Regime for Non-Regular Residents in Portugal
The Investment Tax Code, created by Decree-Law n. 249/2009, approved on September 23rd, implemented a Personal Income tax regime for the Non-Regular residents, with the purpose of attracting to Portugal non-resident professionals qualified for activities with high added value intellectual or industrial propriety or know-how, as well as beneficiaries of pension schemes granted abroad.
1 – Competitive advantages:
For a period of 10 years, taxation related to IRS (personal income tax) on labor income in Portugal is at a fixed rate of 20%;
No double taxation for pensions or for employment and self-employment income obtained abroad.
2 – How can you acquire Non-Regular Resident Status?
• Having not been a resident in Portugal for the last 5 years;
• Register at the local tax office as a tax resident in Portugal (to do so you must have remained in Portugal for more than 183 consecutive or non-consecutive days, or having remained for less time, having, at 31st December of that year, a home in such conditions that would lead to the assumption that it is intended to be kept and occupied as your habitual residence);
• Request that the status of Non-Regular Resident be attributed at the time of registering as a tax resident in Portugal, or by 31st March of the year following that in which you become a resident in Portugal.
3 – Once Non-Regular Resident Status has been obtained, what is the taxation rate and incidence applicable to domestic source income?
In the case of employment or self-employment, the applicable taxation rate is 20% (with an additional 3.5% surcharge in 2014).
Taxation applies to income derived from high added value activities of a scientific, artistic or technical nature:
• Architects, engineers and similar
• Fine artists, actors and musicians
• Doctors and dentists, teachers and psychologists
• Liberal professions, technicians and similar
• Senior managers
• Investors, directors and managers, when part of companies covered by the contractual regime provided for in the Investment Tax Code
Registration as a Non-Regular Resident confers the right to be taxed as such for a period of 10 years as from the year of registering as a tax resident in Portuguese territory.
4 – Once Non-Regular Resident Status has been obtained, in which cases is foreign income obtained by Non-Regular Residents in Portugal exempt from taxation?
4.1 – In the case of pensioners and retired people when:
• Income is taxed in the source State, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or
• Income is not considered to have been obtained through a Portuguese source, according to the criteria provided for in the IRS Code (personal income tax).
4.2 – In the case of income derived from employment, when:
• Income is taxed in the State of origin, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or
• That income is taxed in another State with which Portugal has not signed any convention to eliminate double taxation, as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS Code (personal income tax);
4.3 – In the case of income from self-employment (through the provision of services of a high added value, of a scientific, artistic or technical nature, or through intellectual or industrial property, investment income, rental income, capital gains income or other increases in equity), when:
The income may be taxed in the source country, territory or region, in accordance with the convention to eliminate double taxation, or;
When no convention to eliminate double taxation has been signed, the OECD model convention may be applied (taking into consideration the observations and reservations made by Portugal) and as long as the source country, territory or region does not have a privileged tax regime, and as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS (personal income tax).