Portugal has become a popular destination for those seeking investment migration locations. As a country, it boasts a very high quality of life. For such a small country, it has a wealth of natural beauty from its rugged oceanside cliffs to golden beaches to lakes tucked away deep in thick forests. Its cities, led by its capital, Lisbon, are highly cosmopolitan.
You can experience all of this while enjoying a low cost-of-living, when compared to some of its more famous neighbors in western Europe. Portugal has one of the most popular residency by investment programs and tax programs in the world. It is relatively inexpensive and easy to become a permanent resident of the country and to take advantage of a reduced tax rate. These programs have been particularly attractive for highly skilled professionals, retirees and nomadic workers.
Two of Portugal’s programs are the Golden Visa and the non-habitual resident (NHR). Here is how the programs complement one another.
Portugal’s Golden Visa
Portugal’s Golden Visa program, also called Residence Permit Program, provides people from non-EU countries a way to gain a Portuguese passport within five years. It offers eight pathways to gain the residency permit, all of which can be used to acquire resident permits for an applicant’s direct family members – spouse, children and adult children, and parents.
Holders of a Portuguese resident permit can work and study in the country without the need of obtaining additional permits. They can spend a minimum of only seven days per year in a Portuguese territory to remain in status. Among the benefits of the program is the right to apply for citizenship by naturalization after five years, visa-free access within the Schengen Zone, and the potential for a strong return on the initial investment.
The eight pathways to a Golden Visa require either an investment in real estate, venture capital or private equity, business and job creation, capital transfer, or direct donations to specific art, cultural or technical programs. The costs range from €200,000 to €1.5 million.
Those who earn a Golden Visa are on the path to apply for the Portugal Non-Habitual Resident program, a special tax regime for foreign residents with unique qualifications.
Non-Habitual Resident in Portugal
The Portugal NHR program is a tax scheme offering tax breaks for foreign residents. It was initiated in 2009 and updated in 2020 and is an alternative for those looking to optimize their tax planning and reside in Portugal. The program is designed to attract investors and professionals of high cultural and economic worth to increase the country’s competitiveness.
The benefits for residents include:
- A flat tax rate of 20% on income earned in Portugal for specific professions (scientific, artistic, or technical) or through self-employment; In comparison, Portuguese citizens have a tax rate up to 47% depending on how much they earn.
- Tax exemption on nearly all foreign sources of income if the country you are from has a Double Taxation Agreement with Portugal. Pension income is taxed at a flat 10% rate. Like income tax, Portuguese citizens pay a rate up to 48% for income from pensions.
- There is no inheritance or wealth tax.
- Opportunity to have tax residency within the EU.
- Exemption of tax on gifts or inheritance to family members.
There are several eligibility requirements to become a non-habitual resident. The three main ones are that:
- You cannot have been taxed in Portugal during the five years before the application.
- You must request a tax residence certificate which means you must live in Portugal for more than 183 days (doesn’t need to be consecutive) within a 12-month period. Or you can live in Portugal for less than 183 days but bought property in Portugal during those 12 months. Another option is to have performed public functions in the name of the Portuguese state for the last 12 months.
- You already have the right to be in Portugal through a long residency visa such as the Portugal Golden Visa.
Since it began in 2012, more than 10,000 applicants have been granted Portugal Golden Visas and 17,956 dependent family members have accompanied them, according to government statistics. More than 20,000 persons are said to have taken advantage of the NHR tax scheme since 2009.
Together they provide a relatively stress-free way to gain residency and favored tax status in a country known for its relaxed lifestyle and sun-drenched climate as well as visa-free travel to 187 countries.
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