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NON-HABITUAL RESIDENTS REGIME
The new Portuguese non-habitual resident status gives the opportunity to those who wish to become residents in Portugal to benefit from a favourable taxation of foreign income, with an exemption of taxation in Portugal and a possible double exemption, both in Portugal and in the country where the income is paid, if a Double Taxation Agreement is in place.
The non-habitual resident regime represents a major step forward in making Portugal a tax-free jurisdiction for individuals in receipt of pension income. Individuals who declare their foreign income here can also benefit from this preferential regime such as business and professional income, interest, and dividends. This attractive regime also covers income deriving from high value-added activities, which benefit from a special tax rate of 20%.
The sole requirement to benefit from this preferential treatment is to become a Portuguese tax resident, not having been a tax resident in Portugal in the previous five years. This status can be maintained for 10 years.
WHY WAS THE REGIME INTRODUCED?
The Non Habitual Resident regime was introduced in Portugal in 2009. One of the principal objectives of this regime was to attract individuals and their families to Portugal by making it beneficial from a tax perspective to become tax resident in Portugal. As a result Portuguese NHRs have the ability to grow their wealth in a white listed jurisdiction, to dispose of their assets and may benefit from tax exemptions, to pass on their wealth without inheritance or gift taxes, namely for children or spouse and/or to enjoy their retirement without tax on their pensions.
WHAT ARE THE BENEFITS?
A Non-Habitual Resident (“NHR”) will be exempt from personal income tax on certain types of qualifying income if this income is subject to tax in the country of source under an existing Double Tax Treaty that allows for this or, if no Tax Treaty exists, were subject to tax in another jurisdiction and are not considered as Portuguese source income under domestic rules. There is also the possibility of certain types of qualifying income under the regime from benefiting from a double tax exemption i.e. an exemption in Portugal and in the source jurisdiction. A special flat rate of 20% is also applicable for certain types of income arising from a number of highly qualified activities.
WHAT TYPES OF INCOME ARE ELIGIBLE FOR EXEMPTION UNDER NHR STATUS?
Salaries, provided they are paid from a non-Portuguese source. Pensions paid abroad to NHRs are also exempt from personal income tax if such pensions were subject to tax under an existing Double Tax Treaty or if the pension should not be considered as obtained in Portugal and related contributions did not allow a deduction in Portugal. Dividends of a non-Portuguese source obtained by non-habitual residents are also exempt from personal income tax, provided that these conditions are met.
WHO IS ELIGIBLE?
Any individual who becomes Portuguese tax resident in accordance with Portuguese Law i.e. who has its habitual domicile in Portugal or who spends more than 183 days in Portugal in the tax year, which runs from 1st January to 31st December or has a dwelling in Portugal at 31 December of that year with the intention to hold it as his habitual residence, and has not been taxed in Portugal, as tax resident, in the previous five years.
HOW DO YOU APPLY?
You may apply when you have become a Portuguese tax resident or before 31st March of the following tax year.
HOW LONG DOES IT TAKE?
NHR application are processed within a short timeframe (up to 6 months).
ARE THERE ANY GUARANTEES?
Whilst there are no guarantees that applications will be successful, the first batch of applications have been accepted and there appears to be a genuine will on the part of the authorities to look at applications sympathetically. As long as the individual who wishes to become a NHR in Portugal fulfils all the legal requirements to become tax resident in Portugal and also the specific requirements to become a NHR, there is no reason for the registration to be rejected. However it is possible that issues may be raised when it comes to time to assess the income tax as a NHR.
DOES THE TERM NON-HABITUAL MEAN THAT I HAVE TO BE TAX RESIDENT OUTSIDE PORTUGAL?
No. The term “non habitual” often leads to misinterpretations. It means that under the NHR regime you are required to have your tax resident in Portugal and here live for more than 183 days per year. As this regime is valid for each applicant for a period of 10 years tax authorities used the term “non habitual”.
CAN I RENT INSTEAD OF PURCHASE?
Yes. Rental is an option under the NHR regime. As occurs when you purchase a property, if you are renting a property you may be required from tax authorities to provide evidence of your address in Portugal, which can be done through providing your rental contract.
DO I HAVE TO MAKE A STATEMENT OF ASSETS
When applying for the NHR regime, you will not need to provide any statement of assets. This will also not be required when filing your first tax return. In each tax return you will only be required to provide information on your annual income.
IS THE NHR REGIME STABLE?
This regime was implemented in 2009 but only became fully operational in 2010. As such, the regime is quite new and some of its features are still being tested. Nevertheless, Portuguese Government is making efforts to ensure the effectiveness and fully operation of the regime, which has been developing over the months.
DO I HAVE TO PAY TAX IN THE SOURCE OF INCOME COUNTRY AFTER MY REGISTRATION AS NHR?
After your registration as a non-habitual resident in Portugal you are able to request an international certificate of residence to the Portuguese tax authorities. This document then has to be sent to the tax authorities of source of income and that should enable you to be exempt of tax in that jurisdiction.
The Golden Visa. What is it?
The Golden Visa Programme launched by the Portuguese Authorities is a fast track for foreign investors from non-EU countries to obtain a fully valid residency permit in Portugal (“Golden Visa”). Under the Golden Visa programme, non-EU citizens simply need to carry out one of the investments set out in the law to qualify to obtain a residency permit in Portugal. This residency permit will allow the investor and his family members to enter and/or live in Portugal and to travel freely within the vast majority of European countries (Schengen space). Aimed at attracting foreign investment to Portugal, the Golden Visa is a very straightforward and flexible programme, with simple and clear legal requirements. With extremely reduced minimum stay requirements, the Golden Visa is clearly one of the most attractive residency programs for investors in the world.
2 - What types of investments are allowed under the Golden Visa rules?
The Golden Visa programme was recently widened to include further types of investment. As a result, the following types of investment now qualify for the Golden Visa programme:
a) Property Investments:
i. Acquisition of property above € 500,000;
ii. Acquisition of property above € 350,000 - for properties more than 30 years old or located in areas of urban renovation.
b) Capital Investments:
i. Transfer of Funds above € 1,000,000;
ii. Transfer of Funds above € 350,000 for research activities;
iii. Transfer of Funds above € 250,000 for artistic or cultural activities;
iv. Transfer of Funds above € 500,000 for capitalization of small and medium size companies.
c) Job creation:
Creation of a minimum of 10 jobs; It should be noted that only investments effectively made after 8th October 2012 are eligible for the Golden Visa programme.
3 - For how long is the Golden Visa valid?
Once issued, the Golden Visa will be valid for an initial period of 1 (one) year and then will be renewed for subsequent periods of 2 (two) years.
4 - What are the general requirements that the investor has to comply with?
The simplicity of the Golden Visa Programme implies an extremely reduced amount of requirements being asked from the investor. The Golden Visa Programme sets out that the investor must comply with general requirements applicable to all types of qualifying investments and also with the specific requirements of each type of qualifying investment. In general, all investors have to comply with the following requirements:
a) Keep the investment for a minimum period of 5 years
b) Funds for investment should come from abroad
c) Entry in Portugal with a valid Schengen visa
d) Absence of references in the Portuguese Immigration and the Schengen services
e) Absence of conviction of relevant crime
f) Minimum stay in Portugal: 7 (seven) days during the first year and 14 (fourteen) days during each subsequent period of two years.
5 - What are the specific characteristics for each type of qualifying investment?
Each type of qualifying investment has specific characteristics, as follows:
a) Property Acquisitions
i. Acquisition of property above € 500.000; - Minimum investment of € 500,000 - Purchase of one or multiple properties - All property types qualify - Possibility of co-ownership; - Freedom to use, rent or lease - Investment amount may be reduced by 20% (€ 400,000) in case such investment is made in low density population areas
ii. Acquisition of property above € 350,000 - For properties more than 30 years or located in areas of urban regeneration. This value includes not only the property but also the investment in the refurbishment works - Possibility of co-ownership - Freedom to use, rent for commercial or agricultural purposes - Investment amount may be reduced by 20% (€ 280,000) in case such investment is made in low density population areas
b) Transfer of Funds
i. Transfer Funds above € 1,000,000 - Minimum investment of € 1 million - Funds transferred from abroad to a bank in Portugal - Total freedom to invest the funds - Possibility of using the funds to invest in shares of companies
ii. Transfer of Funds of at least € 350,000 applied to research activities carried out by entities which are part of the national scientific and technological system - Minimum investment above € 350.000 - Funds transferred from abroad to a bank in Portugal - To be used in research activities conducted by public or private scientific research institutions involved in the national scientific or technologic system
iii. Transfer of Funds of at least € 250,000 applied to investment or support to artistic production or recovery or maintenance of the national cultural heritage - Minimum investment above € 250,000 - Funds transferred from abroad to a bank in Portugal - Investing in artistic output or supporting the arts, for reconstruction or refurbishment of the national heritage
iv. Transfer of Funds of at least € 500,000 for acquisition of participation units investment funds or capital investment companies for capitalization of small and medium size companies - Minimum investment above € 500,000 - Funds transferred from abroad to a bank in Portugal - Investment used for purchasing shares in investment funds or in venture capital
c) Job Creation - Creation of a minimum of 10 jobs - No minimum investment value - No limitation on areas/activities - Compliance with Social Security obligations - Possibility of grants/incentives/benefits - Investment amount may be reduced by 20% (8 employees) in case such investment is made in low density population areas.
6 - What are the main advantages of the GOLDEN VISA Programme?
The Golden Visa Programme will provide investors with the following advantages:
- No need to obtain a visa to enter Portugal
- No need to obtain a visa to travel in Europe (Schengen area)
- Living and working in Portugal, even with residency in a different country
- Residency extended to family members
- Extremely low minimum stay periods
- Low taxes (see questions 22 – 24)
- Permanent Residency after 5 years
- Citizenship after 6 years.
7 - What is the Schengen Area and what are the countries included?
The Schengen Area is a group of 26 European countries that have abolished passport and immigration controls at their common borders. With a resident permit from Portugal, the investor is entitled to enter and travel freely throughout all the countries of the Schengen area. The Schengen Area includes the following countries: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, The Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland. Romania, Bulgaria and Croatia are currently candidate countries to the Schengen Area.
8 - Is it possible to extend the Golden Visa to family members?
Yes. Under the Golden Visa Programme, the investor’s family members may also apply and obtain a resident permit from Portugal by applying for “family reunion”. The Golden visa will be extended to family members, namely children, spouse and dependent family members. The family members will also be eligible for Permanent Residency after 5 years Portuguese Citizenship after 6 years.
9 - How can the investor and family obtain Permanent Residency after 5 years?
Under Portuguese Law any person that has held a valid Portuguese temporary residency title (e.g. the Golden Visa) for a period of at least 5 years, he will be entitled to obtain Permanent Residency in Portugal. The investor and family members will have to meet the following criteria in order to be able to apply for Permanent Residency in Portugal:
- Absence of conviction of relevant crime during the last 5 (five years)
- Proof of income / financial independence
- Proof of accommodation in Portugal
- Basic knowledge of Portuguese.
10 - How can the investor and family obtain Portuguese Citizenship?
The Portuguese legislation also sets out that any person who has been validly resident in Portugal for at least 6 (years (either under a temporary or permanent residency title), is eligible for obtaining Portuguese Citizenship. In order to be able to obtain Portuguese Citizenship, the investor and family members will also have to comply with the following requirements:
- Be at least 18 years old (or at least 16 but married or legally responsible)
- Absence of conviction of any relevant crime
- Pass a simple Portuguese language test, which will serve to show sufficient knowledge of the language.
11 - Which documents does the investor need to provide to apply for the Golden Visa?
The application for the Golden Visa implies that the investor will have to submit the following documentation:
- Proof of Investment
- Passport & Valid Schengen Visa
- Portuguese Fiscal number
- Criminal Record from country of origin and/or residency
- Portuguese Criminal Record
- Declaration from the Tax Department proving the absence of debts to the Tax Authorities
- Declaration from Social Security proving the absence of debts to Social Security Authorities
- Declaration from the investor confirming compliance with the investment requirements
- Health Insurance valid in Portugal (if living in Portugal)
- Receipt of payment of the initial application fee.
12 - The documents are not in the Portuguese Language. What does the investor need to do?
Any document that is not in the Portuguese or English languages needs to be translated to Portuguese. The translation needs to be certified.
13 - Are there any specific requirements for documents issued by foreign authorities?
Document issued by foreign authorities need to be legalized before being submitted in Portugal. This legalization means obtaining the Appostille of the Hague Convention (when applicable) or legalization by the Portuguese Consular services.
14 - What is a Fiscal Number?
Why does the investor need one and how does he get one? A fiscal number is an identification number before the Portuguese Tax Authorities (also known as the tax number). This number is required to carry out the investments.
15 - Where may the investor apply for a Golden Visa?
Any investor interested in applying for a Golden Visa, can submit the application, either personally or via a legal representative appointed by him, in one of the following manners:
a) Online Registration By registering online at the Services of Foreigners and Borders’ (“SEF”) website. After the registration is complete the investor will receive a password and will be able to access online in order to submit the necessary forms and documents.
b) In Person In person, at the Services of Foreigners and Borders in Portugal. It should be noted that the investor and family members will always have to be present at the Service of Foreigners and Boarders of Portugal for fingerprinting, signature and other formalities. We strongly recommend obtaining legal advice from an experienced law firm before taking any of the steps of the Golden Visa, namely before making any kind of investment or submitting any applications or documents.
16 - What are the costs involved in obtaining a Golden Visa?
The Golden Visa involves payment of the following fees (payable directly to the Services of Foreigners and Borders (“SEF”):
a) Processing fee (application and renewal) - € 517.40 (plus € 80.60 per family member)
b) Initial Golden Visa - € 5,173.60 per applicant
c) Renewal of Golden Visa - € 2,586.80 per applicant
17 - How long will the application take to be processed and does the investor have to pick up the Golden Visa in person?
Once the application is submitted at the Services of Foreigners and Borders (SEF), it will take a few months for the application to be processed (please note that this is just an estimate based on our recent experience). Once the application is processed, the Services of Foreigners and Borders (SEF) will contact the investor or the investor’s legal representatives in Portugal to proceed with the payment of the corresponding approval fees.
18 - Are there any grounds for refusing the issuing of a Golden Visa or its renewal?
The investor (or any family member) will only be refused the Golden Visa (or its renewal) if:
a) He/she has not maintained the investment for the minimum period of 5 (years)
b) He/she has not complied with the minimum periods of stay in Portugal
c) He/she has been convicted of a crime punishable with a prison sentence of more than one year
d) The investor is in a period where he/she has been banned entry into Portuguese territory following a removal measure of the country
e) On the grounds of public health (this may only be based on diseases that have been defined by the World Health Organization or other infectious or parasitic contagious diseases which are the object of protection measures in Portuguese territory)
f) A Golden Visa may be refused on the grounds of public order, public security or public health
19 - What happens to the investment after 5 years – can the investor sell the property / transfer the money to another country/extinguish the job positions?
Yes, the investor only needs to hold the investment during the Golden Visa’s validity period – 5 years.
20 - Can the investor sell the investment at any time if he no longer needs the Golden Visa?
Yes, but without proof that the investment has been kept, the investor will not be able to renew the Golden Visa Permit.
21 - Does the investor need to live in/use the property he is purchasing or can it be rented out?
No. The investor does not need to occupy the property and it can be rented out to obtain income.
22 - What are the taxes and costs for property acquisitions and ownership?
There are three taxes in Portugal related to property:
a) Payable with the acquisition of the property: - “IMT” or Property Transfer Tax”, which is the tax on transfer of ownership of property - Stamp Duty.
Note: The exact amount of taxes to be paid varies according to the actual value of the acquisition.
b) Payable on an annual basis: “IMI” or Council Tax, which is the annual municipal property tax; it is levied between 0.3% and 0.45% on the property’s tax value.
23 - With the Golden Visa does the investor need to pay taxes in Portugal on his worldwide income?
No. If the holder of the golden visa does not stay in Portugal form more than 183 consecutive days, he/she will not be required to pay taxes for income generated outside of Portugal.
24 - What income taxes apply to income generated in Portugal?
Rental income and income arising from capital (e.g. interest, dividends, etc) will be taxed at a rate of 28%.The new Portuguese non-habitual resident status gives the opportunity to those who wish to become residents in Portugal to benefit from a favourable taxation of foreign income, with an exemption of taxation in Portugal and a possible double exemption, both in Portugal and in the country where the income is paid, if a Double Taxation Agreement is in place.
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