Have you considered that you should probably make the leap of a lifetime and relocate to Portugal for good? Well, turns out you’re not alone.
With its sunny weather, relaxed lifestyle, and attractive tax advantages, Portugal has become a magnet for expats from all over the world. However, beyond the beauty of the beaches and charm of the cobbled streets lies another compelling reason to move: a remarkably favorable tax regime for newcomers.
Let’s explore the key tax advantages the Portuguese Government has to offer, especially those related to the now-retired Non-Habitual Resident (NHR) program and the new regime that replaced it in 2024.
Overview of Portugal’s Tax System for Foreign Residents
The Portuguese tax system for expats follows a progressive income tax model, ranging from around 13% to 48% for residents. If you spend more than 183 days in Portugal per year or maintain a habitual residence there, you are considered a tax resident. As such, your global income may become taxable in Portugal.
However, Portugal offers a series of tax incentives in Portugal aimed at attracting highly skilled professionals, retirees, and remote workers. For over a decade, the centerpiece of these incentives was the NHR program, a regime that’s now evolving.
What Is the Non-Habitual Resident (NHR) Program?
The original NHR program was introduced in 2009 to attract foreign professionals and retirees to Portugal. It imposed a fixed 20% flat tax on qualifying Portuguese-sourced income and granted major exemptions on foreign income (such as pensions, dividends, royalties, and rental income) for a period of 10 years.
However, the classic Non-Habitual Resident tax benefits are no longer available to new applicants. The program closed to most new entrants as of March 31st, 2025. Those who became Portuguese tax residents in 2024 and had already signed a lease or job contract before the end of 2023 were still eligible to apply under transitional rules. After that, the door officially shut.
To replace it, Portugal introduced a new tax regime in January 2024: the Incentivo Fiscal à Investigação Científica e Inovação – IFICI (Tax Incentive for Scientific Research and Innovation, in English), informally referred to as “NHR 2.0.”
Tax Benefits for Retirees and Remote Workers
Retirees
Under the old NHR, foreign-sourced pensions were taxed at a flat 10% rate, rather than the usual progressive income tax. This was a major draw for retirees. If you were granted NHR status under the original regime before the cutoff date, these benefits still apply for the full 10-year term.
Under NHR 2.0, however, retirees no longer enjoy the same tax breaks unless their income qualifies under one of the new eligible categories.
Remote Workers and Skilled Professionals
The new IFICI regime focuses on highly qualified individuals working in sectors such as tech, science, R&D, and innovation. If you qualify, your Portuguese-sourced employment or self-employment income may still be taxed at a flat rate of 20% for up to 10 years, mirroring the old program’s benefits.
In many cases, foreign-sourced income (such as royalties or dividends) may be exempt from Portuguese taxation, provided the income is taxed in the country of origin and Portugal has a relevant treaty in place. That makes the regime still quite attractive for digital nomads and remote-first professionals.
Double Taxation Agreements and How They Work
A major component of the tax system for foreigners in Portugal is its network of Double Taxation Agreements (DTAs). Portugal has agreements with over 70 countries, including the US, UK, Germany, and Canada. These treaties ensure you don’t get taxed twice on the same income, i.e., once abroad and once in Portugal.
Under both the old NHR and the new IFICI regime, DTAs are crucial in securing foreign income exemptions. For instance, dividends or rental income earned in your home country might be taxed there and exempt in Portugal, as long as the treaty recognizes this treatment.
Keep in mind that Portugal maintains a blacklist of tax havens. Income sourced from these jurisdictions may not qualify for tax exemptions and could be subject to a flat tax rate of 35%.
How to Apply for Tax Incentives in Portugal
Wondering how to apply for NHR or its new version? Here’s what you need to know:
For NHR (Old Program) – Closed
- Final Deadline:March 31st, 2025;
- Eligibility:Must have been a tax resident in 2024 and signed a rental contract, employment contract, or started a visa process by December 31st, 2023;
- Program Shutdown:After March 2025, the NHR became fully closed to new applicants.
For IFICI (NHR 2.0) – Ongoing
To qualify for the new tax incentives in Portugal under the IFICI scheme, you must:
- Have become a Portuguese tax resident in 2024 or later;
- Not have been a tax resident in Portugal in the previous 5 years;
- Not have benefited from the old NHR regime;
- Derive income from eligible high-value sectors, such as:
4.1 Scientific research;
4.2 Tech innovation;
4.3 Higher education and teaching;
4.4 Startups and export-focused companies.
You’ll need to apply through Portal das Finanças by January 15th of the year following your residency. For 2024 residents, the deadline was January 15th, 2025 (extended to March 15th, 2025, under transitional rules).
Once granted, the benefits last for 10 consecutive years and are non-renewable.
Final Thoughts
Whether you’re dreaming of retirement in the Algarve or planning your next startup from Lisbon, Portugal offers an incredibly attractive financial proposition.
From generous Non-Habitual Resident tax benefits to the newly introduced Portuguese tax system for expats under IFICI, the country remains one of the most tax-efficient destinations in Europe.
By understanding the different Portuguese tax advantages, how double taxation treaties work, and exactly how to apply for NHR, you can position yourself to make the most of your time—and your income—in Portugal.
So, if you’re ready to relocate to Portugal, now’s the time to get informed, organized, and ahead of the game.
