The 2024 State Budget Law ended the NHR regime as was. However, it is still possible to access a new NHR scheme (also known as Scientific Research and Innovation Regime, but often referred to as NHR 2.0) under special conditions foreseen in the Tax Benefits Code.
Who is eligible to apply for the new NHR regime?
The “new NHR” regime has a narrower scope and applies to the professionals listed briefly below:
- Teachers in higher education institutions, Researchers, and other professional or board members of technology and innovation hubs;
- Qualified job positions and board members within the scope of the Contractual Incentives Tax Regime;
- Highly skilled job roles in entities that benefit or benefited from the Tax Regime for Investment Promotion;
- Highly skilled job roles in entities that export at least 50% of their turnover;
- Highly skilled job positions and board members of entities considered relevant for the national economy by AICEP and IAPMEI;
- R&D personnel deemed eligible within the Business Research and Development Tax Incentive System;
- Job roles and board members of entities certified as startups;
- Jobs roles and activities performed by tax residents of Madeira or Azores, to be established by regional decree.
Note: eligibility needs to be duly proven according to the rules in place.
Similarly to the “old NHR”, this regime applies to the abovementioned professionals who:
- Become tax residents in Portugal: reside in Portugal for more than 183 days in a 12- month period or have residence in Portugal with the intent of maintaining it as habitual residence;
- Were not considered tax residents in Portugal for the five years prior to their arrival.
What is a startup for NHR purposes?
A startup is considered to be a legal person that cumulatively:
- Has been operating for less than 10 years;
- Employs less than 250 workers;
- Has an annual turnover not exceeding 50 million euros;
- Has not resulted from the transformation or split of a large company and does not have any majority direct or indirect participation from a large company in its share capital;
- Has its headquarters or permanent representation in Portugal or at least 25 workers in Portugal; and
- Meets one of the following conditions:
(i) Is an innovative company with high growth potential, featuring an innovative business model, products, or services, or has been recognized for its practice of research and development activities or for the certification of its process of recognizing technology companies;
(ii) Has completed at least one round of venture capital financing by a legally qualified entity or through the contribution of capital or quasi-equity instruments by investors who are not founding partners of the company, namely by business angels, certified by IAPMEI;
(iii) Has received investment from Banco Português de Fomento, S.A., or from funds managed by it, or by its participated companies.
What are the benefits of the “new NHR”?
There are two main advantages, as follows:
- Employment/self-employment income related with the abovementioned activities is liable to a 20% flat tax rate;
- As a rule, foreign sourced income is exempt from tax in Portugal, as long as it does not originate from tax havens/blacklisted countries.
The regime is valid for a 10-year period.
What are the downsides of this new regime compared to the “old NHR”?
For example, foreign pension income will be liable to progressive tax rates up to 48%, plus surcharges, instead of the 10% flat tax rate available under the “old NHR”.
Moreover, individuals earning only passive income cannot claim exemptions on foreign sourced income in Portugal, being liable to the general rules of taxation, typically a 28% flat tax rate.
We would like to stress that one cannot benefit from this new regime if the “old NHR” was previously granted. The same applies for anyone who benefited from the “former residents” regime.
If you wish to understand if you meet the requirements for NHR 2.0, please contact us at geral@sbpslegal.com.
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