Following an unexpected announcement in Portugal’s 2024 Government Budget, which confirmed that the Non-Habitual Resident regime (NHR) would be terminated effective 1 January 2024, the government almost simultaneously introduced a new regime with some tax holidays and exemptions, focused on individuals, employees, and self-employed individuals that move their tax residency to Portugal and meet specific requirements regarding their activities.
Unlike the previous framework, referred to as NHR 1.0, which also attracted passive income earners, the new NHR 2.0 has changed the paradigm, and is now geared to granting relief for active income earners, employed or self-employed, that perform technical, scientific, or academic roles in R&D projects for production and development, academics, and start-up companies.
Access to the individual benefits of NHR 2.0 may prove to be more limited, as the program will require that the activities be developed in local undertakings with an R&D and innovation “seal.” However, the new regime may prove to be more tax efficient for individuals who meet the requirements, with the exception of some pension tax relief.
In addition to this beneficial regime for individuals, Portugal has one of the most generous tax and financial incentives for companies that perform R&D activities. Taking advantage of the two regimes may be a win-win situation for both the companies and the overseas talent they wish to attract for Portuguese undertakings.
Additionally, the so-called “return regime” has also been revisited and reviewed in 2024 to encourage ex-residents. It offers a 50% exemption on income from employment and self-employment, capped to the upper limit of the first bracket (EUR 250,000) of the individual tax code.
For more information on this topic, please consult your regular BDO contact or the author of this article.
Miguel Nuno Cardiga
BDO in Portugal
Unlike the previous framework, referred to as NHR 1.0, which also attracted passive income earners, the new NHR 2.0 has changed the paradigm, and is now geared to granting relief for active income earners, employed or self-employed, that perform technical, scientific, or academic roles in R&D projects for production and development, academics, and start-up companies.
Access to the individual benefits of NHR 2.0 may prove to be more limited, as the program will require that the activities be developed in local undertakings with an R&D and innovation “seal.” However, the new regime may prove to be more tax efficient for individuals who meet the requirements, with the exception of some pension tax relief.
In addition to this beneficial regime for individuals, Portugal has one of the most generous tax and financial incentives for companies that perform R&D activities. Taking advantage of the two regimes may be a win-win situation for both the companies and the overseas talent they wish to attract for Portuguese undertakings.
Additionally, the so-called “return regime” has also been revisited and reviewed in 2024 to encourage ex-residents. It offers a 50% exemption on income from employment and self-employment, capped to the upper limit of the first bracket (EUR 250,000) of the individual tax code.
For more information on this topic, please consult your regular BDO contact or the author of this article.
Miguel Nuno Cardiga
BDO in Portugal