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Non-Habitual Tax Resident

26K views 89 replies 27 participants last post by  TonyJ1 
#1 ·
I'm interested in applying for NHTR status. Did a search of previous posts that left some questions unanswered. Would appreciate some pointers on how to go about the process. Can one do it oneself? If so, where does one apply? If through an accountant, how much do they charge for an application (or what range do their fees cover)? I've mentioned the NHTR to two advogados now and neither seemed to know much/anything about it.

Related: how does one get online access to the NIF?

Many thanks,
VV
 
#2 ·
Basic questions when did you become a Resident? if you've already filed IRS returns your not able to join scheme. personally I'd use an accountant for at least 1st year so you know in the future what to do.
Advogados unlikely to know it's an accountants area of expertise but saying that you again need to find a local accountant who does know about scheme
Robc could or might help you

Financas to register you go on line https://www.portaldasfinancas.gov.pt/pt/home.action

on right hand side click on NOVO UTILIZADOR and follow steps in Portuguese
 
#3 ·
Not resident yet, but in process of buying property. Will probably take up residency within the next 2 years. Should not run afoul of NHTR 5-year exclusion, but if I don't apply now, I might miss the opportunity as one must apply within a certain limited time of meeting NHTR conditions. Likely to end up in Castelo Branco region, so will be looking for an accountant there. Thanks for the reply.
 
#5 ·
Many thanks! The home country is actually Canada. Any idea of where a high net worth cutoff may be? (I realize this may be an unfair question, no problem if it's impossible to answer.) The other thing of interest is what an accountant may charge for the NHTR application. A previous poster in a different thread has made the observation that the spread between fees can be up to E250, but it is not clear what the 'base' amount may be.
 
#9 ·
Can someone explain to me what this Non Habitual Tax Residence is?
We will be moving to PT in 2-3 years' time probably renting first. Does that mean we won't qualify?
Is there a time limit on it?
And what is the tax concession - something about for 10 years?
When did it start/ when does it finish?
Would we be able to get it even in 3 years' time?
 
#10 · (Edited)
This is a tax incentive for new residents and applies to certain professions (e.g. engineers, doctors, artists, etc.) if they are still earning and to pension income. There are rules and conditions and also dovetails with double tax treaties, therefore each case should be analysed properly.

The scheme is a tax holiday or a reduced tax level depending on the type of income and, once in the scheme, is guaranteed for the following 10 years.

As to whether this scheme will still be in effect in 3 years time, it is difficult to say as tax rules change constantly. The law is in the tax code, and I see no pressure to get it changed in the immediate future.

As things stand, new residents as from 1 January 2014 up to now, are able to request to be placed on this scheme.

As a warning, people do mess it up without getting proper advice beforehand and then find it that they cannot get on to this scheme.
 
#13 ·
You misreading the posts - it also applies to pensions
- but also needs analysis, generally civil service pensions are taxed by the paying country, and private pensions (including social security pensions) are taxed in the country of residence, but there is no guarantee what will happen in 3 years.
 
#14 ·
I have seen accountants charge 750€ and 1000€ per application (person).
You have to apply within 3 months of establishing residence in Portugal.
I recommend using an account such as a PWC or KPMG, they are familiar with the process and can handle follow up questions if required.
In the last two years, we have had 3 approved and are dealing with follow up questions hoping for the 4th.
Here's a link that gives some info, but if you google non habitual residents regime you will also find other refrences. The new Portuguese tax regime for non-habitual residents
 
#15 ·
Cheers anapedrosa. That article you linked reinforces my opinion, especially the statement:

Despite these nuisances, it is still expected that this tax regime for non-habitual residents will be effective in the attraction to Portugal of the high net worth individuals, increasing demand in the domestic market, and fostering increased fiscal revenue, namely in regard of real estate and consumption taxes, from individuals that otherwise would not be taxpayers in Portugal.

I'm thinking of doing it but remaining taxable and employed in Germany only to enjoy the lower cost of living (better in some areas than others but still a net gain) and the sunshine and ocean (unavailable in most of Germany and especially in the southwest). Plus being in software development I can work anywhere I have a decent internet connection and that meets the requirements. But I guess I will have to bite the bullet and pay the expert for his or her advice. ;)
 
#16 ·
You all seem to not have actually understood basics of Portuguese of Tax law, if you are a Resident then you must declare worldwide income regardless of maybe being eligible for NHRS which might or might mean savings for you but those savings relate to PORTUGUESE EARNED INCOME not income paid in Germany
 
#17 · (Edited)
I fully understand that concept. It's the same in Germany but Germany doesn't have a NHR law on the books like P. Of course, the risk is that you first have to declare residency in P and then get the NHR. If you get that then according to how the law has been described by many different sources such as the link anapedrosa linked, then you should not pay income tax on that source in P because Germany has taxed it and there is a tax treaty. Even if it is earned income/employment income.

Or are you saying that P will not respect the fact that Germany taxed the income and attempt to tax it again and force the taxpayer to try to get credit in Germany for the tax paid? Do you have a source to cite? I'm talking about having NHR status, not normal status which seems to be what you are saying.
 
#19 ·
This is what the link says about that:

...foreign-sourced employment income will be exempt (with progression) from IRS, provided that it is taxed in the source State according to the rules of a tax treaty entered into by Portugal... Income from independent personal services and royalties will be exempt (with progression) if it may be taxed in the source State according to the rules of a tax treaty entered into by Portugal

Most tax treaties give precedence to the citizen of the country demanding the tax. In the case of Germany, a German citizen being taxed in Germany will be have the trump card in getting the tax. Germany is known for it's "center of life principal" in that if you have a home available to you and maybe have kids in school there and such then you get taxed as resident even if you spend less than 183 days there. Boris Becker got nailed on that.

So if a German buys a house in Portugal, has it available to him, gets a resident tax ID, applies for NHR and gets it and is then taxed in Germany because he has his "center of life" there then P should not tax that earned income. This is in Article 4b of the tax treaty. Article 4c says that if you have a home in both states then the country of which you are a national takes precedence. So in my case, I would pay tax to Germany only.

I will still get professional advice though because despite tax treaties and the NHR law, there could still be gotchas out there.
 
#23 ·
Okay so the NHR benefits our family are deriving deal with Pensions and Investment incomes. Under the Canadian - Portuguese tax treaty Canada withholds 15%. With the NHR we have to declare worldwide income, Portugal Finances use that to calculate your tax rate which they apply to any income earned in Portugal. The savings is that the Canadian income is not taxed here in Portugal.

We also discovered that the application process is a bit different if you want to apply under the professional services (e.g. IT). My husband thought that he might continue to do some consulting so we went through an additional couple of steps. As a Portuguese resident if he earned consulting income that would be taxed at a 20% rate by Portugal.

You can only have residency in one country, so I think the part you can probably clarify in Germany is, how does Germany tax your income if you are a Portuguese resident. A professional accountant is definitely the way to go, this is well beyond my scope of experience, though I know there are several people here who work remotely for UK clients. I have not asked what that involves.
 
#24 ·
My understanding from a quick read of the UK tax treaty (I'm not an expert, just interested) is that income is taxed in the country where it is earned. If that country decides not to tax your income (perhaps because you're resident abroad) then the PT Financas won't tax it either. As canoeman said, government pensions (civil service, military, etc) are invariably taxed at source by that government. NHRS applies to income earned in PT.

I'd be grateful if anyone could confirm that this is correct.
 
#27 ·
Absolutely. This is a really tricky law. I understood it this way by reading that report you linked:

...foreign-sourced employment income will be exempt (with progression) from IRS, provided that it is taxed in the source State according to the rules of a tax treaty entered into by Portugal...

and

Income deriving from employment or independent personal services of a domestic source or from a foreign source, but, in the latter case, not qualifying for the exemptions applicable under the first set of rules, will be liable to autonomous taxation at a special 20% flat rate and not to the general and progressive IRS rates (whose higher bracket is 42%), provided that it derives from high value-added activities of a scientific, artistic or technical nature.

So if the exemption is not granted because the source state didn't tax it, then the first rule has failed and so the 20% flat rate rule becomes in effect.
 
#28 ·
Just a few observations comments on this thread:

1. German income paid to a Portuguese resident will be tax free in Germany if it says so in the treaty i.e. if the treaty gives Portugal the right to tax that income. At least that is the theory.

If in terms of the treaty, Germany has the right to taxation, then Portugal will not tax it further in terms of the NHR scheme. However, if Portugal has the right to tax a particular income in terms of the treaty and Germany has done likewise (but not in accordance with the treaty), it is up to the taxpayer to claim from the German authorities - the Portuguese tax authorities will generally not be of much assistance.

In terms of the NHR Scheme, Portugal will tax foreign income up to 20% (+surcharges if applicable) if it has the right to tax the income in terms of a double tax treaty irrespective of what the foreign country has done / not done.

To escape the German tax net, professional advice in Germany should be obtained i.e. how to delink from the German tax net. This will normally involve notifying the German tax authorities that the taxpayer is resident in Portugal, providing a Portuguese fiscal residence certificate and may involve other steps. Usually people do not take all the necessary steps - they maintain a residence, a car, do not change their drivers licences, etc.

2. A consultant (person as listed in the legislation) will be entitled to the tax holiday / reduction in tax. Generally a resident is subject to tax in Portugal, irrespective whether the earnings are from a Portuguese source or foreign source - the scheme provides for a reduction or exemption depending on the circumstances / source / double tax treaty.

3 Though most double tax treaties do follow a certain logic and tend to follow a 'model' (either the OECD or UN models), these models alter through time, and negotiating teams sometimes negotiate for particular interests (have a look at the clauses dealing with university professors - usually the lead negotiators).

4. On another point, pensions not of a civil service nature are usually taxed in the country of residence in most double taxation treaties (but not always - there are exceptions).
 
#29 ·
My current understanding is that if I move to Portugal on 2 Sept., I become tax resident on that day. I will then have been a tax resident of Canada for 8 months and one of Portugal for 4 months for 2015. If I decide to keep my apartment in Canada and rent it out, starting the day before (i.e. on 1 Sept.), the change of use will not trigger a Canadian CGT as this was my principal residence for the prior years that I owned it, but, does anyone know if Portuguese capital gains would be triggered even if the "deemed" disposition (i.e. the change of use) occurred before I became a Portuguese tax resident? I would not think so, but you never know! In other words, how watertight is the division of tax residency when it occurs within a calendar year?

If I am liable for Portuguese CGT for disposition of property that occurred before I became a Portuguese tax resident, NHTR will certainly help as non-Portuguese property will be exempt from Portuguese CGT for 10 years.

Also, I see very pricey numbers for NHTR applications - in the E2500 to E3000 per application. This strikes me as excessive. If anyone knows of good alternatives and cares to share (via post or pm), it would be appreciated, thanks.

VV
 
#30 ·
We did not have to pay CGT on our property which we sold before moving to Portugal. The deemed disposition date is used. However, look carefully at rental properties and incomes, these are treated differently from other investments in terms of income. I am not familiar with the tax treatment, but there always seems to be a separate clause for real property.
We paid much less than 2500€ for our applications, but I don't know the current rates.
I recommend PWC in Lisbon, I will PM you contact info.
 
#31 · (Edited)
Non Habitual Residency

Hi VV

We are on the verge of heading to PT for our retirement and we have looked into the NHR regime (NOT the Golden Visa) and had meetings with a really good guy at PWC Lisbon, plus a whole bunch of follow up mails.

We initially thought the process would entail: piles of paperwork, paper trails of expenditure, ownerships, proof of residency and tax returns. In reality it is very, very simple.

Have we previously paid tax in Portugal in the past five years? Answer NO.
Are we residents of Portugal? Answer, YES (well, we will be in around 70 days’ time)
Are we planning to earn money from employment or investments in Portugal? Answer NO, we are retiring.

The result, we qualify.

Ensure the NHR application is put into action within a couple of month's of arriving in PT, don't wait until your first tax return submission.

What does this mean for us? Our worldwide income is effectively tax free, so long as it doesn’t come from one or more of the nefarious ‘black listed’ countries. This list is subject to change on a regular basis, but in essence it contains all of the usual suspects, I think it’s about 80 plus countries at the moment.

Our income will be rental from our family home in the UK plus and a company pension.

So what do we have to pay for this? PWC initial consultation has been free of charge. PWC will charge € 1,500 for us as a couple to manage the NHR process and submit paperwork to the PT taxman. Plus we will most probably use them for our first year’s tax returns, this will be another € 1,500.

OK, this seems high, but the way we see things, you only get one shot at NHR. Considering PT tax kicks in € 0 - € 7K @ 14.5%, then € 7,001 - € 20K @ 28.5% then 20,001 - € 40K @ 37%, we feel that once we get NHR the tax we save/avoid paying to PT and UK taxman over ten years will be more than enough to cover thee initial € 3K. The rest is money in our pockets to spend in PT, which is the whole point of the Portuguese government’s cunning plan.

As for your CGT query on your property in Canada, this is a question PWC will definitely be able to answer. But my understanding of a capital gain is the difference in monies you get when you realize the sale of an asset. If you are not actually selling the property, merely renting it, it can’t be classified as a capital gain, can it? As mentioned, I’m no tax expert.

Here are a couple of links you might find of interest. But I do recommend you book some time with PWC or KMPG rather than a smaller local firm, it is well worth the effort and time and consider the bigger ten year picture when looking at NHR.

Anyhow, I hope our experiences are helpful for you.

PWC contacts:
Martim Gomes
PwC | Tax – Private Wealth/HRS Manager
Direct: +351 213 599 671 | Mobile: +351 916 636 231
Email: martim.gomes@pt.pwc.com
Leopoldo Mántaras Martínez
PwC | Tax - Human Resource Services
Direct: +351 213 599 671 | Mobile: +351 914 210 275
Email: leopoldo.m.martinez@pt.pwc.com

http://www.pwc.pt/pt/fiscalidade/imagens/2012/PwC_RNH_2012.pdf

https://www.blevinsfranks.com/News/BlevinsFranks/BlevinsFranksNews?ArticleID=598

http://fas.org/sgp/crs/misc/R40623.pdf

http://www.internationaltaxreview.com/pdfs/taxdata/portugal-vda.pdf
 
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