NHR and Article 16.3 of the tax code?

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NHR and Article 16.3 of the tax code?


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Old 14th April 2019, 03:44 PM
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Default NHR and Article 16.3 of the tax code?

Does anyone understand this? It seems weird to me.

dancebert is right, I think, when he refers to Article 16. stating:

3 The persons meeting the requirements under subparagraphs 1(a) or 1(b) shall be deemed to be resident since the first day of their stay in the Portuguese territory, unless they have been resident therein on any day of the previous year, in which case they shall be deemed to be resident in this territory since the first day of the year in which any of the requirements provided for in paragraph 1 is met.

I think this only makes sense if resident here does not mean tax-resident. Because, as I understand it, the NHR rules closely follow tax residency rules. It is therefore difficult/ bad luck/ impossible for people moving to Portugal trying to get NHR to become tax resident without getting NHR status. So if they were tax resident in the previous year they would already have NHR status and that would have started on the first day of their stay.

The difficulty, as I see it, with this interpretation is that elsewhere in the tax code it states that you cannot get NHR if you have been 'resident' in any of the 5 previous years. So unless the tax code uses the word resident to mean different things in different places then we have another impossible situation. This is because if the applicant was resident in the previous they could not avail themselves of the 'from the beginning of the tax year' provision in 16.3 for the simple reason that they would be ineligible for NHR status full stop!

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Old 14th April 2019, 10:06 PM
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The tax code refers to tax-residency.

You have to become (tax-)resident before you can even apply for NHR status and you must apply by the end of March following the year in which you become (tax-)resident.

If you are deemed (tax-)resident on 30th December 2019 you could apply for NHR status for 2019-onwards but must do so by 31st March 2020.

Unlike (tax-) residency, under no circumstance is NHR status acquired accidentally or by default.

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Old 14th April 2019, 11:19 PM
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Quote:
Originally Posted by RichardHenshall View Post
The tax code refers to tax-residency.
If you are deemed (tax-)resident on 30th December 2019 you could apply for NHR status for 2019-onwards but must do so by 31st March 2020.
Thanks for confirming some of what I suspected. But please bear with me as I am still puzzled. In the case above you are likely to be eligible for NHR for one of two reasons would you not?
1. You had racked up 183 days on 30/12 or 2. You occupy a dwelling in such a way that it indicates it will be your habitual residence.

In case 1. your NHR would appear from Art 16 to start on day 1/183. In case 2 it would appear to start on 30/12. If the latter you would be likely to waste one of your ten years for little gain. In neither case would the NHR start on 1 January 2019 (or at least it would be highly unlikely to). (As I understand it, it used to work that way before the partial year provisions were introduced.)

But where would the 'having been resident in the previous year come in? The previous year might have been 2018. If resident means tax resident would not being resident in 2018 bar anyone from applying for NHR in 2019?

I hope I have made myself clear this time.

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Old 15th April 2019, 12:30 AM
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NHR status will always apply from the 1st January of the of the first year for which you request it, whether you became (tax-)resident at the start of that year or the end.

The only year for which you can request the beginning of the 10-year NHR status is the first year in which you become deemed (tax-)resident. To be successful in your request you must apply before the end of March of the following year. If that deadline is missed, you will not be eligible the following year as you will have been (tax-)resident in one of the previous five years.

It doesn't matter how or why you are deemed (tax-)resident but to be sure of a successful request for NHR status you need to know when you became deemed (tax-)resident (or will become deemed (tax-)resident). In both your examples the NHR status (if successfully requested) will be from 1st January 2019. The benefits of NHR status will apply only for the part of the year during which you are (tax-)resident and declaring income to Portugal (approx 6 months or 1 day in your examples). To get the best value from the first year of NHR status, it is evident you should arrange your affairs to become deemed (tax-)resident as early in the calendar year as possible.
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Old 15th April 2019, 07:05 AM
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Quote:
Originally Posted by RichardHenshall View Post
NHR status will always apply from the 1st January of the of the first year for which you request it, whether you became (tax-)resident at the start of that year or the end.....
The benefits of NHR status will apply only for the part of the year during which you are (tax-)resident and declaring income to Portugal
You clearly know your stuff. I will now bear in mind the subtle distinction between the period of NHR status and the period in which one can benefit from that status.

I now believe that my problem with Art 16.3 was that I was reading it from an NHR point of view while it is more general than that. The resident in previous year provision, while relevant to tax residency in general, cannot be relevant in relation to NHR status.

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Old 15th April 2019, 10:29 AM
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Quote:
Originally Posted by geological View Post
... I will now bear in mind the subtle distinction between the period of NHR status and the period in which one can benefit from that status. ...
I realise that my statement could be confusing. The NHR status is available for 10 (calendar) years starting on 1st January of the 1st year in which the tax-payer becomes (tax-)resident but it has no effect or benefit until the tax-payer is accounting for tax to Portugal as there would be no tax liability that could be reduced.

It is possible to be tax-resident in Portugal with NHR status and still receive no benefit from NHR status, simply through having the wrong sort of income. However, I don't believe there are any negative consequences from applying for NHR status, if eligible, in those circumstances.

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Old 28th April 2019, 12:13 PM
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Richard, hope you don't mind me adding myself into this string...
I am a retired GB citizen (although lived most of my life in Australia) who arrived here in Feb 2018 and in that same month acquired my Registo Central de Contribuinte and Fiscal Number. I wonder if you can clear up some confusion I have? By getting my Registo Central de Contribuinte in Feb 2018, is there a date limit as to when I need to apply for NHR status? And second, do I need to have applied for any other kind of 'residency status' in order to apply for NHR?

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Old 28th April 2019, 12:26 PM
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Quote:
Originally Posted by yotor View Post
... do I need to have applied for any other kind of 'residency status' in order to apply for NHR?
You must be registered as a resident (see https://www.sef.pt/pt/Pages/conteudo...x?nID=63#p_id1) before you can apply for NHR tax status.

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Old 28th April 2019, 02:41 PM
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OK thanks, appreciate the info.

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Old 29th July 2019, 10:14 AM
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Default NHR staus

Hello Richard.
Sorry to bother you but I too seem to be flummoxed by the NHR application procedure.
I own a portuguese property and I registered my 'prova de residencia' at my local Freguesia on 12 March 2019. I have also received my password from AT. I do have a residence in the UK but I spend most of my time in Portugal. I have twos private pensions and the State Pension which are all subject to IR income tax. I emailed a company who claim to help ex-pats with various tasks and I was informed their standard charge for completing the NHR process was 350 euros but because I had already gone some way, their fee would be reduced to 200 euros. Is this reasonable? And could you recommend a more competitive contact?
Many thanks.

Lewis

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