The special scheme for non-resident residents (“RNH”) applies to natural persons transferring their residence to Portugal after a long period of residence outside Portugal.
SOME GENERAL CONCEPTS ABOUT THE SCHEME:
The RNH can benefit from a special IRS (Personal Income Tax) regime for a period of ten years.
INCOME OBTAINED IN PORTUGAL
Income from dependent work and corporate and professional income can be taxed at the special rate of 20%, if related to activities of high added value, with a scientific, artistic or technical character, exercised in Portugal and identified by Ordinance no. 12/2012, of 7 January.
Examples of activities with high added value:
Architects, physicians, university professors, designers, computer programmers, engineers, researchers, professionals, investors and managers under certain conditions.
Other income will be subject to taxation at normal IRS rates.
INCOME OBTAINED ON THE ABROAD
In this case, it will be necessary to distinguish (i) professional income and royalties, (ii) pension income, and (iii) passive income.
PROFESSIONAL INCOME AND ROYALTIES
In the case of income from dependent work obtained abroad, they will be exempt from IRS, provided that they are effectively taxed in the State of source in accordance with a double taxation agreement between Portugal and that State or, in the absence of a double taxation agreement , such income is taxed in the State of source and can not be considered to have been obtained in Portuguese territory, in accordance with the rules established in the IRS Code.
On the other hand, as regards income from self-employment resulting from high added value activities, as well as royalties, both will be exempt from IRS, provided that they can alternatively be taxed in the State of source in accordance with double taxation agreement concluded between Portugal and that State, or, in the absence of a double taxation agreement, (i) such income may be taxed in the State of source in accordance with the OECD Model Tax Convention on Income and Assets ; (ii) income is not considered to be obtained in Portuguese territory, in light of the IRS Code, and (iii) the country, territory or region of the source of the income is not included in the Portuguese list of tax havens.
It is particularly relevant for the application of the IRS exemption referred to above to the distinction established by the legislator as to the effective taxation or mere subjection of income by the State of source. Thus, while in the case of dependent work income, the application of the exemption is dependent on the effective taxation of income in the State of source; in the case of income from self-employment, the legislature made the application of the exemption subject to the mere possibility of taxation of that kind of income by the State of source.
Where income from dependent work, self-employment or royalties does not meet the above conditions, their income will be taxed in accordance with the general taxation regime applicable to taxable persons, in particular by subjecting them to progressive IRS 48%, plus an extraordinarily high surcharge of 3.5% on the value of the remuneration that exceeds the guaranteed minimum monthly remuneration, and the additional solidarity rate, applicable progressively to the part of the taxable income that exceeds € 80,000.00 . The part of the income that exceeds EUR 250,000 will, in turn, be taxed at the rate of 5%.
In respect of pension income, they shall be exempt from taxation in Portugal provided that they are taxed in the State of source in accordance with the double taxation agreement between Portugal and that State or alternatively by the criteria set out in the IRS Code, such income is not considered to have been obtained in Portuguese territory.
In practical terms, this means that even if pension income is taxed exclusively by the State of source, they will not be subject to IRS taxation provided that, according to Portuguese tax rules, they are not considered to have been obtained in Portugal.
PASSIVE OR CAPITAL INCOME
In respect of passive income, such as interest, dividends, other income from capital, income and capital gains obtained abroad, they shall be exempt from taxation in Portugal provided that they can alternatively be taxed in the State of source in accordance with double taxation agreement concluded between Portugal and that State, or, in the absence of a double taxation agreement, (i) such income may be taxed in the State of source, in accordance with the Model Tax Convention on the Income and OECD; (ii) income is not considered to be obtained in Portuguese territory, in light of the IRS Code, and (iii) the country, territory or region of the source of the income is not included in the Portuguese list of tax havens.
In this respect, as regards the taxation of capital gains, it should be pointed out that most of the double taxation agreements concluded by Portugal provide for taxation of this type of income only by the State where the taxable person is resident, which makes it impossible to application of the abovementioned exemption.
Tax on Assets
Portugal does not tax the assets. There are only local taxes levied on properties located in Portugal (as described below).
Real Estate Acquisition
Portugal applies a municipal tax on the acquisition of Portuguese properties, which varies between 0 and 6%. Stamp duty is also due at the rate of 0.8%.
Annual Real Estate Tax
In Portugal, the properties are subject to an annual municipal tax (IMI), calculated based on the registered equity value. The rate varies between 0.3 and 0.45% (depending on municipality and type of property). Stamp duty will also be due on an annual basis, at the rate of 1%, for properties with a tax asset value equal to or greater than € 1,000,000.
Stamp Tax is due to the 10% rate on Portuguese assets, except for the spouses, descendants and ascendants, which are exempt.
Stamp duty is payable on donations made in Portugal at the rate of 10%, except for spouses, descendants and ascendants, who are exempt. A rate of 0.8% is applied to real estate donations.
QUALIFICATION FOR THE REGIME
To qualify as RNH, a natural person must meet the following requirements:
To be considered as a tax resident in Portugal;
You have not qualified or been taxed as a tax resident in Portugal for the previous five years in respect of the year in which you become a tax resident.
Qualifies as a tax resident in Portugal who, in any year:
Has remained for more than 183 days (followed or interpolated) in any period of 12 months beginning or ending in the year in question; or
Have, at any time during the period referred to above, a dwelling that can be considered as habitual residence in Portugal.