Last Updated on 14th February 2025
The original Portuguese Non-Habitual Residency regime (NHR) was established in 2009. It acted as a significant draw for expatriates looking to relocate to a beautifully warm, relaxing climate, with the additional benefit of reduced, flat-rate tax rates and exemptions, which lasted for up to ten years, and low tax against pension incomes and wealth.
During a period of political upheaval, the scheme was abolished in 2023, although with a transitional period. The program officially ended in January 2024, effectively meaning that those planning to relocate and apply to the NHR after this date were no longer able to do so.
Now, the Portuguese government has announced a new scheme called the Incentivised Tax Status Program (ITS). Designed to attract professionals in certain high-demand sectors and with specific skill sets, the program is being called the NHR 2.0 and will undoubtedly be welcome news to those who were disappointed at the end of the original NHR scheme.
What Is the Portuguese Incentivised Tax Status Program?
The NHR remains in the final stages of the transition. This means a very small number of applicants might be eligible to apply, provided they have evidence of a pre-existing transaction that predates the reforms, such as signing an employment contract, dated up to 31st December 2023. The scheme is, to all other intents and purposes, closed.
Further information about the tapered closure of the NHR is available through our previous guide to The End of the Portuguese NHR Scheme.
The ITS is the newly announced replacement and is designed to attract expatriates who work, specialise, or run businesses that focus on scientific research, innovation, and technology.
It offers a range of similar tax advantages, although with different eligibility conditions. Applicants who fall into one of several employment categories can benefit from a 20% flat rate tax on professional incomes, including foreign-sourced and self-employment earnings.
They can also claim a five-year exemption of up to 50% of the income tax levied on professional incomes, with a maximum cap of €250,000, and are exempt from paying Portuguese wealth tax on assets held outside the country.
Successful applicants with ITS program status are further exempt from tax on capital gains, dividends, interest income, and rental income—although this may depend on the circumstances and origin of those earnings.
Qualification Criteria for Portugal’s New Incentivised Tax Status Program
As we’ve mentioned, the criteria to apply for the ITS are stricter and less wide-ranging than those for the original NHR scheme because the Portuguese government wants to target applicants who fall into certain categories, including:
- Scientists, teachers and researchers.
- Professionals in tourism, IT, agriculture, research and development and manufacturing.
- Those working for companies approved by the Portuguese government as making a significant contribution to the national economy.
- Professionals working for start-up businesses or companies related to investment.
Applicants cannot have been tax residents in Portugal within the last five years, must be able to show they earn an income within the category against which they are applying, and must become full tax residents to continue to benefit from the scheme’s tax advantages.
While this means those already living in Portugal and with NHR tax scheme membership cannot apply, those residents will continue to benefit from the NHR program for the full 10-year duration.
Scheme beneficiaries are expected to maintain records to show that their incomes and professional activities continue to qualify for the scheme and will need to submit information annually by a 31st March deadline to remain members, with rules about declaring non-qualifying activities that could affect their eligibility.
Understanding the Application Process for the Portuguese NHR 2.0 Program
Just as the NHR wasn’t itself a visa, expatriates keen to apply will need to select an appropriate visa or permit category and secure the right to relocate, live, and work in Portugal to apply to the ITS.
However, professionals engaged in a relevant career, sector, or industry can be either EU citizens or non-EU nationals and can pick the most appropriate visa.
That includes the ‘golden visa‘ or residency by investment program, which, under recently reformed regulations, enables applicants to qualify by making an investment of €500,000 or more into a qualifying venture capital or private equity investment fund.
For those with substantial incomes, international wealth or earnings that fall into the tax-exempt or low-rate tax categories, the cost of investing could be easily offset by the heavily reduced tax burden and the exemptions that last for the initial five years of residency.
Applying for Incentivised Tax Status (ITS)
As an outline, the step-by-step process of claiming the tax benefits of the ITS include:
- Applying for a relevant visa and registering within Portugal as a tax resident with an NIF tax identification number.
- Advising of an address in Portugal – required to register as a taxpayer.
- Completing the official ITS application, available through the Portuguese government’s taxpayer portal.
- Providing supporting documentation, showing that the applicant has not been a tax resident within the last five years, has a valid passport and a Portuguese address.
Applications must be submitted by 31st March each year or within the year after the applicant has become a tax resident, and currently, the processing times are between one and three months. On approval, ITS status remains valid for ten years, with minimum stay requirements to maintain access to the scheme as a verified tax resident.
Learn More About the New Incentivised Tax Status Scheme in Portugal
The ITS is widely seen as a new incarnation of the NHR. However, it has more stringent controls and conditions to ensure that all tax residents benefiting from the program also provide a tangible benefit to the Portuguese economy or fill gaps in skilled sectors and professions in high demand.
It represents a shift, with the government keen to prioritise innovation and reserve tax advantages for non-nationals who can contribute to the country’s technological advancement in return for generous tax exemptions and lower tax rates.
If you’d like to learn more about the Portuguese ITS scheme, managing your tax position as an expatriate resident in Portugal, or the respective benefits of varied visa programs that would provide access to the scheme, you are welcome to contact our local Chase Buchanan team to arrange a convenient time to talk.
*Information correct as at February 2025