The Introduction of Reduced Taxes for Expats in Portugal With In-Demand Professional Skills

The end of the non-habitual resident (NHR) tax program created major changes to the taxes many expats were liable to pay in Portugal, but the announcement of a new program, the Tax Incentive for Scientific Research and Innovation, or NHR 2.0, opens up new opportunities for expatriates to claim generous tax treatments.

While not a visa or permit itself, the NHR 2.0 may benefit a wide range of applicants who work in professional occupations, including expats relocating through the Portugal Golden Residence Permit Program, the D8 Digital Nomad permit, and D7 Visa applicants who will receive employment income.

Here, we’ll examine the new tax regime, clarify the tax advantages, allowances and rates payable, and look at some of the eligibility criteria, noting that these include significant reforms from the previous NHR – since the revised scheme is specifically designed to attract skilled foreign nationals who contribute to the Portuguese economy.

Portugal’s New Tax Scheme to Attract Professional Expatriates

The primary driver behind NHR 2.0 is to stimulate economic growth, one of several measures announced across the sectors to boost employment, increase jobs, support Portuguese businesses, and incentivise higher investment.

Interestingly, the new tax regime has been introduced through a Portaria – a type of Portuguese law that doesn’t need validation through parliament, which means the program will be faster and easier to implement.

While the regulations officially came into effect from 24^th December 2024, there are opportunities to apply retroactively, backdated to 1^st January of last year. This may be particularly advantageous for those who had been intending to register for the old NHR program, which had an official transition deadline that fell on 15^th March 2025.

New expatriates hoping to take advantage of the revised scheme must register by the 15^th of January in the year following the start of their residency period, making NHR 2.0 active immediately.

The old NHR program was criticised by other EU members who perceived it as a way for affluent individuals and wealthy retirees to relocate from other member states to avoid paying local taxes in their own countries.

In response, this new initiative aims to attract younger professionals and applies flat-rate discounted income tax only to salaries and professional earnings, excluding capital gains tax, pension income, dividends, rental income and other types of investment income.

Summarising the Benefits and Tax Advantages of Portugal’s Tax Incentive for Scientific Research and Innovation

NHR 2.0 applies to any source of active income, which covers freelance or self-employment income and employment earnings, but excludes passive incomes. The main rules and inclusions are as follows:

• Qualifying incomes will be subject to a capped flat tax rate of 20% – similar to the tax treatments offered through the original regime.
• Foreign nationals must not have lived in Portugal for the past five years at the point of application but must apply for tax residency to qualify.
• There are no obligations to purchase a property—in line with concerns around pressure on the Portuguese property market. Although Golden Visa applicants can claim NHR 2.0 tax treatment, this visa route now excludes the option of qualifying through property investment.
• Foreign income arising from overseas, including rents, capital gains, interest, and dividends, will be largely exempt from Portuguese tax, but this excludes foreign pension income.
• Tax benefits are available for a ten-year period from the point of approval.

These criteria have generally been welcomed and provide an incentive not only for professionals looking to relocate to Portugal but also for businesses.

Companies trading in Portugal and reliant on overseas talent have often struggled to attract high-calibre applicants due to the personal income tax rates, with a top marginal rate of 48% – which compares very favourably with the 20% flat rate.

Professions, Skills and Sectors Set to Benefit from the NHR 2.0 Tax System in Portugal

As the name suggests, the overarching goal of the Tax Incentive for Scientific Research and Innovation is to invite highly qualified foreign nationals who have become tax residents in Portugal to apply—but this doesn’t cover every role or industry.

However, the Azores and Madeira have the autonomy to create their own lists of qualifying activities, professions or jobs that will be exempt from the standard resident income tax rates.

Teachers, scientists, research and development professionals, corporate managers, employees of start-ups, and individuals who work in any of the below areas may be able to apply:

• Activities related to manufacturing, natural resources and mining
• Tourism and corresponding sectors related to the tourism industry
• IT, telecommunications, audiovisual and multimedia projects or production
• Energy, environment, defences, forestry and agriculture

NHR 2.0 also applies to those working in industrial and skilled trades such as metallurgy, construction and assembly, medical practitioners, engineers and physicists, all of whom are considered added-value professionals.

Foreign nationals who work within investment and are employed by a Portuguese company recognised by a government agency such as the AICEP, the Portuguese Trade and Investment Agency, or the Institute for the Support of Small and Medium Enterprises and Innovation (IAPMEI) may also qualify.

The Impact of Portugal’s NHR 2.0 Regime on Taxes for Expatriates

These changes to the non-habitual resident tax program are anticipated to have a sizable effect on Portugal’s ability to attract skilled foreign workers. The reforms also react to past criticisms by creating pathways to incentivise foreign nationals who will contribute to the economy without being designed for affluent applicants with passive incomes.

While the announcements remain fairly recent, and there aren’t yet any statistics or data to reflect how well NHR 2.0 will be received and implemented, it has been cited as a model for other countries to boost their economies through tax incentives while being cautious of broader issues around the EU.

The new tax program may have considerable impacts on individuals, families, and businesses.

Professionals can pay taxes at a minimal, flat rate against their taxable income earned, whether relocating permanently and benefiting from reduced taxation for the first 10 years or using digital nomad visas to work in Portugal temporarily and enjoying a low tax rate for the duration.

For more information and guidance around taxation and relocation to Portugal, you are welcome to contact our Chase Buchanan team in Portugal to schedule an initial chat with one of our experienced advisers.

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*Information correct as at April 2025