Update on the NHR Tax Programme
On Monday, October 10th, the Portuguese Government unveiled the 2024 Budget Bill. The initial draft of the bill stipulates the termination of the existing and well-established Non-Habitual Residency (NHR) program for new applicants starting January 1, 2024.
Current NHR beneficiaries, as well as those who successfully register as NHR until its termination, will retain all their benefits without alteration.
*It is important to note that only individuals who become tax residents in Portugal by the end of 2023 or hold a valid residence visa as of December 31st will be eligible to apply.*
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Portugal's other tax advantages, such as the absence of general wealth or inheritance taxes and a crypto-friendly tax environment, combined with specific tax regimes, will continue.
What Happens Next?
Starting January 1, 2024, a modified "new NHR" regime, termed the "incentive to scientific research and innovation," is proposed for specific professional categories:
Professionals falling within these categories (who have not been Portuguese tax residents in the previous 5 years) will benefit from a 20% tax rate on professional income earned in Portugal. Additionally, they can enjoy exemptions on various categories of foreign-sourced income, including employment or freelance income, dividends, capital gains, real estate income, or interest. It's worth noting that the scope of this "new NHR," at least in its initial version for parliamentary discussion, appears more limited.
Notably, a new tax incentive is introduced for individuals who become Portuguese tax residents starting January 1, 2024 (without having held this status in any of the previous 5 years). They will be granted a 50% personal income tax exemption for employment and freelance income for 5 years, regardless of their field of expertise. However, this exemption is capped at 250,000 EUR annually, with income exceeding this threshold subject to regular tax rates.
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