The NHR 2.0 Program in Portugal

Portugal’s Non-Habitual Residency (NHR) regime was introduced in 2009, becoming immensely popular among digital nomads, expats, retirees, and professionals attracted by significant tax benefits. The program allowed eligible individuals to enjoy a special tax status with reduced tax rates or exemptions for 10 consecutive years. However, in 2025, the current NHR program will come to an end, making way for its successor, the NHR 2.0, a revamped tax incentive designed to remain attractive while adjusting to new economic realities and international tax standards. Let’s explore what’s changing and how to continue benefiting from Portugal’s appealing tax environment.

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What is the NRH 2.0?

The NHR 2.0 is Portugal’s updated tax incentive designed to replace the original Non-Habitual Residency program from January 2025 onward. Officially named "IFICI - Incentivo Fiscal à Internacionalização e Competitividade Individual" (Fiscal Incentive for Individual Internationalization and Competitiveness), this new regime continues to attract highly qualified professionals, retirees, entrepreneurs, and investors. The NHR 2.0 aims to further support Portugal’s internationalization and competitiveness by offering advantageous tax conditions aligned with the latest European and international tax regulations.

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How does NHR 2.0 compare with the existing NHR Tax regime?

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What are the Benefits of the NHR 2.0 Program?

The NHR 2.0 offers numerous advantages that make Portugal an attractive destination for international residents, including:

• Attractive Tax Rates: A highly competitive flat rate of 15% on eligible Portuguese-sourced professional income, significantly lower than standard progressive tax rates, making it particularly appealing for entrepreneurs, digital nomads, and highly qualified professionals.
• Reduced Pension Taxes: Foreign-sourced pension income is taxed at a favorable flat rate of just 10%, ideal for retirees seeking a financially efficient retirement destination.
• Tax Exemptions on Foreign Income: Qualifying foreign-sourced income, such as dividends, rental income, royalties, and certain types of capital gains, can be exempt from taxation in Portugal, provided specific conditions and double-tax treaties are met.
• Asset Protection and Wealth Preservation: Portugal imposes no wealth tax, inheritance tax for direct descendants, or gift taxes between close family members, offering significant opportunities for asset protection and wealth transfer.
• Stability and Transparency: The NHR 2.0 regime aligns closely with European Union (EU) and OECD standards, providing transparency, legal certainty, and international credibility, thereby reducing risk and uncertainty for individuals relocating to Portugal.

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Who is eligible for the NRH 2.0 in 2025?

The NHR 2.0 program (IFICI) is designed to attract individuals who can contribute significantly to Portugal's economic, cultural, and technological development. Eligibility is carefully structured around specific criteria and qualifying activities:

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Qualifying Activities Include:

• High-value-added professional activities:
• Individuals engaged in professions that add substantial value to the Portuguese economy, including scientific research, technology development, innovation, and creative or artistic activities. Specific examples include professionals in Information Technology, Engineering, Medicine, Architecture, Designers, Researchers, University Professors, and other technical specialists.
• Entrepreneurial and business activities:
• Entrepreneurs or investors carrying out business operations in Portugal may qualify, provided these businesses lead to significant economic impacts, job creation, or regional development. Activities contributing to technological advancements, sustainable practices, or international competitiveness are particularly favored.
• Pension income:
• Retirees who receive pension income from abroad may qualify under NHR 2.0. However, under the new regime, pension income must typically be taxed in its country of origin or will otherwise be subject to progressive tax rates in Portugal. Applicants should ensure their pension arrangements align with international taxation treaties.

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Additional Eligibility Criteria:

• Tax residency established after January 2025:
• Applicants must officially become Portuguese tax residents from January 2025 onward, having their habitual residence in Portugal or spending at least 183 days per year in the country.
• No Portuguese tax residency in the past 5 years:
• To maintain the objective of attracting new international talent and investment, the NHR 2.0 is specifically reserved for individuals who have not been tax residents in Portugal within the five years immediately preceding their application.
• No previous NHR or Return Program benefits:
• Individuals who previously benefited from the original NHR program or Portugal’s Return Program (Regime dos Residentes Não Habituais or Programa Regressar) are explicitly excluded from eligibility, ensuring the program remains available exclusively for first-time beneficiaries.
• Compliance with income-source restrictions:
• Applicants must fulfill specific income-source requirements, carefully avoiding income originating from jurisdictions listed as "tax havens" by the Portuguese tax authorities, as these sources face aggravated taxation rates (currently 35%). Ensuring the transparency of income sources and the legality of arrangements is crucial for eligibility.

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What are the Steps to Apply for the NHR 2.0 Program?

If you meet the eligibility criteria for the NHR program and wish to apply, the process is relatively straightforward. Here are the steps you need to follow:

1. Obtain Portuguese residency: Secure your legal residence through appropriate visa programs (D7, Digital Nomad, Golden Visa, etc.).
2. Register as a tax resident in Portugal by obtaining your NIF (Portuguese Tax Identification Number).
3. Declare tax residency in Portugal at the local tax office or via Portugal’s online finance portal.
4. Apply for NHR 2.0 status online via the Portuguese Tax Authority within 6 months of becoming a resident.
5. Provide documentation: Submit required documents proving eligibility, including proof of professional activity, pension documents, or income sources.
6. Confirm approval: Await confirmation, typically issued within a few weeks to months.

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What Should You Consider Before Applying for the NHR Program?

Before applying to the NHR 2.0 program, ensure you've carefully considered these important factors:

• Eligibility Requirements: Verify that you meet all eligibility criteria, including professional qualifications, tax residency status, and absence of previous residency benefits from Portugal’s NHR or Return programs.
• Income Sources and Structure: Thoroughly review your income sources to ensure they comply with the conditions set by NHR 2.0, particularly concerning income derived from jurisdictions considered "tax havens", which face higher taxation.

"tax havens" (also called "blacklisted jurisdictions") are territories identified by Portuguese authorities as offering significantly favorable tax regimes, low transparency, or limited cooperation regarding tax information exchange, such as Monaco and Bahamas.

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• Professional Tax Advice: Consulting with a qualified tax advisor or accountant familiar with Portuguese and international taxation is crucial to optimize your tax position and ensure compliance with all regulations.
• Residency Commitment: Understand that establishing Portuguese tax residency entails spending at least 183 days per year in Portugal or having a primary home in Portugal, and prepare accordingly for lifestyle and logistical considerations.
• Potential Legislative Changes: Stay alert for any governmental or legislative changes, as Portugal can revise the NHR 2.0 terms and conditions periodically. Regularly reviewing official communications and consulting professionals will help you remain compliant and maximize your benefits.

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Additional Considerations for the NHR 2.0 Program

While the IFICI offers compelling benefits, there are essential limitations to consider. For instance, taxpayers earning income from entities located in jurisdictions on Portugal's tax blacklist face aggravated taxation at a 35% rate.

Additionally, the regime excludes individuals previously benefiting from the original NHR or Return Program. Missing the NHR 2.0 registration deadlines can significantly delay access to benefits. Special conditions for residents of Madeira and the Azores are expected but await clarification from forthcoming regional legislative decrees.

Lastly, it is important to note that the Portuguese government reserves the right to amend the terms of the NHR 2.0 program at any time, as demonstrated by the changes in 2025—so continuous monitoring of updates is crucial.

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Portugal’s new NHR 2.0 program ensures the country remains a compelling destination for international residents seeking an advantageous tax environment, high quality of life, and European Union residency. Although the original NHR ends in 2025, the NHR 2.0 promises continuity and certainty for digital nomads, entrepreneurs, retirees, and high-value professionals. Stay informed, prepare adequately, and take advantage of this renewed opportunity to secure your future in Portugal.

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