THE PORTUGUESE NON-HABITUAL TAX RESIDENT (NHR) REGIME

Transcription

1 THE PORTUGUESE NON-HABITUAL TAX RESIDENT (NHR) REGIME Frequently Asked Questions & Reasons to Move to Portugal Ricardo da Palma Borges

2 Why Portugal? Portugal ( has a number of attractive characteristics: REASON #01 Quality of Life 31 th country on the OECD Better Life Index (1) and 30 th on the Economist Quality-of-Life Index. (2) As reported by The Telegraph, Portugal is the 2 nd best place to retire abroad. (3) (1) - (2) - (3) - 2

3 Frequently Asked Questions FAQ #1 What is the NHR regime? The non-habitual tax resident (NHR) is a tax regime created to improve Portuguese international competitiveness. This regime targets non-resident individuals who are likely to establish a permanent or a temporary residence in Portugal. FAQ #2 What are the benefits of the NHR regime? The NHR regime establishes, under certain conditions, IRS exemptions on foreign source income, as well as a limited taxation of income deriving from certain high value added activities. 3

4 Why Portugal? REASON #02 Weather Weather and environment quality (18 th country on the OECD 2014 Better Life Index). REASON #03 Sunshine Estimated 3300 hours of sunshine per year, one of the highest rates in Europe. 4

5 Frequently Asked Questions FAQ #3 What types of income are eligible for exemption under NHR regime? Foreign-sourced passive income (interest, dividends, certain royalties, other income from capital, capital gains and income from immovable property) derived by non habitual residents is exempt (without progression except in the case of capital gains on real estate) in Portugal, provided that it is potentially liable to taxation in the source State under the rules of a tax treaty or of the OECD Model Tax Convention (no effective taxation is required). Foreign-sourced income from pensions is exempt (with progression). Foreign-sourced employment income is exempt (with progression) in Portugal, provided that it is effectively taxed in the source State under the rules of a tax treaty or of the OECD Model Tax Convention. Foreign-sourced employment income is exempt (without progression) in Portugal, provided that it is effectively taxed in the source State under the rules of a tax treaty or of the OECD Model Tax Convention and that it is income derived from high value added activities of a scientific, artistic or technical nature. Foreign-sourced income from independent personal services is exempt (without progression) in Portugal, provided that it is potentially liable to taxation in the source State under the rules of a tax treaty or of the OECD Model Tax Convention (no effective taxation is required) and that it is income derived from high value added activities of a scientific, artistic or technical nature. 5

6 Why Portugal? REASON #04 Modernity Modern and cosmopolitan country: Lisbon was elected 2 nd best place to travel in 2015 (4) and Porto was the best European destination for (5) Lisbon also ranked 22 nd on the Monocle Quality of Life Survey (6) REASON #05 Cultural Offering Portugal has a great list of wonders declared a World Heritage Site by Unesco. (7) Fado (the Portuguese most traditional music genre) was considered by UNESCO Intangible Cultural Heritage of Humanity, in (4) - (5) - (6) - (7) - 6

7 Frequently Asked Questions FAQ #4 What types of income are eligible for reduced rates under NHR regime? Domestic and foreign-sourced income deriving from high value added activities of a scientific, artistic or technical nature will be liable to autonomous taxation at a special 20% flat rate and not to the general and progressive IRS rates (currently of up to 56,5% for yearly taxable income above ). In 2015, a 3,5% surcharge is applied in addition to the said 20% rate, which raises the total tax rate on such income to 23,5%, but this measure is expected to be abolished soon. 7

8 Why Portugal? REASON #06 Education There is a significant number of International Schools throughout Portugal, attended by both Portuguese and foreign students. REASON #07 Other Languages Spoken A large part of the population speaks foreign languages, especially English and French. 8

9 Frequently Asked Questions: NHR FAQ #5 What are considered high value added activities of a scientific, artistic or technical nature? Ministerial Order nr. 12/2010, of January 7, defined the high value added activities of a scientific, artistic or technical nature qualifying for the regime. It encompasses a wide range of professions and activities, as follows: 1 - Architects, engineers and similar technicians: 101 Architects 102 Engineers 103 Geologists 2 - Visual artists, actors and musicians: 201 Theater, ballet, film, radio and television Artists 202 Singers 203 Sculptors 204 Musicians 205 Painters 3 Auditors: 301 Auditors 302 Tax Consultants 4 - Doctors and dentists: 401 Dentists 402 Analyst Doctors 403 Surgeons 404 Board doctors in ships 405 General Practitioners 406 Dentists 407 Dentist Doctors 408 Physiatrists 9

10 409 Gastroenterologists 410 Ophthalmologists 411 Orthopaedists 412 Otorhinolaryngologists 413 Paediatricians 414 Radiologists 415 Doctors in other specialties 5 - Teachers: University professors 6 - Psychologists: Psychologists 7 - Professional services, technicians and similar: Archaeologists Biologists and experts in life sciences Computer Programmers Software consultancy and activities related to information technology and information technology Computer programming activities Computer consultancy activities Management and operation of computer equipment Activities of information services Activities of data processing, hosting information and related activities/web portals Activities of data processing, hosting information and related activities Other information service activities Activities of news agencies Other information service activities Scientific research and development Research and development of science physical and natural Research and development in biotechnology Designers 8 - Investors, administrators and managers: Investors, administrators and managers of companies promoting productive investment, if allocated to eligible projects under tax benefits contracts awarded under the Tax Code for Investment, approved by Decree-Law No. 249/2009, of 23 September Senior employees of companies 10

11 Why Portugal? REASON #08 Daily Flights About 300 daily flights from Portugal to foreign countries. Porto Airport ranks among the best REASON #09 Convenient Location for Globetrotters Portugal ranked 1 st on Globe Spots Top 10 countries in (9) airports in Europe since (8) (8) - (9)

12 Frequently Asked Questions FAQ #6 Who may apply for the NHR regime? Individuals who become resident for tax purposes in Portugal without having been so in the previous five years. FAQ #7 How do I acquire tax residence in Portugal? Staying for more than 183 days in the Portuguese territory, whether these days are consecutive or not, in any 12-month period beginning or ending in a given tax year; If staying for a shorter period, having in the Portuguese territory, on any day of the period referred above, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode; Being, on the 31st of December, a crew member of a ship or aircraft at the service of an entity with residence, head office or effective management in Portugal. 12

13 Why Portugal? REASON #10 Sports Top conditions for sports (sailing, diving, biking, trekking; leading European golf destination (10), with some of the best European golf courses). (10)

14 Frequently Asked Questions FAQ #8 What is the procedure to register as tax resident in Portugal? Registering as a tax resident in Portugal is a requirement to obtain the non-habitual resident status, which means that those wishing to apply for the regime must: i. register as non-resident taxpayers; ii. obtain residence permits (for non-eu nationals) and residence cards (for EU nationals); iii. register as tax residents; and iv. only then apply for the non-habitual resident status. 14

15 Why Portugal? REASON #11 Investments Value for money in real estate investments (which have undergone significant decreases since 2008). REASON #12 Cost of Living In comparison with other major European countries, Portugal is highly affordable. (11) (11)

16 Frequently Asked Questions FAQ #9 How do I apply for the NHR status? An application must be submitted until March 31st of the tax year following that in which Portuguese tax residence is acquired. This application is addressed to the Director of the Taxable Persons Registration Service (Serviços de Registo de Contribuintes). Moreover, individuals must submit a statement whereby they solemnly declare that they have not fulfilled the criteria necessary for being considered a Portuguese tax resident during the preceding five years. FAQ #10 For how long may I enjoy the NHR status? Non-habitual resident individuals may enjoy such status for a ten-year period, after which they will be taxed under the standard IRS regime. 16

17 Why Portugal? REASON #13 Health System Portugal has a high quality health system, offering both public and private healthcare. For instance, according to the 2014 OECD Health Statistics, the average life expectancy in Portugal in 2012 was 80.5 years. (12) (12)

18 Frequently Asked Questions FAQ #11 Once I have the NHR status, what are my tax obligations? After obtaining the non-habitual resident status it will be necessary to file annual tax returns in Portugal, stating the worldwide income and expenses, for which adequate documentation keeping is required. FAQ #12 For how long are the benefits of the regime granted? The NHR status is granted for a ten-year period. The particular features of the NHR regime may always be amended by law, for better or for worse. This regime was implemented in 2009 by a Socialist government (center-left wing), and since then it has remained stable. The current government coalition of Social Democrats and Christian Democrats / People s Party (center-right wing) has not materially changed the regime. The general perception is of its widespread acceptance by the community in general and by the main political parties. The only relevant adverse change to the regime was the enforcement in 2011 and from 2013 onwards of a 3,5% surcharge to employment or independent personal services income deriving from high value added activities of a scientific, artistic or technical nature obtained by NHR residents liable to autonomous taxation at a special 20% flat rate, a measure which is expected to be abolished soon. 18

19 Why Portugal? REASON #14 Economic Progress Successful conclusion of the Troika s (International Monetary Fund, European Central Bank and European Union) financial assistance program ( ) on May 17, REASON #15 Political Stability Portugal is a developed democracy with political and social stability. 19

20 Why Portugal? REASON #16 Peaceful Country According to the 2014 s Global Peace Index, Portugal ranks 18 th, out of 162 countries. (13) (13)

21 The Portuguese NHR Regime For more information on our Residence Planning Services, please visit our microsite or scan the QR code below with your smartphone: 21

22 Recent Tax Recognition Chambers & Partners Ricardo Band 1 / RPBA Band 3 (2014) Legal 500 Ricardo and Pedro are Recommended Lawyers / RPBA Band 3 (2014) World Tax Ricardo and Bruno mentioned / RPBA Tier 3 (2014) Best Lawyers Ricardo ranked under the "Tax Law" practice area and the "Tax Planning" subspecialty (2014) World Transfer Pricing Ricardo mentioned / RPBA Tier 3 (2014) Tax Directors Handbook Ricardo mentioned / RPBA Tier 3 (2015) Who s Who Legal Ricardo ranked as a top lawyer in the Corporate Tax Lawyers directory (2013) Acquisition International Tax Award RPBA Portuguese Tax Law Boutique Firm of the Year (2015) Acquisition International Legal Award RPBA Boutique Law Firm of the Year Portugal (2014) Corporate Intl Magazine Legal Award RPBA Boutique Tax Law Firm of the Year in Portugal (2014) Global Law Experts - RPBA Portuguese Corporate Tax Law Firm of the Year (2014 / 2013) Corporate Intl - RPBA Tax Law Firm of the Year in Portugal (2014) Although great care has been taken when drafting this Presentation, Ricardo da Palma Borges & Associados (RPBA) - Sociedade de Advogados, R.L. does not accept any responsibility whatsoever for any consequences arising from the use of the information contained herein. The information is provided solely for general purposes, cannot be regarded as legal or other advice and was last revised on 27 March