Understanding Tax Residency in Portugal and the NHR 2.0 Regime 

Featuring insights from Forvis Mazars Bernardo Pereira (Tax Partner) and Mário Patrício (Tax Senior Manager) 

There are many aspects to consider when opening a business in, or moving to, a new country, and taxes are certainly among them. The accomplished professionals considering our HQA® Program have many questions about tax implications in Portugal, many of which are listed below. Our Empowered Startups’ team works with the trusted experts at Forvis Mazars to ensure that our HQA® founders understand the tax laws and regulations pertinent to their respective situations. 

Forvis Mazars is a globally integrated audit, tax, and advisory firm with a presence in over 100 countries and territories. Known for its deep expertise across corporate and private sectors, Forvis Mazars provides tailored services in audit, accounting, financial advisory, consulting, and tax planning. 

This guide is based on in-depth conversations with two of the firm’s leading experts on international tax planning: Bernardo Pereira, a Tax Partner at Forvis Mazars Portugal leading the Private Client and Global Mobility team, and Mário Patrício, Senior Manager of Tax, who has provided specialized guidance on the evolving NHR (Non-Habitual Resident) tax regime, now known as NHR 2.0. 

1. What Determines Tax Residency in Portugal? 

According to Mário Patrício, Portugal uses two primary criteria to determine tax residency: 

“In Portugal, it’s quite straightforward to determine and establish tax residency. The two main criteria to be a tax resident are either to spend 183 days or more in Portugal in a 12-month period, or even if one spends less, if one has their main residence in Portugal. If one of these two requirements are met, one can self-declare themself as a tax resident in Portugal and request the tax authorities to update the tax status.” 

These conditions mean that even without staying in Portugal for more than half the year, someone could still be qualified as a tax resident if they maintain a home there. The key point is that homeowners are not automatically qualified as tax residents. 

“From a tax residency point of view, it’s indeed self-declared by the individual,” explains Bernardo Pereira. “It’s always an analysis that we make from a holistic perspective to understand in all countries where you have any kind of presence or relationship, to define where you are a resident”.  

This becomes particularly important for individuals with ties to multiple countries like those who participate in the HQA® Program. Patrício emphasized the need for caution: 

“If you spend less than 183 days in Portugal, you can be a tax resident in Portugal, but it is not required,” he reiterates. “But if you are spending 50 days in Portugal and the majority or the rest of the days of the year in another country, that other country may claim your tax residency as well. When international tax matters are to be addressed, please be cautious in the country where you are arriving as well as the country where you are departing from.” 

2. What Is NHR 2.0 and Who Is Eligible? 

The original NHR regime was launched in 2009 and positioned Portugal as a haven for retirees and remote income earners. In 2024, it was replaced by IFICI (Fiscal Incentive for Scientific Research and Innovation) but is commonly referred to as NHR 2.0. Unlike the former version, the new regime is designed to attract active professionals: 

“NHR 2.0 is indeed an evolution of the NHR that previously existed. This new regime is really targeting the attraction of highly qualified individuals to Portuguese companies,” states Pereira. 

Eligibility criteria for NHR 2.0 include: 

• Not having been a Portuguese tax resident in the past 5 years. 
• Having an active employment relationship or being a board member with a qualifying Portuguese company. 

Participants in the HQA® Program are required to open a company in Portugal. Yet, owning the company yourself does not disqualify you: 

“There is no limitation that you are employed by a company that you own. But that employment relationship still requires it to meet all the criteria set by the Portuguese legislation,” adds Pereira.  

It is important to note that anyone who qualifies for the HQA® Program should also be eligible for NHR 2.0, however, applications should still be duly prepared and filed and are subject to the review of the tax authorities. 

3. What Are the Tax Benefits of NHR 2.0? 

Those who qualify for NHR 2.0 are able to participate in the regime for a period of 10 years. There are several benefits of NHR 2.0, with the most attractive features including: 

• A 20% flat tax rate on income from qualifying Portuguese employment. 
• Full exemption on foreign-source income, except in the case of pensions and income from tax havens. 

Capital gains and rental income from foreign assets are also exempt under NHR 2.0 as per Pereira: 

“The NHR 2.0 provides a full exemption on foreign source income, particularly related to capital gains, which are now also within the scope of the exemption. This means that Portugal, whenever you have a foreign source income, will not subject that income to taxation, even though the country of source of such income may still tax it under the terms of the Double Tax Treaties,” he says before addressing the questions of pension income.  

“Pension income is no longer subject to any kind of special regime, so pension income is subject to progressive rates.”  

4. What Are the Key Compliance Requirements? 

Pereira notes that expats in Portugal must ensure proper tax registration and yearly filings: 

“The first tax challenge that any expat will face in Portugal is indeed to be sure that all compliance obligations are fully met and all contacts with the Portuguese tax authorities went smoothly from the first interaction to become tax resident in Portugal to every year submitting the personal income tax return.”  

An important distinction with NHR 2.0 is that it requires annual confirmation of eligibility, both by the individual and their employing company. 

“It is necessary to confirm each year that you still meet the requirements. If you are relying on a third party, your eligibility may be put in risk,” cautions Patrício. 

5. How Are Income and Investments from Abroad Treated in Portugal? 

“From a Portuguese perspective, the fact that you move assets to Portugal, either cash or any kind of other assets, it’s not by itself a taxable event,” answers Pereira.  “Of course, you may be required by the financial institutions involved in that process for additional compliance obligations like anti-money laundering checks. But from a tax perspective, there is not a trigger from the fact that you move any of your assets to Portugal or from Portugal.” 

This includes bank transfers and asset relocations, though financial institutions may require due diligence under anti-money laundering laws. 

Foreign capital gains, dividends and interest are exempt—unless derived from blacklisted tax havens. Portugal publishes a tax haven list that includes jurisdictions like the British Virgin Islands, Jersey, and even some parts of the UAE: 

“Whenever it’s foreign sourced income, it is exempt… unless it derives from tax havens,” asserts Patrício. “The tax haven list is made from a Portuguese perspective. Locations that might not be considered tax havens elsewhere may be listed here.” 

6. Are There Double Taxation Treaties in Place?

Yes. Portugal has one of the world’s most extensive double tax treaty networks: 

“Portugal has a widespread double tax treaty network with most developed economies,” states Pereira before highlighting another key advantage of the NHR 2.0. 

“Contrary to other countries, the fact that you apply this regime in Portugal, you are still entitled to all treaty benefits”. 

This is especially critical for U.S. citizens, who remain subject to taxation based on nationality. In these cases, taxes paid in Portugal may often be credited against U.S. tax liabilities according to Pereira. 

“It’s important to bear in mind that the taxation rules in the US are not only based on the residency but based on the nationality. This means that you may be a resident in Portugal for tax purposes, but at the end you still have some liability in the U.S.” 

“There are mechanisms already established to avoid double tax situation because of this mismatch in terms of how you define your tax status in the US based on nationality and in Portugal based on specific rules for it for you to become resident in Portugal.” 

7. How Are Inheritance and Gift Taxes Handled? 

Portugal offers a relatively favorable inheritance and gift tax framework as explained by Pereira.  

“We provide an exemption on gift and inheritance tax whenever the transaction or the gift or the inheritance goes between direct line or relatives. So, whenever we are dealing between parents and children or grandparents and children, we have an exemption on gift and inheritance tax.” 

Though Portugal provides this exemption, Pereira points out that cross-border implications must be considered in each individual case. 

“It’s important to assess from the other country’s perspective. For instance, if the beneficiary is another country, what are the rules applicable to the beneficiary in the other country? In the same way, while some countries tax the beneficiary, others tax the estate, which may be in a different country than the beneficiary, reason why international coordination is crucial.” he poses. 

8. How Are Social Security Contributions Handled? 

Even under NHR 2.0, standard social security obligations apply: 

“The Social Security contribution for the employee will amount to 11% and for the employer 23.75%, totaling 34.75%,” reveals Patrício. That being said, he also makes clear that strategic income structuring is possible. 

“Most likely, those who can from abroad have their main sources of income outside of Portugal, hence, only a small part of one’s income would be subject to social security, with the rest coming from exempt foreign income”. 

9. How Does Portugal Handle VAT? 

VAT (Value-Added Tax) is a consumption tax applied in most European countries on the sale of goods and services. It is collected at each stage of the supply chain, from production to final sale, but the tax burden is ultimately borne by the final consumer.  

Portugal’s main VAT rate is 23%, which places it in line with European norms. From a business perspective,  

“Within the business activity, you can deduct the VAT incurred and charge your clients VAT. That should have a neutral effect from a business point of view”. 

10. The Importance of Planning and Compliance 

Both Patrício and Pereira emphasized proactive planning: 

“Residency for immigration purposes may not be the same as residency for tax purposes”. 

Exit strategies should be carefully mapped out as well, particularly for business owners: 

“When deciding to leave Portugal, the sale of assets should also be planned accordingly:  asset deals, share deals, capital gains, and tax reliefs”. 

Portugal’s NHR 2.0 offers powerful tax advantages for globally mobile professionals, entrepreneurs, and investors, but it demands careful planning and compliance. Whether it’s tax residency, international income exemptions, social security structuring, or exit strategy, the new regime can offer a very favorable landscape if navigated correctly. 

To ensure success, individuals considering relocation should seek guidance from qualified advisors like the team at Forvis Mazars, who specialize in cross-border tax matters. 

“It’s very important that you understand that residency for immigration purposes may not be the same as residency for tax purposes… we are able to assist along with our colleagues in other jurisdictions”.