Non-Habitual Resident Regime vs. Residence Permits
Cecília Beatriz Ferreira | Lawyer
José Manuel Pereira da Costa | Lawyer
Before further considerations, let’s start with the basics: the NHR is not a Residence Visa, nor a Portugal Residence Permit – it is a Portuguese tax regime. A Residence Permit is a document, issued as a residence title, that allows foreigner citizens to live in this country.
When one decides to relocate to a different country, some of the issues that arise need a quick solution, while other issues come with time. The first thought that usually crosses a foreign citizen’s mind is to make sure that he complies with the immigration rules of the country they decide to live in and how they can benefit from the legal framework of said country.
A foreign citizen begins their relocation process by applying for a Visa/residence permit. A Visa will allow them to enter the country and the Residence Permit will be a sort of an ID card that will prove that the holder complies with all the requirements to stay in the country for a certain period. This is the common procedure for someone who is looking to move to Portugal: first apply for a residence visa, then obtain a residence permit. But this will ultimately depend on each specific case.
There are a lot of different Visa/Residence Permits that may be applicable depending on numerous factors. With respect to Portugal, there are a few options for Visa and residence permits. For instance, short-stay visas; temporary work visas; work permits; investment residence permits; family reunification Visas/residence permits, and so on.
Typically, depending on the applicant's reason for moving to Portugal and on whether they have all the legal requirements, they may have a specific Visa/Residence Permit in mind.
We usually assist our clients during this process at the Portuguese Consulate near their legal area of residence or at SEF – The Immigration and Border Service.
On a general basis, the applicant submits a request to one of these public entities and after a detailed analysis, they should be granted a Visa or a Residence Permit. The Visa/Residence Permit implies the payment of a government fee, and the amount varies according to the type of Visa or residence permit.
In our experience, once the immigration matter is solved, the foreign citizen should then consider taxes. And on this note, when it comes to becoming a new tax resident in Portugal, we usually suggest that our clients apply for the Non-Habitual Resident tax regime.
The Non-Habitual Resident tax regime is a special tax status for individuals (Portuguese or foreigners) that haven´t been tax residents in Portugal in the five years prior to becoming one.
The conditions necessary to be considered a tax resident in Portugal are as follows:
- the applicant has stayed in Portugal for more than 183 days, either consecutive or not, in any 12-month period beginning or ending in the year in question. or
- the applicant has stayed in the country for less time but has an available accommodation that can serve as their habitual place of residence.
Please be advised that one does not need to apply for or be granted residency rights to be eventually considered a tax resident in Portugal. It is important to understand that tax residence is separate from legal residency status.
The entity responsible for deciding on the NHR application is the Portuguese tax authority (Autoridade Tributária e Aduaneira or simply “AT”).
A residence permit is therefore different from the NHR tax status. The following tables summarize the main differences:
Non-Habitual Tax Resident Eligibility Criteria
a) One must not have been a tax resident in Portugal in the previous 5 years before becoming one;
b) One must register as a tax resident in Portugal (*);
c) Apply for NHR status by March 31 of the year following the first year they became a tax resident in Portugal.
Visa/Residence Permit Eligibility Criteria
Depends on the applicant's reasons to move to Portugal and whether they will be able to comply with the respective Portuguese legal framework.
(*) The right to be taxed as a non-habitual resident yearly implies that the person must be considered a tax resident in Portugal at any time during that year.
Portuguese Tax Residency Requirements
The person will be considered a tax resident in Portugal if any of the below circumstances are met:
a) Remaining within Portuguese territory (including Azores and Madeira) for more than 183 days, consecutive or interpolated, in any period of 12 months; (**)
b) Staying for less time but having an available accommodation that can serve as their habitual place of residence;
c) Are crew members of ships or aircrafts, or are in service of entities with residence, headquarters, or effective management in Portuguese territory.;
d) Perform public functions or commissions abroad in the service of the Portuguese Government.;
Visa/Residence Permit Requirements
Depends on the chosen visa/Residence Permit.
(**) A day of presence in the Portuguese territory corresponds to any day, complete or partial, that includes an overnight stay.
In conclusion:
- A Visa is granted solely at the discretion of the Portuguese Consulate after the applicant requests a visa to enter Portugal.
- A Residence Permit is granted only if the process is accepted by the SEF, after the applicant asks to live in Portugal.
- The NHR is a special tax regime best suited for new tax residents in Portugal.
If you have further questions regarding this matter, get in touch with us and we will be delighted to assist you.
