Taxation Non-Habitual Residents

The Non-Habitual Resident (NHR) Statute is a special tax regime that provides a reduction in the Personal Income Tax (IRS) for a period of 10 years to new foreign residents (of any nationality) and to the Portuguese citizens who have been living abroad for more than 5 years.

To be qualified for this favorable tax regime, the NHR must engage in a professional activity considered to be of “high added value” or to be a pensioner.

This incentive aims to attract qualified professionals in high-importance activities and the beneficiaries of pensions obtained abroad.

In addition, there are two essential requirements that must be met:

1. Being classified as a resident in Portuguese territory
2. Having not been a resident in Portugal for the preceding 5 years

Since the establishment of this special tax regime, the tax administration has argued that, once the legal registration deadline has expired, the taxpayer's right to benefit from this measure is automatically forfeited.

However, over the past few years, this question has been examined and it was a subject of discussion.

Recently, a judicial trend has been developed, especially in the arbitration contexts, asserting that the registration obligation has only declarative effects and not constitutive ones.

The Supreme Administrative Court has now weighed in on this debate in the Process nº 0842/23.9BESNT, considering  that has been consistently upheld by the arbitration jurisprudence and is anticipated to resolve the protracted debate concerning to the effects of the registration requirement for NHR.

It has established that this obligation doesn’t constitute a prerequisite for the establishment of the rights.

Consequently, the conditions for the application of the NHR regime are solely that the taxpayer must be a tax resident in Portugal and must haven’t been considered a resident in the national territory during any of the five years immediately preceding.

Therefore, it follow that even if the taxpayer doesn’t complete the registration as a NHR by March 31 of the year following their establishment of residency in Portugal, provided that the substantive requirements are met, they may still qualify for and benefit from the NHR status.

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