Clélia Brás

Partner | National Head of Real Estate

Nuno Oliveira Santos

Partner | National Head of Tax

Bruno Sousa Gavaia

Managing Associate | Real Estate PRA Porto

Inês Santos

Managing Associate | Tax PRA Porto

October 6, 2022

Non-Habitual Resident Personal Income Tax Regime in Portugal and the impact on Real Estate Transactions

Created in 2009, the non-habitual resident (hereby “NHR”) Portuguese tax regime provides a rather favorable personal income tax framework for those that qualify to benefit from it.

Such regime is characterized by two key aspects – type of income and eligibility requirements to qualify as a non-habitual resident in Portugal.

Firstly, regarding the types of personal income.

  1. Income obtained abroad:
    1. Employment Income will be tax exempt if effectively taxed abroad;
    2. Real Estate Income, dividends, interests, royalties, capital gains and self-employment (from high added value activities) income are exempt in Portugal provided that under a Double Tax Agreement rules of OECD Model Convention rules can be potentially taxed in the country of source;
    3. Pension Income is subject to a 10% fixed tax rate.
  2. Income obtained in Portugal – Employment and Self-employment income obtained from high added value activities (the Portuguese Tax Authorities have a list with such type of activities that are recognised as high added value activities) are taxed at a reduced fixed personal income tax rate of 20%.


Secondly, in order to benefit from the NHR regime, there are some specific requirements that must be met.

On one hand, having not been a Portuguese tax resident for the five years prior to the one in which you intend to benefit from the NHR personal income tax regime, you must qualify as a Portuguese resident, for tax purposes.

Regarding this particular aspect, Portuguese tax law establishes different possibilities for an individual taxpayer to be considered a Portuguese tax resident (either by staying in Portuguese territory for more than 183 days, whether they are uninterrupted or spread out throughout a 12-month period, or even, if you stayed in Portugal for less than 183 days in a full calendar year, it is still possible to be considered a Portuguese tax resident, if, in any of the days of that 183-day period, you have a permanent address in Portugal that can indicate an intention of maintaining and occupying it as a permanent residence).

So, having met the criteria mentioned above, whilst not being considered a Portuguese tax resident for the previous five years, one can be eligible to benefit from the NHR personal income tax regime. Also, once a taxpayer is considered a non-habitual resident in Portugal, for tax purposes, this special regime will be applicable for full a ten-year period, provided that they qualify as a tax resident in Portugal for each calendar year of the ten-year period.

Overall, the NHR regime represents a substantially more beneficial personal income tax regime for foreigners that intent to relocate, either definitely or just temporarily, to Portugal, to live and work. In fact, and as indicated above, under the Portuguese NHR regime, it is possible to reach full tax exemption in both country of residence and country of source of the income, namely on passive income as dividends, interests and royalties.

Another plus is that the NHR status eligibility depends exclusively on the non-tax residency in Portugal during the previous 5 years prior to becoming tax resident in Portugal, without any investment or additional requirements.

Finally, this special regime has been in place since 2009 and since then, the tax benefits it includes have only been amended (in the sense of making the regime more solid and robust) twice (but solely applicable to newcomers, protecting acquired rights), making it a stable and trustworthy legal framework.

The NHR regime, obviously in parallel with other extra-fiscal measures, has led to a significant increase in real estate transactions which, considering the growth trend of the last few years, to a certain extent, also due to a non-fixed housing policy, whose supply has corresponded to the exponential demand for real estate, and also to highlight the increase in consumption, whether in restaurants, hotels, supermarkets, etc., This regime has had a very positive economic and real estate impact, namely in areas of the country that would never have been an option for the real estate market in the past, and that today have surprising levels of real estate activity.

It should also be noted that one of the most encouraging qualities in Portugal is that there are no restrictions for foreigners who want to buy a home in the country. Also, the right to housing has been promoted by the Portuguese Government (it is also contemplated in the Law – Lei de Bases da Habitação) and it was established that in the case of first housing in Portugal that is intended for the owners permanent housing, the prospected owners may benefit from some tax exemptions, namely:

  • IMT (Municipal Tax on Transfers of Property)Benefit from IMT exemption if the value of the property does not exceed €92,407 in mainland Portugal or €115,509 in the autonomous regions, these values ​​are updated annually.
  • IMI (Municipal Property Tax)Owners are exempt from payment during the first 3 years, as long as the property value does not exceed €125,000 and the owners’ taxable income does not exceed €153,300 per year.


Portugal has also promoted the urban rehabilitation of its real estate market, for which some tax benefits were instituted, for those who promote the rehabilitation of properties in accordance to the law.

This, if convergent with the real estate activity in an ARU zone (Urban Rehabilitation Area), contemplates an increase of benefits, namely at the level of IRS (through a tax deduction), of Capital Gains (with own taxation), of VAT (with a reduced rate of 6%) or of IMI, for example.

In conclusion, the tax regime applicable to NHR is an essential regime for attracting new (tax) residents to Portugal and, obviously, has an impact on the growth of real estate transactions.