NHR current rules valid until 31st March 2020 as 2020 Budget comes into force 1st April 2020

The 2020 Budget, which was approved by Parliament on 6th February will result in some important changes to the NHR programme, particularly for NHRs in receipt of pension income and self-employment/consulting income. Due to the development of the Covid-19 pandemic and the current State of Emergency, the Budget was only recently approved by the President and will enter into force on 1st April 2020.

By way of a reminder, the changes will be as follows.

  1. A rate of tax of 10% on foreign pension applying to new NHRs with no minimum tax.
  2. NHRs acquiring the status before the law comes into force would benefit under the existing rules. This means individuals already benefiting from the status will keep in full their current benefits until the end of the ten-year period.
  3. Consequently, existing NHRs would be “grandfathered” under the existing legislation; and
  4. Existing NHRs could choose to have the new rules applied to them.
  5. In order to benefit from an exemption, self-employment income and some royalties generated in the exercise of a High Added Value Activity must be taxed at source.

The new rules also seem to broaden the definition of pension income, previously treated as salary, which can benefit from the 10% rate.

Finally, individuals who have established their tax residency in Portugal up to the end of 31st March 2020 may apply for the NHR under the current existing rules until 31st March 2021. Given the current challenges, we are working closely with our clients to find solutions enabling them to establish this tax residency or prove this tax residency should it be necessary to backdate it to a date prior to 1st April.