Last Updated on April 11, 2025 by Maryam Siddiqui
The NHR (Non-Habitual-Residency) tax regime has been one of the major draws for expats looking to relocate to Portugal. Launched in 2009, this regime’s main objective was to attract foreign nationals, particularly those who wanted to reduce their tax obligations. With the old tax regime having closed its doors to new applicants in January 2024, the new Portugal NHR 2.0 took up.
What’s new with this new tax incentive? What does it mean for expats who were interested in relocating to Portugal courtesy of the old tax regime? This post gives you an exclusive look at the new NHR program. Stay tuned for all the details!
What Happened to the Original NHR Regime?
The original NHR Regime served its purpose, in fact, it was such a success that over 10,000 non-habitual residents took advantage of the program. However, while this was a good initiative for foreign nationals, the program had to come to an end because of two main reasons.
The main reason being politics, the left-wing politicians called the program “fiscal injustice”. Their main argument was that it gave foreigners lower tax rates while locals had to pay the full amount with no special breaks.
Another big reason for ending the program is the housing crisis. It’s no secret that property prices in Portugal have been climbing. The government believes the old NHR program played a role in this “unfair inflation.”
Since many foreigners had tax breaks, they could afford to pay more for homes, pushing prices up even further.
About Portugal’s New Non-Habitual Tax Regime
The new Portugal NHR 2.0 is now the official replacement for the old NHR regime. Commonly referred to as NHR 2.0, the Fiscal Incentive for Scientific Research and Innovation (IFICI) is different.
Unlike the old regime, the IFICI is quite specific on the type of expats Portugal intends to attract into the country. The new tax system is designed to draw in top talent from certain fields and attract high-value individuals.
It also encourages companies to invest in industries that are considered valuable for the country’s growth. NHR 2.0 not only offers tax incentives on Portuguese income but also reduced or exempted tax on foreign-earned income.
Yes, this new regime has come along with many changes. However, the one thing that has remained constant is the duration of these incentives which remains 10 years.
Tax Incentive and Benefits for Scientific Research and Innovation (IFICI)
The new tax regime in Portugal offers a special 20% personal income tax (IRS) rate for people working in certain high-demand fields, making it an attractive option for top professionals. Plus, if you earn income from abroad, it’s mostly tax-free!
The IRS exemption applies to different types of income, including dependent work, professional activities, capital income, rental income, and capital gains. These incomes will be added up to determine your remaining earnings’ tax rate.
Also, any foreign investments you make during the first 10 years are tax-free, so you can watch your investments grow without worrying about taxes.
This setup is designed to encourage skilled professionals and companies to come to Portugal, boosting the country’s economy. By extension, expats also get to enjoy some great tax benefits along the way. It’s a win-win for both individuals and businesses!
Key Differences Between Old NHR vs. IFICI
The IFICI is designed to establish the country as a hub for science and technology.
It is worth pointing out that while the NHR program has a standard qualification policy across the country. The IFICI has given the Islands of Madeira and Azores the autonomy to define the jobs and activities that the program will apply to.
That said, take a look at this table for differences between NHR and IFICI:
| Feature | NHR (2009-2023) | IFICI (2025) |
|---|---|---|
| Eligible Applicants | Professionals & Retirees | Highly Skilled Workers In Science, Research, and Innovation |
| Retirees Eligible | Yes | No |
| Foreign Income Exemptions | Yes, in many cases | Only under specific Circumstances |
| Tax Rate On Local Income | 20% | 20% |
| Duration | 10 Years | 10 Years |
When Can You Apply For IFICI In 2025?
Initially, when you could apply for IFICI depended on when you officially became a tax resident in Portugal. You become a tax resident by spending more than 183 days a year in Portugal or having a primary home there.
If you became a tax resident in 2024, the deadline to apply (March 31, 2025) has already passed. If you missed it, don’t panic—reach out to Viv Europe for expert advice on what to do next. We specialize in helping expats navigate Portugal’s tax system and also facilitate visits or immigration.
If you become a tax resident in 2025, you still have time! The deadline for your application is January 15, 2026. But we must admit, this whole process can feel a bit overwhelming, especially for first-time applicants.
That’s why getting professional guidance is so important. If you need help, don’t hesitate to reach out to our experts. We will not only point you in the right direction but also hold your hand along the way.
Tax Saving Tips For Expats
The new Portugal NHR 2.0 isn’t as generous as before, it’s got perks, but only for a select group of expats, leaving many out.
So, if you don’t qualify for the IFICI, how can you still keep your tax bill low? Let’s dive into some smart and legal ways to save on taxes in Portugal.
- Read Also: Portugal Tax System: Easy Breakdown For Expats.
Keep In Mind The Currency Rates
Keeping an eye on currency exchange rates can actually help you save on taxes in Portugal.
Here’s how: First, if you earn in a foreign currency, converting your money when the rates are good means you get more euros while keeping your tax hit lower. Bad timing? You might lose out and still get taxed on a higher amount.
Second, if you’re selling investments or assets, the exchange rate at the time of sale affects how much you owe in capital gains tax. A smart conversion strategy can help you keep more of your money.
If you’re getting pensions, rental income, or dividends from abroad, a poor exchange rate could mean you’re taxed on a bigger euro value than what actually lands in your account.
Bottom line? Being strategic with currency conversions isn’t just about getting more bang for your buck, it can also stop you from paying more taxes.
Take Advantage Of Personal Deductions
One thing you need to be aware of is personal deductions. These are expenses that you can deduct from your overall taxable income, reducing your tax obligation to the government.
Such expenses cover healthcare, education, or even house expenses just to mention a few. A good example is when you pay for your child’s education.
You have the option of deducting the tuition fees and other education-related activities from your tax. So, keep those receipts..
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- Next Read: Personal Tax Deductions in Portugal.
Optimize Taxes On Property
If you’re an expat in Portugal, knowing how property taxes work can save you a good chunk of money. Whether you’re buying or selling, understanding the different taxes can help you plan better and avoid unnecessary costs.
First, there’s IMT (property transfer tax). You pay this when buying a property, and the rate depends on the type, value, and location. Looking into exemptions can help cut costs.
Then there’s stamp duty, a small percentage of the property price, which might be reduced if it’s your permanent home or a rehab project. If you sell a property, you might get hit with capital gains tax on the profit. Remember that factors like how long you’ve owned it can affect the amount.
Lastly, the AIMI wealth tax applies to high-value properties. Knowing these taxes ahead of time means you can plan smarter, claim exemptions where possible, and keep more of your money.
The Portuguese Succession Law And Taxes
As an expat, understanding the succession laws in Portugal is important if you want to save money on taxes. One important succession law you need to know is the no inheritance tax. This only applies to close families, exempting them from paying taxes for inherited assets.
Another way of leveraging succession laws is by writing a will. Forced heirship ensures your assets are distributed how you want and helps prevent other unexpected tax obligations.
Something else worth mentioning is that you can use foreign laws to your advantage. Instead of using Portuguese law for property succession, you can choose property laws from your home country. This can be to your advantage in unique circumstances.
Consider The Options For Your Pension
As an expat, the one thing that you can leverage to save on tax is how you handle your pension. Begin by checking if you qualify for any favorable tax incentives.
The old Non-Habitual-Regime initially gave a 10-year tax-free period to anyone who qualified for the program. For this new program, pension is taxed at 10%.
Something else worth mentioning is that some pensions allow you to withdraw a lump sum instead of making monthly payments.
This can sometimes be more tax-efficient, depending on Portugal’s tax rules and any treaties with your home country. Lastly, Portugal has tax treaties with other nations. Be sure to confirm that you don’t get taxed twice.
Time Your Move
If you plan to move, it’s worth considering when to sell your assets back home. Timing it right can help you save on taxes and keep more of your money. Here’s what to keep in mind:
- Selling property or investments could mean paying capital gains tax in your home country. But if you sell before officially becoming a tax resident in Portugal, you might get better tax rates or even avoid some taxes altogether.
- Some countries have tax-free limits on capital gains or other income. If you sell before you move and stay within those limits, you could reduce or even skip the tax bill.
Long story short: a little planning now can save you a lot later!
Reduced Corporate Tax Rates
Businesses set up and running in Portugal enjoy a reduced corporate tax rate aimed at encouraging businesses and companies to set up shop in the country.
At the moment, the corporate tax stands at 21% but can also get as low as 17% for Small and Medium Enterprises, as per TaxSummaries.
That said, by choosing to establish your business in Portugal, you can benefit from the reduced corporate tax rates, which will ultimately increase your profit margin.
Do You Want To Move To Portugal?
Thinking about moving to Portugal? Great choice! The Portugal NHR 2.0 is here to stay. While it’s different from the old program, it still comes with plenty of benefits for expats looking to make Portugal their new home. The key is understanding the new rules and figuring out how they work in your favor.
With these changes, getting expert advice is more important than ever. A professional can guide you through the application process and help you make the most of the new system. Viv Europe is a fantastic option that specializes in helping expats settle in Portugal. Consider booking a consultation and engaging our experts. We promise to make your move smooth and stress-free.
Also, don’t forget to join our Facebook Group – All About Portugal For Expats! It’s a great place to ask questions, share experiences, and even make new friends before you arrive. See you there!
