Portugal
Portugal's Non-Habitual Resident (NHR) regime closed to new applicants on 1 January 2024. Its replacement is IFICI, the Tax Incentive for Scientific Research and Innovation, widely called NHR 2.0. IFICI gives a 20% flat IRS rate on Portuguese income from a qualifying activity and exempts most foreign income for 10 years, but it is far narrower than the old regime, and crucially it offers nothing for pensions. This guide explains who qualifies in 2026, what changed, and how to apply.
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.
The ongoing housing crisis also influenced the government’s decision to end the NHR tax regime. Property prices in Portugal have risen sharply, and officials believe the program contributed to what they describe as “unfair inflation” in the housing market.
With generous tax breaks under the NHR scheme, many foreign residents had greater purchasing power and could pay higher prices for property in Portugal, which further drove up housing costs.
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.
The new regime also encourages companies to invest in high-value industries that support Portugal’s economic growth. NHR 2.0 provides tax incentives on Portuguese-sourced income and offers reduced or exempt tax on qualifying foreign-earned income.
Although the updated regime introduces several changes, it maintains one key feature: eligible individuals can still benefit from these tax incentives for 10 years.
Tax Incentive and Benefits for Scientific Research and Innovation (IFICI)
IFICI applies a 20% flat personal income tax (IRS) rate to Portuguese-source employment and self-employment income earned from the qualifying activity. Note the limit: the 20% rate covers income from that eligible activity only. Any other Portuguese income you earn is taxed at the standard progressive rates, which run up to about 53%.
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.
Most foreign-source income and capital gains are exempt from Portuguese tax during the 10 years, which is what makes IFICI valuable for people with investment income. The important exceptions are pensions, which are fully taxable, and income from jurisdictions on Portugal's blacklist, which is taxed at 35%.
This framework attracts skilled professionals and international companies to Portugal, strengthening the country’s economy and global competitiveness. At the same time, expats benefit from valuable tax advantages under the program, creating a win-win opportunity for both individuals and businesses relocating to Portugal.
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 | Old NHR (2009 to 2023) | IFICI / NHR 2.0 (from 2024) |
|---|---|---|
| Status | Closed to new applicants since 1 Jan 2024 | The current regime |
| Who it is for | Professionals and retirees | Highly qualified roles in research, innovation and certain companies |
| Retirees eligible | Yes | No |
| Rate on qualifying Portuguese income | 20% | 20% |
| Foreign pensions | Taxed at a flat 10% | No benefit, taxed at progressive rates up to about 53% |
| Other foreign income | Exempt in many cases | Generally exempt, except blacklisted jurisdictions at 35% |
| Duration | 10 years | 10 years |
Who actually qualifies for IFICI in 2026?
IFICI is not open to anyone who moves to Portugal. You must meet all of the conditions below, and the activity test is where most people fall out.
| Condition | What it means |
|---|---|
| Become a Portuguese tax resident | Spend more than 183 days in Portugal in a 12-month period, or have your habitual home there |
| Not resident in the last 5 years | You must not have been a Portuguese tax resident in the five preceding years |
| Work in a qualifying activity | Higher education and scientific research, certified startups, or qualified roles in eligible companies such as exporters and RFAI-benefiting firms |
| Hold the right qualifications | Typically a bachelor's degree, doctorate, or an equivalent European Qualifications Framework level 5 credential |
| Register on time | By 15 January of the year following the year you became resident |
The rules sit in article 58-A of the Tax Benefits Statute, introduced by Law 82/2023. Because eligibility hinges on your specific role and employer, this is worth checking with a tax professional before you rely on it.
When can you apply for IFICI?
Your eligibility to apply for IFICI depends on when you officially became a tax resident in Portugal. You are considered a tax resident if you spend more than 183 days per year in Portugal or if you maintain a primary residence there.
If you became a tax resident in 2024, the application deadline (31 March 2025) has already passed. If you did not apply in time, it is still worth seeking professional advice on your options. Viv Europe can assist with guidance on next steps and broader immigration or relocation matters.
If you became a tax resident in 2025, the application deadline was 15 January 2026. If you became a tax resident in 2026, you can still apply. Your deadline will be 15 January 2027.
For many applicants, the process can feel complex, particularly if this is your first time dealing with the Portuguese tax system. Getting professional guidance can help ensure the application is completed correctly and on time. If you need support, our experts can guide you through the process and help you avoid common mistakes.
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, when you sell investments or other assets, the exchange rate at the time of sale directly affects your capital gains tax liability in Portugal. A smart currency conversion strategy can help you reduce taxable gains and keep more of your money.
If you receive foreign pensions, rental income, or dividends, an unfavorable exchange rate can increase the euro value reported for tax purposes, meaning you may pay tax on more income than you effectively receive.
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
Portugal allows personal tax deductions for certain types of expenses. These deductions reduce the amount of tax payable, not your taxable income directly, and they are subject to annual limits.
Common deductible expenses include:
- Healthcare costs
- Education expenses.
- Housing-related expenses
- Elderly care and family support expenses
To benefit from these deductions, invoices must be issued with your Portuguese tax number (NIF) and be correctly classified in the tax portal. For example, education expenses are only deductible if the institution is recognised and the legal limits are respected. Keeping organised records of your expenses is essential.
- 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.
You must also pay stamp duty, which represents a percentage of the property price. However, the rate may decrease if you purchase the property as your permanent residence or as part of a qualifying rehabilitation project.
If you sell a property in Portugal, you may owe capital gains tax on the profit. Factors such as the length of ownership can directly affect how much capital gains tax you pay.
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.
You can also take advantage of foreign laws when planning property succession in Portugal. Instead of applying Portuguese succession law, you may choose the inheritance laws of your home country, depending on your nationality and circumstances.
This option can provide greater flexibility and create strategic advantages in specific estate planning situations.
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.
This is where IFICI differs most sharply from the old regime. Under the original NHR, foreign pension income was taxed at a flat 10%. Under IFICI there is no pension benefit at all: foreign pensions are fully taxable in Portugal at ordinary progressive IRS rates, which reach about 53% at the top. If your income is mainly a pension, IFICI will not help you, and that single fact should shape how you plan your move.
It’s also worth noting that some pensions let you take a lump-sum withdrawal instead of regular monthly payments. This approach can sometimes be more tax-efficient, depending on Portugal’s tax rules and any agreements with your home country.
Finally, Portugal has tax treaties with many countries, so it’s important to check these to avoid being taxed twice on the same income.
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 may trigger capital gains tax in your home country. However, if you complete the sale before officially becoming a tax resident in Portugal, you could benefit from lower tax rates or even avoid certain taxes.
- Many countries offer tax-free thresholds on capital gains or other income. By selling before you relocate and staying within these limits, you may reduce or even eliminate your tax liability.
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.
Frequently asked questions about NHR 2.0 and IFICI
Can I still apply for the old NHR regime?
No. NHR closed to new applicants on 1 January 2024, and the transitional window for people with prior ties to Portugal ended on 31 March 2025. If you already hold NHR status you keep it for the remainder of your 10 years.
Are pensions taxed under IFICI?
Yes, and this is the biggest change. The old NHR taxed foreign pensions at a flat 10%. IFICI gives pensions no relief at all, so they are taxed at ordinary progressive IRS rates of up to about 53%.
Is IFICI worth it for retirees?
Generally no. IFICI is built around qualifying professional activity, so if your income is mostly a pension you will not qualify and would not benefit even if you did. Retirees usually move to Portugal on the D7 visa and are taxed under the ordinary rules.
What is the deadline to register for IFICI?
15 January of the year following the year you became a Portuguese tax resident. The tax authority is expected to respond by 31 March. Missing the deadline generally means losing the benefit for that year.
How long does IFICI last?
Ten consecutive years from the year you first become a Portuguese tax resident, provided you continue to meet the conditions. It cannot be renewed or extended.
Does IFICI exempt all my foreign income?
Most of it, including employment, self-employment, capital, rental income and capital gains. The exceptions are pensions, which are fully taxable, and income from blacklisted jurisdictions, which is taxed at 35%.
What is the difference between NHR 2.0 and IFICI?
They are the same thing. IFICI is the official name, and NHR 2.0 is the informal nickname the market gave it because it replaced the NHR regime.
This article is general information, not personal tax advice. Portuguese tax rules change and outcomes depend on your circumstances, your nationality and any double taxation treaty. Speak to a qualified Portuguese tax adviser before making decisions.
Do You Want To Move To Portugal?
Planning a move to Portugal? Excellent choice! The Portugal NHR 2.0 program offers attractive benefits for expats, even though it differs from the previous regime. The key is to understand the updated rules and leverage them to maximize your tax advantages as you settle into your new home.
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!
