When is foreign income obtained by Non-Habitual Residents in Portugal exempt from taxation?

For those individuals who also wish to reside in Portugal, a special tax regime for non-habitual residents may apply, which may lead to a more beneficial tax burden.

Foreign income obtained by Non-Habitual Residents in Portugal is exempt from taxation in the following cases:

In the case of pensioners and retired people when:

  • Income is taxed in the source State, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or
  • Income is not considered to have been obtained through a Portuguese source, according to the criteria provided for in the IRS Code (personal income tax)

In the case of income derived from employment, when:

  • Income is taxed in the State of origin, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or
  • That income is taxed in another State with which Portugal has not signed any convention to eliminate double taxation, as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS Code (personal income tax)

In the case of income from self-employment (through the provision of services of a high added value, of a scientific, artistic or technical nature, or through intellectual or industrial property, investment income, rental income, capital gains income or other increases in equity), when:

  • The income may be taxed in the source country, territory or region, in accordance with the convention to eliminate double taxation, or
  • When no convention to eliminate double taxation has been signed, the OECD model convention may be applied (taking into consideration the observations and reservations made by Portugal) and as long as the source country, territory or region does not have a privileged tax regime, and as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS (personal income tax)

Source: Living in Portugal

Stuart Beaty

Celsium, Birmingham, UK