In order to qualify as a “non-habitual resident”, a Portuguese national or a foreign individual must become a tax resident of Portugal (i.e. spend >182 days/year or else have a place of abode as at December 31st) after not having been taxed in this country during at least the previous 5 years.
Recognition of this status is not automatic and is granted for a period of 10 years upon successful application to the Portuguese tax authorities up until March 31st of the year following that in which Portuguese residence was taken up.
It should be noted that although the individual must be a resident in Portugal when he/she submits the application, there is no minimum stay requirement afterwards and it is even possible to stop being a Portuguese tax resident for one or more of the 10 years without losing the non habitual resident status.
The application formalities have recently been considerably simplified and all that is now required is the filing of a statement to the effect that the applicant was not resident for tax purposes in Portugal during the 5 years preceding the arrival in in the country. Only in the event the tax authorities have doubts concerning the truth of what is stated will they request additional documentation, which may include a tax residence certificate from the previous country and a document proving that the vital and economic interests of the applicant were centred in another country during the previous 5 years.
Qualifying applicants are skilled professionals, entrepreneurs and investors, as per an official list of occupations, as well as recipients of occupational pensions.
Under this regime, the following taxation rules apply:
One interesting feature of this regime is that many double taxation treaties grant the power to tax income to the country of residence of the taxpayer, which means that in practice some types of income will in many cases be zero taxed in the hands of the “non-habitual resident”. One notable exception is the pensions of retired civil servants, which under most tax treaties are taxed by the source country regardless of the recipient’s country of residence.