Portugal Announces 'transitory NHR tax regime’ for 2024

In a surprising turn of events, Portugal’s government announced a transitory NHR (Non-Habitual Residence) tax regime for 2024. This announcement comes as a crucial update for digital nomads and remote workers who have been eyeing Portugal as their next destination. The original NHR regime, which has been in place since 2009, offered reduced tax rates on income for a duration of 10 years. This regime was set to be discontinued in 2024, but the new transitory NHR regime offers a temporary extension.

Understanding the Transitory NHR Regime

The transitory NHR regime is a bridge for those who were already planning their move to Portugal in 2023. To qualify, applicants must provide evidence of their commitment to moving to Portugal, such as property purchase contracts, employment or work contracts in Portugal, or enrolment of dependents in Portuguese educational institutions. This regime is a response to concerns regarding fiscal justice and the impact of the original NHR regime on the housing market, as pointed out by former PM António Costa.

According to the government’s official statement, there are six ways to benefit from the transitory regime:

➤ Promise of employment or work contract, or promise or secondment agreement celebrated until December 31, 2023, with work duties having to be performed in national territory;
➤ Lease contract or another contract granting the use or possession of property in Portuguese territory concluded until October 10, 2023;
➤ Reservation contract or promissory purchase contract with rights over property (contrato-promessa de aquisição de direito real sobre imóvel) in Portuguese territory concluded until October 10, 2023;
➤ Enrolment or registration of dependants in an educational institution located in Portuguese territory, completed until October 10, 2023;
➤ Residence visa or residence permit valid until December 31, 2023;
➤ Procedure initiated with the competent authorities for the granting of a residence visa or residence permit, until December 31, 2023.

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Deadlines and Eligibility Criteria

For digital nomads and remote workers, understanding the eligibility criteria and deadlines is crucial. Key dates include December 31, 2023, for employment contracts, and October 10, 2023, for property-related contracts and educational enrolments. Additionally, those with a valid residence visa or permit, or those who have initiated the procedure for obtaining one, are eligible until December 31, 2023.

Implications for Digital Nomads and Remote Workers

This new development is particularly significant for digital nomads and remote workers, who often seek tax-efficient destinations. Portugal, with its favorable climate, vibrant culture, and robust digital infrastructure, has been a top choice for many. The transitory NHR regime offers an additional year of reduced tax rates, which can be a decisive factor for those considering Portugal for their remote work base.

Political Context and Future Outlook

The announcement of the transitory NHR regime coincides with the resignation of PM António Costa and the call for early elections in March 2024. This political shift opens the door for future changes to the tax regime, leaving digital nomads and remote workers in a position to closely monitor the evolving tax landscape in Portugal.

Conclusion

The introduction of the transitory NHR regime underscores the dynamic nature of tax policies in a global context. For digital nomads and remote workers, this development offers a timely opportunity to benefit from Portugal’s tax incentives. However, it’s essential to stay informed about future policy changes that might arise following the upcoming elections and the evolving global economic climate.

Published on November 17, 2023.