UK tax residents can take advantage of Portugal’s non-habitual resident scheme to receive their pension, and other qualifying income, tax-free.

About the Non-Habitual Residency scheme

By becoming a Portuguese tax resident under the Non-Habitual Residency scheme, your qualifying income will be tax-free both in Portugal and in the United Kingdom, subject to any withholding taxes applied in the UK. This attractive regime also covers professional income, from high value-added activities, which benefit from a special flat tax rate of 20%. The special status takes effect for 10 years, with all foreign-sourced pension income generally being tax-free, making it particularly attractive to those who are retired or who are looking to retire.

Benefits of the NHR scheme

  • No minimum investment required.
  • Pensions, dividends, royalties and interest from non-Portuguese sourced income are exempt from personal income tax in Portugal, as are certain types of salaries that qualify.
  • Favourable to succession tax regimes; spouses and children are exempt.
  • Successful NHR applicants will have access to other benefits associated with tax residency in Portugal, including healthcare.

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Eligibility and requirements

Requirements of Portugal’s Non-Habitual residency The requirements are straightforward and offer flexible options. You must first become a tax resident of Portugal. This can be achieved through Portugal’s golden visa programme. Download our full guide to Portugal’s golden visa scheme. The Non-Habitual Residency scheme also requires that you have not already been declared a tax resident of Portugal for the five years prior to your application. How to apply for Non-Habitual residency You need to declare yourself a tax resident of Portugal – to officially become a tax resident you must either spend 183 days or more per year in Portugal, or you must be habitually resident in Portugal. Do I have to buy or can I rent? Yes, you can rent instead of purchase. If you are renting a property, you will be required to provide evidence of your address in Portugal, which you can do by submitting a copy of your rental contract. What income qualifies? Pensions, dividends, royalties and interest from non-Portuguese sourced income are exempt from personal income tax in Portugal, as are certain types of salaries that qualify. It is important to note that capital gains from the sale of securities will be taxed at 28%, as will income sourced from a blacklisted jurisdiction. Finally, if you receive a salary from a high-value activity, it will be taxed at a flat rate of 20%.

What about Brexit?

Brexit won’t have an impact on your NHR tax-free pension once the UK leaves the EU. This is because it is based on Portugal’s double taxation treaty with the UK, which states that pension income can only be taxed in the country in which the individual is a tax resident. Ten years of tax-free pension sounding good? Global Citizen Solutions can guide you seamlessly through the application process. Contact us now. Source: Edge International Lawyers UK citizens can now also apply for the Portugal Golden Visa to secure residency and, ultimately citizenship after five years if they fulfill all the requirements under Portugal nationality law. You can read our article here on the Portugal Golden Visa for UK citizens for further information.