Zero Tax on Retirement Pension for foreigners in Portugal – Non Habitual Resident Tax Regime
Foreign Pensioners can reside and collect their retirement pensions in Portugal entirely tax free. Non Habitual Reisdent Tax Regime is best of the crop across the world! Portugal has launched an impressive and golden measure to attract affluent worldwide pensioners to come and reside in Portugal. The lure is zero tax on such pensions. Most of the treaties on double taxation state that pensions can only be taxed in the country of residence of the beneficiary, with the exception of pensions paid to former public servants. Portugal guarantee the zero tax status to newcomers for ten years. The law also provides for reduced taxation on wages, intellectual property, interests, dividends and other capital gains.
Portugal becoming a tax haven for your retirement; the tax regime for Non Habitual Residents in Portugal; Pensions and other foreign sourced income.
I. Introduction to the Non Habitual Retired Resident Regime
In its assumed objective to attract affluent senior citizens from around the world, and specially from high tax countries, the Portuguese government has approved one of the most aggressive and competitive tax regime for pensions of any kind, from pensions paid by social security, employer’s retirement plans, to pension funds, trough other arrangements like private insurance.
Since the 1st of January 2013, foreign sourced pension income, even if has not been taxed in the country of origin (most cases), received in Portugal by individuals who qualify for the status of non habitual residents, are totally exempted from tax (0%).
Other foreign sourced income will also be exempt in Portugal and locally generated income, will be in most cases taxed at a flat rate of 20%.
II. Who can benefit from the status of non habitual resident?
Any foreigner was not been taxed as Portuguese residents in the previous five years.
III. What is needed to fulfill the legal criteria to become a Non Habitual Resident?
a) the individual must reside in Portugal 183 calendar days, either consecutive or not, in the year of application and the subsequent years.
b) The individual should have by the 31st of December of the year of application a permanent residence and be able to show that he is the intent of using it has his primary home and residence.
IV. For how long is this tax exception granted?
The retired foreign citizen that successfully applies to this status benefits from the foreign sourced personal income 0% tax and reduced tax from Portuguese generated income for 10 (ten) years.
V. Other advantages:
The Non Habitual Resident Regime can be cumulated or coupled with other existing tax incentives such as the GOLDEN VISAS. Portuguese earned income such as wages, provision of services will be taxed at a reduced rate of 20%. In general, dividends, interests, capital gains and other foreign earned income will be exempt from personal income tax in Portugal.
Tax Regime for Non Habitual Residents
How can you acquire Non Habitual Resident Status?
Once Non Habitual Resident Status has been obtained, what is the taxation rate and incidence applicable to domestic source income?
In the case of employment or self-employment, the applicable taxation rate is 20% (with an additional 3.5% surcharge in 2014).Taxation applies to income derived from high added value activities of a scientific, artistic or technical nature:
Registration as a Non Habitual Resident confers the right to be taxed as such for a period of 10 years as from the year of registering as a tax resident in Portuguese territory.
Once Non Habitual Resident Status has been obtained, in which cases is foreign income obtained by Non Habitual Residents in Portugal exempt from taxation?
In the case of pensioners and retired people when:
In the case of income derived from employment, when:
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: