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The NHR 2.0 refers to the new favorable tax regime, named «Tax Incentive for Scientific Research and Innovation», targeting highly qualified individuals that relocate to Portugal.

The NHR regime was introduced in 2009, offering significant tax benefits to those who are qualified, particularly for their foreign income. However, changes to the program, introduced in the beginning of January 2024 aim to address some criticisms and reform the system while still attracting highly qualified individuals.

To access this tax regime the individual must become a tax resident in Portugal, not having been considered a tax resident in Portugal for the previous 5 years and perform one of the eligible scientific research and innovation activities.

Key Features of NHR 2.0

  1. Flat Income Tax Rate for Certain Professions – One of the most attractive features of the NHR 2.0 program is the flat 20% tax rate for individuals working in scientific research and innovation activities, regardless of being employees or freelancers. This flat rate is highly competitive compared to the standard progressive Portuguese tax rates, which can go up to 48%.
  2. Tax Exemption for Foreign-Sourced Income – One of the core benefits of the NHR program is that it allows individuals to be exempt from taxes on foreign-sourced income for up to 10 years. This includes income from employment, freelancing, business activities, royalties, dividends, interest, rents, and capital gains earned abroad.
  3. 10-Year Benefit Period – The NHR 2.0 allows beneficiaries to enjoy from these tax benefits up to 10 years from the date they first register as tax residents in Portugal. This makes it a long-term option for individuals looking to live and work in Portugal while maximizing tax savings.
  4. Stricter Residency Requirements  – Under NHR 2.0, the Portuguese Government is applying stricter rules to verify genuine residency in the country. Individuals must prove that they spend a significant amount of time in Portugal, usually defined as 183 days per year, or demonstrate that Portugal is their primary place of residence (owning property, having family ties, etc.). This is meant to prevent people from using the program as a tax loophole without genuinely living in Portugal.

Why NHR 2.0 Still Appeals to Digital Nomads and Expats

Despite the reforms that tighten some loopholes, NHR 2.0 remains one of the most attractive tax schemes in Europe for several reasons:

  • 10-year tax benefits: A decade of favorable tax treatment is a significant incentive for long-term relocation.
  • Tax-free foreign income: For those earning a significant part of their income outside Portugal the potential to be exempt from Portuguese taxes on that income remains a substantial draw.
  • Strategic relocation: Portugal’s competitive tax rates, high quality of life, and stable political and economic environment make it an ideal location for those seeking an EU country with favorable tax conditions.

In summary, NHR 2.0 keeps Portugal an attractive option for highly qualified individuals, especially those working in high-value industries or earning substantial foreign income.

Please, note that the Portuguese Government has not yet published the decree that will enable the above measures to be implemented

To learn more about how you can apply, please contact our Tax Department at [email protected].

 

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