The Investment Tax Code, implemented a Personal Income tax system for the non-regular resident, with the purpose of attracting to Portugal non resident professionals qualified for activities with high added value intellectual or industrial propriety or knowhow, as well as beneficiaries of pension schemes granted abroad.
This regime offers multiple advantages at individual income tax rate (IRS) in the seveal types of income, obtained in Portugal or abroad.
The non-regular resident tax regime is available for citizens meeting the following conditions:
• Has not been deemed resident on Portuguese territory during the five years prior to the year pretended to be taxed as a non-regular resident.
stay in Portugal for a period longer than 183 days, consecutive or not, in the last 12 months, or If less time, own a property as an habitual residence by 31st December of the same year.
A citizen deemed non-regular resident has the right to be taxed according to the nonregular resident tax scheme during a period of 10 consecutive years, from the year of the registration as a resident on Portuguese territory, as long as continues to be deemed resident in each of the 10 years.
This period of 10 years is not extendable.
Whenever the citizen has not benefited from right to be taxed according to the tax regime defined for non-regular residents in one or more years of that 10 years period, still may benefit again from that same right in any of the remaining years of that period, provided the citizen still has a resident status for income tax purposes.
The request for registration as a non-regular resident must be made:
only after the registration as a resident in the Portuguese territory, or
must be done until March 31, inclusive, of the year following the one in which he became a resident in the Portuguese territory.
This special tax regimen offers low effective tax rates on personal income to people who decide to live in Portugal. Rates are applied to Portuguese and to foreign income.
A - PORTUGUESE SOURCE INCOME
PROFESSIONAL INCOME – EMPLOYMENT - CATEGORY A
Net income of category A (employment) obtained from the high added value activities, of scientific, artistic or technical nature mentioned above, by non-regular residents on Portuguese territory are taxed at the special rate of 20%.
Managers, administrators and others investors with managing powers are included.
A surcharge of 3.5% may apply
INDEPENDENT INCOME - SELF EMPLOYMENT - CATEGORY B
Net income obtained from the listed high added value activities, of scientific, artistic or technical nature by non-regular residents on Portuguese territory shall be subject to a withholding tax of 20%,
A surcharge of 3.5% may apply
Income from real estate management, capital gains, interests and royalties: flat rate of 28%
Regarding the remaining income of category A and B (not considered of high added value) and income of the remaining categories, obtained from non-regular residents, these shall be aggregated and taxed according to the general rules of the CIRS – rates from 14 to 48%.
B – FOREIGN SOURCE INCOME
1 - CATEGORY A INCOME (EMPLOYMENT)
The exemption method is applied to category A income obtained abroad by nonregular residents on Portuguese territory, if one of the conditions described in the following subparagraphs is satisfied:
a) Person taxed by the source State (Nation), according to the convention to eliminate double taxation entered into by Portugal and the source State (Nation); or
b)They can be taxed in another country, in cases where the convention to eliminate double taxation has not been held, as long as the income obtained is not considered to have been obtained in Portuguese territory
2 - Income in category B (Self Employment),
Income obtained through high added value rendering of services of a scientific, artistic or technical nature, or from intellectual or industrial property, as well as, from providing information regarding an experiment carried out in the commercial, industrial or scientific areas B (Self Employment), are exempt if alternatively:
a) They are taxed by the source State/nation, according to the convention to terminate double taxation entered into by Portugal and the source State;
or b) They can be taxed in another country, in cases where the convention to terminate double taxation has not been held into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as it is not a territory subject to privileged tax systems and, as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory
3- income in categories E (Capital Income), F (Real State Income) and G (Increase in Wealth)
Income from category E, F and G, obtained abroad by non-regular residents, are exempt if alternatively:
a) They are taxed by the source State/nation, according to the convention to terminate double taxation entered into by Portugal and the source State; or
b) They can be taxed in another country, in cases where the convention to terminate double taxation has not been held into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as it is not a territory subject to privileged tax systems
and, as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory,
4 - Income in category H (pensions)
Portuguese non-regular residents that have obtained category H incomes in foreign countries, have exemption if these incomes are from contributions that have not been deducted and if the conditions below are met:
a) They are taxed by the source State/nation, according to the convention to eliminate double taxation held by Portugal and the source State; or
b) They cannot be considered to have been obtained on Portuguese territory
What activities are considered of high added value, of scientific, artistic or technical nature, for the purposes of application of the non-regular resident regime?
1 - Architects, engineers Geologists
2 - Visual artists, actors and musicians: Theater, ballet, cinema, radio and television artists - Singers - Sculptors - Musicians - Painters
3 - Auditors: Tax Consultants
4 - Doctors and dentists- Medical Analysts - Clinical Surgeons - Ship’s doctor - General Practitioners - Dentists - Clinical dentists - Medical physiatrists - Gastroenterologists Ophthalmologists – Orthopedic Surgeon ENT(Ear Nose and Throat) specialists -Pediatricians - Radiologists - Doctors from other specialties
5 - Teachers: - Professors
6 - Psychologists:
7 - Liberal Professionals, technicians and alike: Archaeologists - Biologists and life sciences experts - Computer Programmers - Software consultant and activities related to information technology and computing – Computer programming activities - Computer consultancy activities - Management and operation of computer equipment – Data services- Data processing, hosting and related activities; Web portals - Data processing, hosting and related activities - Other data service activities News agencies - Other information service activities - Scientific research and development - Research and experimental development on natural sciences and engineering - Research and development in biotechnology Designers
8 - Investors, Managers and Directors of companies that promote productive investment, as long as they are connected to projects and concession contracts that are eligible for tax benefits per the Investment Tax Code
Who is considered to be an investor, director and/or manager
a) Investors can only benefit from the non-regular resident tax regime if their income is obtained as a director or manager;
b) A Manager is considered to be: 1) Anyone under the scope of Decree-Law n. 71/2007, March 27 (Status of Public Manager); 2) Anyone responsible for permanent establishments of non-resident entities;
c) Upper management includes all people at a director position and with binding powers of the legal person.
AGPC has a recognized experience in advising on the investments of domestic and foreign clients living abroad, guiding and protecting their interests in the taxation of personal income, as well as those who, living outside Portugal for more than 5 years, intend to fix here their residence and thus benefit from this tax scheme.