It cannot be overlooked that Portugal, with its privileged location, security, quality of life and full integration into the European Union, is a country with great cultural and financial attractions. It is well known that there are many tax advantages in Portuguese territory, as the taxation to which tax residents are subject is more favourable than in other countries, which is why many foreigners decide to start a new life there by registering as non-habitual residents or simply as residents.
Non-habitual residence system
Non-habitual residence was a tax system created by Decree Law 249/2009 of 23 September, with the aim of implementing a tax system for non-residents in Portugal with the objective of attracting trade of those qualified professionals with value-added activities, intellectual property, industrial or know-how. According to Ordinance No. 12/2010 of 7 February, activities with high added value are considered to be architects, engineers, actors, painters, musicians, singers, auditors, doctors, dentists, teachers, investors, managers and directors among many others.
For example, if you want to transfer your normal residence to Portugal and register as a non-habitual resident carrying out a high value-added activity, you should be aware that in this particular case, in order to be considered eligible, you will have to earn your income as a director or manager in order to benefit from the non-habitual resident tax regime.
For Portuguese tax purposes, manager is, including those persons having the quality of director and natural binding powers in a legal person, any person responsible for a permanent establishment of non-resident entities.
What does Portugal offer for non-habitual residents vis-à-vis the Portuguese IRS?
Individuals who declare themselves as taxpayers in Portuguese territory under a non-habitual residence tax regime will benefit from this regime for a period of 10 consecutive years from the year in which they register as a non-habitual resident, with the sole condition of maintaining this tax status for each of the 10 years. Among all the advantages of moving to Portugal, here are some of them.
For income obtained outside Portugal, an exemption from taxation of earned income will be applied if there is a Double Taxation Agreement (DTA) applicable and it is established that taxation may be made in the country of origin or, if there is no DTA, the exemption will be applicable only if there is taxation in the country of origin. Likewise, the exemption from taxation will apply to income from professional activities with "high added value" or from intellectual or industrial property, income from real estate, movable capital and capital gains.
In order to apply the exemption in these cases, if the country of origin has not signed a DTA with Portugal, the exemption will only apply if the country of origin is not included in the Portuguese list of tax havens or, when Portuguese legislation is applied, such income is not subject to IRS in Portugal. Likewise, retirement pensions coming from their country of origin or from a foreign country are equally benefited since, depending on whether they are included in the non-habitual residence regime, before or after 31 March, they will be completely exempt or taxed only at a rate of 10%.
For income obtained in Portuguese territory, income obtained through employment or self-employment, from activities with high added value of a scientific, artistic or technical nature regulated in the previous Ordinance, by non-habitual residents, a reduced IRS flat rate of 20% will be applied.
Declaring cryptocurrencies in Portugal
Within the European Union, Portugal has positioned itself as one of the most "crypto-friendly" countries, welcoming new technologies into its financial system since 2015 when the European Supreme Court ruled that cryptocurrencies could begin to be used as a means of payment.
Subsequently, it was the Portuguese Tax and Customs Authority that ratified the above, taking a very important step by declaring that all transactions in which the means of payment is through cryptocurrencies will not be taxed. Regarding taxation, it is simple, it does not exist. This is because Portugal has not yet created a tax system to regulate them and therefore they are exempt from any type of taxation in this territory.
Requirements to be a non-habitual resident in Portugal
If, after seeing some of the advantages of being a tax resident in Portugal, you are thinking of registering as a non-habitual resident, it is important to know that in order for the authorities to recognise this tax status, certain requirements must be met:
1. The applicant must be considered as resident for tax purposes in Portugal in the year he/she wishes to declare as non-habitually resident.
2. Must not have been considered as a tax resident in Portugal in the last 5 years prior to the year in which he/she intends to register as a non-habitual resident.
3. Have resided for more than 183 consecutive or alternate days in Portuguese territory.
4. If you have resided for less than 183 days, you have a dwelling in a condition that implies that you intend to keep it and live in it as your habitual residence.
It is important to clarify that registration as a non-regular resident must be done after you have registered as a resident in Portugal. If you already have a Portuguese tax identification number (NIF) but are still registered as a non-resident, you must first apply for a change of status to resident. As with everything else, there is a deadline for making such an application, and this is 31 March of the year following the year in which you were registered as a tax resident in Portugal.
Therefore, given the generous tax situation that exists in this territory for new citizens who enter the country as a non-regular resident and, in addition, the advantageous conditions when it comes to making payments with cryptocurrencies at zero cost, Portugal has become a global benchmark for those who want to do business and not die trying.
