NHR in 2024: how will the Non-Habitual Resident transition regime work in 2024 for the Scientific Research and Innovation Tax Incentive regime?
The 2024 State Budget (Draft Law no. 109/XV/2.ª) proposes the extinction of the Non-Habitual Resident (NHR) regime.
Even though the Assembly of the Republic is about to be dissolved so that new elections can be called in 2024, the current parliamentarians intend to approve the 2024 Budget proposal before parliament is dissolved.
In principle, as of January 1, 2024, the RNH would be fully extinct, with the deadline for registration being December 31, 2023.
However, the Socialist party (the party with a majority in parliament) has proposed a transitional regime between the Non-Habitual Resident (NHR) regime and the Tax Incentive for Scientific Research and Innovation regime, which we will discuss in more detail in this article.
Why a transitional regime?
For the Socialist party, it's important to create a transitional regime to protect those who were already planning to move to Portugal in 2023, even if, for various reasons, the actual move wouldn't take place until 2024.
An example would be the case of an immigrant who, in the second half of 2023, signed a contract to rent a property for living purposes.
Even if the 2023 deadline passes, because the individual is still planning to move in 2023 and falls under the NHR rules, they will still have the right to apply for this regime in 2024.
For these individuals, the deadline for registering with the RNH would be 12/31/2024.
Requirements to apply for the NHR in 2024
In order to take advantage of this extended deadline, you need to meet certain requirements to prove that you intend to move to Portugal in 2023.
The requirements are to present one of the following documents:
a) Promise or employment contract signed by December 31, 2023, where the work is to be carried out in Portugal;
b) Lease agreement or other contract granting the use or possession of real estate in Portuguese territory signed by October 10, 2023;
c) Reservation contract or promissory contract for the acquisition of a right in rem over real estate in Portuguese territory signed before October 10, 2023;
d) Enrollment or registration for dependents in an educational establishment domiciled in Portuguese territory, completed by October 10, 2023;
e) Residence visa or residence permit valid until December 31, 2023;
f) A procedure for the granting of a residence visa or residence permit, initiated by December 31, 2023.
If you do not have any of these documents, you will not be entitled to the Non-Habitual Resident (NHR) regime and will be taxed according to the progressive IRS table.
Who can benefit from the new "Tax Incentive for Scientific Research and Innovation"?
Under the previous regime, Decree-Law 249/2009 provided a list of professions considered to have "high added value", such as doctors, dentists, artists in general, architects, engineers, among others.
At the time of the proposal, the Socialist party proposed that for this new tax regime, the individual should fall into one of the following options:
"a) Higher education teaching and scientific research careers, including scientific employment in entities, structures and networks dedicated to the production, dissemination and transmission of knowledge, integrated into the national science and technology system;
b) Qualified jobs within the scope of contractual benefits for productive investment, under the terms of Chapter II of the Investment Tax Code;
c) Research and development jobs for staff with minimum qualifications of level 8 of the National Qualifications Framework, whose costs are eligible for the purposes of the tax incentive system for research and business development, under the terms of Article 37(1)(b) of the Investment Tax Code."
According to Chapter II of the Investment Tax Code, the jobs that qualify under the contractual benefits for productive investment would be:
"a) Extractive industry and manufacturing industry;
b) Tourism, including activities of interest to tourism;
c) IT and related activities and services;
d) Agricultural, aquaculture, fish farming, farming and forestry activities;
e) Research and development and technology-intensive activities;
f) Information technology and audiovisual and multimedia production;
g) Defense, environment, energy and telecommunications;
h) Shared service center activities."
However, in the vote on the State Budget on 27/11/2023, MPs approved a relaxation of these requirements, including new jobs, such as the inclusion of startups with headquarters or branches in Portugal.
In addition to the inclusion of activities in startup companies, the proposal included activities recognized by IAPMEI (Agency for Competitiveness and Innovation), and activities carried out on the islands of Madeira and the Azores, which will be regulated later by the local authorities.
In view of this, even with some relaxation, it can be seen that Portugal has chosen to encourage more specific and restricted activities. Therefore, if the professions listed in Decree-Law 249/2009 do not fit these requirements, the individual will not be able to benefit from the new regime.
Furthermore, those who have benefited or are benefiting from the NHR regime at some point in the past will NOT be able to benefit from this new regime.
Similarities with NHR (Non-Habitual Resident)
As with the old NHR regime, those who meet the above requirements will benefit from flat-rate taxation of 20% of income earned from self-employment or dependent work in Portugal, for a period of up to 10 years.
Another similarity with the NHR is that the option for this tax regime can only be used once, without extension.
Another similar requirement is to reside in Portugal for at least 183 days, and not to have resided in Portugal for the previous 5 years.
Warning for Double Tax Residency and Tax Evasion
It is important to note that if you have been resident in Portugal for more than 183 days, you are already considered a Tax Resident in Portugal.
Consequently, you are obliged to file the "Imposto sobre o Rendimentos das Pessoas Singulares" - IRS, universally, i.e. declare all your income, regardless of its origin.
You can be in a situation called double tax residence. Its consequence is the obligation to file tax returns for two different countries at the same time.
Double tax residence in itself is not a crime. However, tax evasion and the omission of amounts for the purposes is a crime. As well as being a crime, the amounts evaded can be charged, plus a fine, interest and monetary correction.
Therefore, if you live or are thinking of living in Portugal, it is important to consider your tax regularization and, consequently, your tax planning.
If you would like to hire professional legal services related to tax planning, we are a law firm specializing in the subject. All you need to do is contact us via WhatsApp or by email: thyanipuppio@gmail.com
