End of NHR Program: What Changes for Non-Habitual Residents
Complete analysis of changes to Portugal's Non-Habitual Resident regime. Understand your rights, deadlines, and how to protect your tax status.
Changes to the non-habitual resident regime surprised many immigrants who were in the preparation and relocation period to Portugal. Some already had rental agreements, others had delayed visa processes, others already had visas but faced difficulties changing their tax residence with the Tax Authority.
The end of Portugal's NHR (Non-Habitual Resident) program marks a significant change in the Portuguese tax landscape. This alteration, introduced by the State Budget 2024, created a period of uncertainty and turbulence for thousands of immigrants who planned to benefit from this favorable tax regime.
We don't know how the Tax Authority will interpret the subject for next year, especially because their guidelines have been more restrictive than the law itself, as evidenced by Service Instructions No. 90052/2022 and 90053/2022 regarding residence changes for foreigners without residence authorization yet.
At this moment, it's essential to seek support from specialized professionals who can help you navigate this turbulent period in the most legally secure way possible, even to sustain any future measures that may be used to guarantee your right to non-habitual resident status.
Legal Analysis: Who Still Qualifies for NHR
In accordance with State Budget 2024 and CIRS (Personal Income Tax Code), we present the following analysis of the legal situation for those caught in this turbulence.
According to OE 2024, the non-habitual resident regime continues to apply, counted from the date the beneficiary became resident in Portuguese territory, when the immigrant fits into one of the following situations:
Conditions to Maintain NHR Status
Those who already have non-habitual resident status maintain all rights for the initially granted 10-year period.
Immigrants who by December 31, 2023, met the conditions to be considered residents in Portuguese territory for tax purposes:
- a) Stay of 183 days or more in a 12-month period beginning or ending in the year in question;
- b) Shorter stay, but with housing under conditions that suggest current intention to maintain and occupy it as habitual residence;
- c) In the above cases, the person becomes resident from the first day in Portuguese territory.
If you couldn't change your tax residence in 2023 and become a tax resident in 2024, you must prove one of the following situations:
3.1 Documents/Contracts by December 31, 2023:
- a) Promise or employment contract, promise or secondment agreement concluded by 12/31/2023, whose exercise of functions must occur in national territory;
- b) Residence visa or residence authorization valid by 12/31/2023;
- c) Initiation by 12/31/2023 of the procedure for residence visa or residence authorization, proven through:
- • Request for appointment or effective appointment for application submission;
- • Submission of application for granting residence visa or residence authorization.
3.2 Documents/Contracts by October 10, 2023:
- a) Rental contract or other contract granting use or possession of property in Portuguese territory concluded by 10/10/2023;
- b) Reservation contract or promise contract for acquisition of real rights over property in Portuguese territory concluded by 10/10/2023;
- c) Enrollment or registration for dependents in educational establishments domiciled in Portuguese territory, completed by 10/10/2023.
Also eligible for the NHR regime is anyone who is a member of the household of the person who meets the previous conditions.
Timeline of Critical Dates
- Rental contracts or property use agreements
- Reservation contracts or property purchase promises
- Enrollment or registration of dependents in Portuguese schools
- Establishing tax residence in Portugal
- Employment or secondment contracts
- Valid residence visa or residence authorization
- Initiation of procedure for visa/residence authorization
Challenges in Law Interpretation
Tax Authority guidelines have been more restrictive than the law itself, as demonstrated by Service Instructions No. 90052/2022 and 90053/2022. This creates additional uncertainty for those in transition.
Experience shows that the Portuguese Tax Authority frequently adopts more restrictive interpretations than the legal text might suggest. This tendency is particularly concerning in the context of NHR regime changes, where the margin for interpretation can determine whether thousands of people maintain or lose significant tax rights.
Main Areas of Uncertainty
- Proof of residence intention: How to prove "current intention" to maintain and occupy housing as habitual residence?
- Validity of appointments: Will appointments made but not completed by 12/31/2023 be accepted?
- Conditional contracts: Will promise contracts with suspensive conditions be recognized?
- Household members: What is the exact extent of this definition for NHR purposes?
Legal Protection Strategies
To protect your rights and maximize chances of maintaining NHR status, it's essential to adopt a proactive and well-documented legal strategy.
1. Complete Documentation
- Compile all documents proving qualification under transition conditions
- Maintain detailed records of all communications with authorities
- Document chronologically all steps taken to establish residence
- Preserve evidence of residence intention (contracts, bills, medical records, etc.)
2. Specialized Legal Advice
- Consult lawyers specialized in tax and immigration law
- Obtain legal opinion on your specific situation
- Prepare defense strategy for potential Tax Authority challenges
- Consider precautionary measures if necessary
3. Proactive Communication
- Formally communicate your situation to the Tax Authority
- Request written clarifications on doubtful interpretations
- Maintain formal and documented correspondence
- Consider binding information requests when appropriate
Tax Impact of Losing NHR Status
Loss of non-habitual resident status has significant tax consequences that must be carefully considered in financial planning:
Tax Rate Comparison
| Income Type | With NHR | Without NHR |
|---|---|---|
| Employment Income High-value activities | 20% flat rate | Progressive rates up to 48% |
| Foreign Pensions Depending on treaty | Total exemption in many cases | Normal progressive rates |
| Capital Income Foreign source | Possible exemption | Normal taxation in Portugal |
| Rental Income Foreign property | Possible exemption | Progressive rates up to 48% |
Available Legal Remedies
If the Tax Authority contests your right to the NHR regime, several legal remedies are available:
1. Gracious Complaint
- Deadline: 30 days after notification
- Addressed to the same body that made the decision
- Allows correction of factual or legal errors
2. Hierarchical Appeal
- Deadline: 30 days after notification
- Addressed to the hierarchical superior
- Alternative to gracious complaint
3. Judicial Challenge
- Deadline: 30 days after final administrative decision
- Processed in Administrative and Tax Courts
- Allows complete discussion of the issue
Practical Recommendations
Follow this checklist to ensure you're taking all necessary steps to protect your NHR status:
Immediate Actions (Next 30 Days)
- Gather all documentation proving qualification under transition conditions
- Schedule consultation with specialized tax lawyer
- Request official confirmation of your NHR status from Tax Authority
- Organize chronological file of all residence-related documents
Medium-Term Actions (Next 3 Months)
- Submit formal application for NHR status if not yet done
- Obtain legal opinion on your specific case
- Prepare comprehensive documentation package
- Consider requesting binding information from Tax Authority
Long-Term Strategy
- Monitor Tax Authority interpretations and decisions
- Maintain updated legal advice on regime changes
- Plan alternative tax strategies if NHR is lost
- Consider other EU jurisdictions if necessary
📚 Legal Sources
- State Budget 2024 - Article 236, paragraph 3, subsections a), b), c) and d)
- CIRS (Personal Income Tax Code) - Article 16, paragraph 1, subsections a) and b) and paragraph 3
- Service Instructions No. 90052/2022 - Residence change for foreigners
- Service Instructions No. 90053/2022 - Procedures for residence authorization
- Double Taxation Conventions - Various bilateral treaties with Portugal