The Benefit of the New Resident (NHR) Scheme
Being new to Portugal can offer many tax advantages. NHR offers a specialized tax benefit to anyone who has been residing in the country for less than 10 years. In addition to this, lower income tax rates of 20 percent are offered to those employed in fields determined to be ‘high value’. High value positions include: General directors, specialists in physical sciences and STEM, physicians, dentists, post secondary educators, technology specialists, journalists, authors, farmers, linguists, performance artists, industrial construction workers, craftsmen, and more.
How much time can I spend here as a non-tax Resident?
Like many countries, the amount of time you spend in the country determines your taxation status, and the same goes for people receiving pensions. You will generally be considered a tax resident, responsible for Portuguese taxes, after spending 183 days in the country. This is one of the many reasons why those spending a portion of their time in one country compared with another to maintain maximum benefits need to keep an eye on how much time they are out of their country. In Canada, for example, you must be in Canada for at least six months of the year. Many people find it is helpful to allow themselves an extra 7 to 14 days in their primary resident country in case they need to leave their home country for an emergency.
Starting a Business in Portugal
Until the end of 2020, some companies that operate in Portugal received a five percent flat corporate income tax as an incentive. Connect with a Portuguese tax specialist to investigate other such opportunities in 2021 and beyond before you open your business.
Enjoying Your Low Tax Pension
Previously, the NHR afforded most people an opportunity to enjoy a tax-free international pension, however last year a 10 percent flat fee was applied. This is still a considerably lower rate compared to many other countries.
Understanding Your Wealth Tax
People living in Portugal can benefit from a fairly low wealth tax on the value of their held assets. This impacts people owning Portuguese property worth more than €600,000 per person or (1.2 million per couple). Should you gain an inheritance it is taxed at 10 percent, only applies to Portuguese assets, and has an exemption for children and spouses.
How Do I know Whether or not I am Deemed a Portuguese Tax resident?
A few factors will determine whether you are a Portuguese tax resident and will be taxed as such. These include (but are not limited to):
- Being a permanent resident in Portugal as of December 31st in that specific tax year
- If the head of your household is a tax resident in Portugal (note the Head of Household is a filing status term designated for single/unmarried taxpayers who keep up a home for a qualifying person)
- Being a crew member on a Portuguese owned ship, yacht, or aircraft
- If you are employed by the Portuguese state (even if you are living outside of the country)
Understanding the Taxation Year
Like many other countries, the taxation year follows a standard calendar year, starting on January 1st of each year and concluding on December 31st. Taxes are submitted the following calendar year between April 1st and June 30th. Make sure you keep these dates in mind when filing your papers to enjoy the many tax benefits without any late filing or interest penalties.
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