Portugal’s NHR Scheme: Is it valid, and are you eligible?

Now the UK has officially left the European Union, the question on many property investor’s minds is, are British citizens able to access Portugals’ Non-Habitual Resident (NHR) tax regime? And, in short, yes.

According to EDGE International Lawyers, a law firm based in Portugal and the UK, the NHR was never specified for EU-only citizens. It just happened that those using the tax regime tended to be from the UK and Europe. So, property investors from the UK can still benefit from the NHR tax scheme

From a tax perspective, there are no implications for UK property investors looking to invest in Portugal, even post-Brexit. The only additional consideration now is your residency permit.

Before the UK departed from the EU, British citizens could receive their EU residency permit the very same day from the local council. Now in 2021, Brexit’s transition period has ended, and councils are no longer authorised to produce this paperwork.

What is the NHR tax regime?

The Non-Habitual Resident (NHR) scheme was first introduced back in 2011. For Portugal, this year saw a significant financial crisis; their economy fell by 1.3%, and the Portuguese government had to report a budget deficit of 4.2%.

The NHR, therefore, aimed to attract overseas investment and skilled professions of ‘high cultural and economic worth’ by offering substantial tax savings for those who met the requirements.

Those who could apply for the NHR scheme must not have been a Portuguese tax resident within the five years before your application and had the right to reside in Portugal. In order to guarantee a financial injection, all applicants were required to have bought or rented a property in the country. With this property, all applicants had to intend to keep and occupy this asset as your main place of residence.

All that is needed for the application is documentation to prove your residency, which was easily obtainable from the local Portuguese councils, a Portuguese tax number and a NIF number.

If you are looking to invest in a holiday home in Portugal, your first port-of-call should be in obtaining this nine-digit tax number. Your NIF (Número de Identificação Fiscal) is also known as your contribution number and is used as your unique tax identification number. Even during these COVID times, a NIF number is possible to obtain, and all you need to prove is a copy of your passport and proof of an address outside of Portugal. 

Once you have received your NIF and completed your property investment, your successful NHR application is valid for a 10-year period. You can find out more here.

Who is interested in the NHR Scheme?

There are two main groups of people who have an interest in this tax scheme. The first group is UK citizens who already live in Portugal and are protected under the Withdrawal Agreement. The second are those who are looking to invest in Portugal. Those in the first group should not face too many changes concerning the terms of NHR. However, for the latter group, there is another process in place.

For those who are yet to seek residency in Portugal, the process of obtaining this and then applying for the NHR scheme might find this process takes a bit longer than usual. These delays, however, are not related to Brexit and, instead, are due to the implications of the coronavirus pandemic. 

This being said, those at EDGE International Lawyers argue that, even with these delays, the process is still doable, and Portugal is still an attractive investment opportunity. 

British citizens have long felt the pull of Portugal, not only for its attractive climate and tourism but also for investment opportunities and business. While travel bans are currently in place, property investments here are not so much unachievable; the process instead is merely on hold for a few more months. If you are looking to benefit from the property Portugal has to offer, now is the time to get ahead on your paperwork and make sure everything is in place for when you can jump on a plane and go and complete your property investment deal.

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