Non regular tax regime for non-regular residents

The Investment Tax Code, approved by the Decree-Law number 249/2009, dated 23rd of September, created the tax regime for non-regular residents, in terms of Personal Income Tax (PIT), being addressed to taxpayers who are not resident in Portugal and that intend to establish either a permanent or temporary residence in Portugal.

It is not new in Europe, and despite the similarities with the Spanish regime for taxing expatriates and with the incentive scheme for expatriates in France, the Portuguese regime is the most favorable in terms of scope, duration and application.

This special tax regime was created in order to attract non-resident qualified professionals in value added activities and high income investors.

Who can request to be registered as non-regular resident?

The status of non-regular resident (RNH – “Residentes Não Habituais”) is granted to taxpayers that, for tax purposes meet the following conditions in the Portuguese territory:

• Were not resident in Portugal for the past 5 years (previous to the year to which it is intended that the taxation as non-regular resident (RNH – “Residentes Não Habituais”) starts or takes place;

• Register as a resident taxpayer in Portugal, and for that, it must have remained in the Portuguese territory for more than 183 consecutive or interpolated days, in any given 12 months period beginning or ending in the year in question;

• In case of remaining for a shorter period of time, in any given period as referred above, have a residence that indicates the intention to maintain it and occupy it as the usual residence; and

• Request for the register as a non-regular resident (RNH – “Residentes Não Habituais”) in the moment that it register itself as resident taxpayer in Portugal or until 31st of March of the following year after becoming resident taxpayer in Portugal.

As so, individuals that are taxpayers in Portugal are taxed over their total income, including the income obtained abroad, as well as the one obtained during their stay in Portuguese territory.

What are the rights granted to non-regular resident (RNH)?

The taxpayers under these circumstances and that are considered as non-regular resident are granted the right to be taxed accordingly for 10 consecutive years, starting from the year, inclusive from their register as resident in Portuguese territory, as long as in each of these 10 years it is considered as resident.

Once the 10 year period ends, they shall be taxed in accordance to the general rules of the Personal Income Tax Code (PITC).

What is the applicable taxation?

Net taxable income of Category A (employment) and B (self employment), obtained by non-regular residents in Portuguese territory or abroad are taxed at the special rate of 20% (accrued in 2017 with a surcharge of 3,21%).

These earnings must be obtained in activities of high value added, in scientific, artistic or technical areas (as defined in Order n.º 12/2010, dated 7th of January).

The non-regular residents establishes the possibility of tax exemption for earning obtained abroad, such as earnings from employment and self employment, real estate, capital income, interests, dividends as well as other capital gains, as long as certain conditions are verified.

Authorization for Residence for Investment Activities – Golden Visa

The Golden Visa program, which is in place since October 2012, consists on an Authorization of Residence for Investment Activities (ARI – “Autorização de Residência para Atividade de Investimento”) allowing its holders to entry and live in Portugal, as well as freely travel in the majority if the European Countries (belonging to the Schengen space/zone).

This residence authorization is addressed to nationals of countries not pertaining to the European Union and countries not within the Schengen space/zone, and that perform, personally or through a company established in Portugal or other EU member state with permanent establishment in Portugal, one of the following investment activities in Portugal:

• International capital transfer in an amount equal or exceeding € 1.000.000, including investment in shares or quota of companies, or

• Creation of at least 10 working places (1); or

• Real estate acquisition in an amount equal or exceeding € 500.000 or a promissory contract of real estate purchase, with an upfront payment equal or exceeding € 500.000 (2); or

• Acquisition and performance or refurbishment works on real estate, in an amount equal or exceeding € 350.000, if the construction of the real estate was concluded for at least 30 years, or if the real estate is located in an urban rehabilitation area (even if with less than 30 years old) (3); or

• Transfer of a capital amount equal or exceeding € 350.000 applied in investigation developed by public or private institutions acting in the scientific research , duly integrated in the national scientific and technological system (4); or

• Transfer of a capital amount equal or exceeding € 250.000 applied in investment or support of artistic production, recovery or maintenance of the national cultural patrimony (5), or

• Transfer of a capital amount equal or exceeding € 500.000 applied in the acquisition of participation units in investment or private equity funds; or

Investment must be performed at the date of the presentation of the residence authorization and shall be kept for a minimum period of 5 years, counted upon the correspondent granting date.

The residence authorization is valid for a 1 year period counted after its issuance, and can be renewed for consecutive periods of 2 years, if the conditions for its issuance are maintained. This residence authorization allows, not only for the individual to live in Portugal, but also to work in Portugal, being compulsory that the individual in the 1st year remains in the country for a period not below 7 days, and in subsequent years for periods not below 14 days.

The Golden Visa is addressed to citizens not resident in the EU or in Schengen area. As any other owner of residence authorization in Portugal, the holders of a Golden Visa can entry and live in the Portuguese territory, as well as travel and circulate freely in the Schengen area, without any requiring any additional visa for residence.

The Golden Visa program also allows the family of the investors to benefit from the Family Regrouping regime, being the request for the Family Regrouping regime able to be submitted simultaneously with the issuance of the Authorization of Residence for the Investor.

According to Foreigners and Border Service (SEF – “Serviço de Estrangeiros e Fronteiras”) published data, between the 8th of October 2012 and 31st January 2017, it were issued 4.423 Golden Visas – Authorization for Residence for Investment Activities (ARI), which corresponds to an investment of around € 2.708.427.398,85 in Portugal, mainly performed by nationals of China, Russia, Brazil, South Africa and Lebanon.

The BELZUZ ADVOGADOS tax department has experienced lawyers available to provide all the advisory and assistance in the subjects of Tax Residence and Authorization of Residence for Investors (ARI), also known as Golden Visa.

 See the latest news about the Regime of non-habitual residents in Portugal

(1) This requirement can be reduced by 20%, meaning 8 working places, when the investment is performed in a low density population area.

(2) The investment value can be reduced by 20%, to €400.000, if performed in a territory with low population density.

(3) The investment value can be reduced by 20%, to €280.000, if performed in a territory with low population density.

(4) The investment value can be reduced by 20%, to €280.000, if performed in a territory with low population density.

(5) The investment value can be reduced by 20%, to €200.000, if performed in a territory with low population density.

Departamento de Derecho Fiscal y Tributario | Madrid (España)

Belzuz Abogados SLP

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