ICIFI: The new RNH Status in Portugal

Portugal’s Non-Habitual Resident Status established a more favourable special regime, but it was repealed with the approval of the General State Budget Law for 2024.

In this article we will deal with the new situation in detail.

What was the RNH Status in Portugal?

The Non-Habitual Resident Status (RNH) established a more favourable special regime, which guaranteed a reduction in Personal Income Tax, for a period of 10 years, to new foreign residents and Portuguese citizens who had emigrated for more than 5 years.

In order to benefit from that scheme, the person concerned was required to pursue a professional activity considered to have ‘high added value’ or to be a pensioner. The aim was to attract qualified professionals in high-profile activities and beneficiaries of pensions obtained abroad.

However, with the approval of the General State Budget Law for 2024, this regime was repealed, replacing another, called Tax Incentive for Scientific Research and Innovation. The new regime, unlike the previous one, is now provided for in the Tax Benefits Statute (EBF).

However, the revitalizing regime did not end with immediate effect on December 31, as a transitional regime was established.

Transitional regime of the NHR

Article 236(3) of the Law on the General State Budget for 2024 provides that the INDH Statute continues to apply to taxable persons who, on the date of entry into force of that law, were already registered as non-habitual residents, until the 10-year period has expired.

Likewise, it is expected that taxpayers who on 31.12.2023 met the conditions to register as non-habitual residents, will continue to be able to enjoy the aforementioned NHR Statute.

It is also applicable to taxpayers who acquire tax residence until 31.12.2024, and who declare, for the purposes of their registration as a non-habitual resident, that they have any of the following elements:

Promise or employment contract, promise or secondment agreement entered into until 31 December 2023, the exercise of which must take place in national territory.
Lease agreement or other contract granting the use or possession of real estate in Portuguese territory entered into until October 10, 2023.
Reservation contract or promise contract for the acquisition of a right in rem over real estate in Portuguese territory entered into until October 10, 2023.
Registration or enrolment for dependents, in an educational establishment domiciled in Portuguese territory, completed before 10 October 2023.
Residence visa or residence permit valid until December 31, 2023.
Procedure, initiated before 31 December 2023, for the granting of a residence visa or residence permit, before the competent authorities, in accordance with the applicable current immigration legislation, in particular through the application for effective scheduling or scheduling for the submission of the application for the grant of a residence visa or residence permit or,   likewise, by submitting the application for the granting of a residence visa or residence permit.

Finally, the household members of the taxpayers referred to in the above hypotheses also benefit from the extinct NHR Statute. In this way, the expectations of taxpayers who were already in the non-habitual resident regime, as well as those who were in the process of transferring, were safeguarded.

The "new" tax incentive for scientific research and innovation (IFICI)

This new regime has a lesser scope than the one mentioned above, finding its legal regulation in Article 58-A of the EBF, which must be combined with Article 81 of the CIRS, with regard to the elimination of international legal double taxation, as well as with Order No. 352/2024/1, of December 23.

This regime is aimed at natural persons who become residents in Portuguese territory and who have not resided here in any of the previous five years (this rule is similar). However, the great and notorious difference is found in the activities covered, which show a clear reduction compared to the previous regime. Thus, the following activities are covered:

Teaching in higher education and scientific research, 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, as well as jobs and members of governing bodies in entities recognized as technology and innovation centers, within the scope of Decree-Law No. 126-B/2021, of 31 December
Qualified jobs and members of corporate bodies in the field of contractual benefits for productive investment, under the terms of Chapter II of the Investment Tax Code
Highly qualified professions, defined in an ordinance of the members of the Government responsible for the areas of finance and economics, developed in:
- (i) Companies with relevant investments, in the exercise of the beginning of their functions or in the previous five years, that benefit or have benefited from the investment support tax regime, under the terms of Chapter III of the Investment Tax Code; or
- (ii) Industrial and service companies, whose main activity corresponds to the CAE code defined in an ordinance of the members of the Government responsible for the areas of finance and economy and which export at least 50% of their turnover, in the year of the beginning of their functions or in any of the two previous years
Other qualified jobs and members of governing bodies, in entities that carry out economic activities recognized by AICEP, EPE, or IAPMEI, IP, as relevant to the national economy, that is, to attract productive investments and reduce regional asymmetries.
Research and development of personnel whose costs are eligible for the purposes of the tax incentive scheme for research and business development, within the terms of Article 37(1)(b) of the Investment Tax Code.
Jobs and members of governing bodies in entities certified as startups, under the terms of Law No. 21/2023, of 25 May, or
Work or other activities carried out by tax residents in the Autonomous Regions of Azores and Madeira, under the terms defined by regional legislative decree.

Tax advantages of the "new" regime

The benefit of the IRS results from taxation at the special rate of 20% on net income of categories A and B obtained in the scope of the aforementioned activities, for a period of 10 consecutive years from the year of your registration as a resident in Portuguese territory, without prejudice to the option of aggregation.

The right to pay tax under this regime, in each year of the concession period, depends on whether the taxpayer is considered a tax resident in Portuguese territory, at any time in that year, and on whether he continues to receive, in each year, income from the exercise of one of the relevant activities. The taxpayer is considered to continue to obtain income from any of the relevant activities, provided that the start of the exercise of the new activity occurs within a maximum period of six months from the end of the activity previously carried out.

A taxpayer who has not enjoyed the right to pay tax under this regime, in one or more years of the concession period, may resume the enjoyment of it in any of the remaining years of that period, starting from the year, inclusive, in which he is again considered a resident for tax purposes in Portuguese territory and obtains income again in the exercise of one of the relevant activities.

Registration in the "new" Regime

The registration of beneficiaries is carried out with the following entities, depending on the relevant activities carried out:

Foundation for Science and Technology, I.P. (FCT), in relation to the relevant activities listed in Article 58-A(1)(a) of the EBF [Teaching in higher education and scientific research].
Investment and Foreign Trade Agency of Portugal (AICEP), E.P.E., in relation to the relevant activities listed in point (b) [ Skilled jobs and members of corporate bodies in the field of contractual benefits for productive investment].
Tax and Customs Authority (TA), in relation to the relevant activities listed in paragraph (c) – [Highly skilled professions, defined in an ordinance of the members of the Government responsible for the areas of finance and economics]
Agency for Competitiveness and Innovation, I.P. (IAPMEI), or Agency for Investment and Foreign Trade of Portugal (AICEP), in relation to the relevant activities listed in point d) [Other skilled jobs and members of corporate bodies, in entities carrying out economic activities recognized by AICEP, EPE, or IAPMEI, IP, as relevant to the national economy].
Agencia Nacional de Inovação, S.A. of Startup Portugal and of the Autonomous Regions of Azores and Madeira, respectively, in relation to the relevant activities listed in points e), f) and g). [Research and development of personnel whose expenses are eligible for the purposes of the system of tax incentives in research and business development; Jobs and members of governing bodies in entities certified as start-ups; Work or other activities carried out by tax residents in the Autonomous Regions of Azores and Madeira

Deadline for registration in the "new" tax regime

The procedures and deadlines for the registration of beneficiaries with the competent authorities, as well as the communication of the respective data by the latter, to the TA, will be regulated by an ordinance of the members of the Government responsible for the areas of finance, economics and science and higher education [not yet approved]

However, paragraph 7 of Article 58-A of the EBF contains a safeguard provision for registration situations made after the period defined in the aforementioned ordinance, in which case the taxation under the terms of the new regime takes effect from the year in which the registration is made and is in force for the remaining legal period provided for it.

Exclusions from the application of the "new" tax regime

Taxable persons who:

Have benefited from the status of non-habitual resident.
Have chosen to pay tax under the terms of Article 12-A of the Personal Income Tax Code (tax regime for former residents).

Income excluded from the "new" tax regime

The income of taxable persons whose salary costs are eligible as relevant investments for the purposes of the RFAI.

Elimination of international legal double taxation

In accordance with the new wording of Article 81 of the CIRS, it is established that the exemption method applies to income obtained abroad in categories A, B, E, F and G, and must be included for the purposes of determining the rate to be applied to other income, regardless of whether or not it is effectively taxed in the other State.

In the event that such income is paid or made available by non-resident entities without a permanent establishment in Portuguese territory, domiciled in a country, territory or region subject to a clearly more favourable tax regime, included in a list approved by ordinance of the member of the Government responsible for the field of finance, such income shall be taxed under the terms of Article 71, paragraph 17(b) and (c) (withholding rate of 35%) and paragraph 18 of Article 72 of the Personal Income Tax Code (regional rate of 35%).

The withholding rate of 20% applied to income from work and to category B of Personal Income Tax, now included in the new Tax Incentive for Research and Scientific Innovation regime provided for in article 58-A of the EBF, which replaces the regime for non-habitual residents, is maintained.

The “new” tax regime does not apply to Category H (pension) income. You can learn more about the specialized tax services we offer at Tax accountant consultancy

Need help?