The non-habitual resident regime is closed.

It was ended for new entrants in 2024, following the announcement made in October 2023, and individuals acquiring Portuguese tax residence from 2025 onwards cannot obtain it.

For those arriving now, the nearest successor is the tax incentive for scientific research and innovation, a narrower regime described under IFICI Tax Benefits.

The underlying provisions were repealed, but existing beneficiaries retain the regime, and it will continue to apply in practice until 2033 because each beneficiary holds it for ten consecutive years counted from the year in which residence was first acquired.

More than 120,000 people are therefore living under a regime that no longer accepts applicants, with annual filing obligations, treaty questions, changing personal circumstances, and a level of scrutiny from the tax authority that has increased markedly as the regime has wound down.

Two routes to the regime remain relevant, and both are frequently overlooked.

The transitional framework

Access was preserved for individuals who were already resident at 31 December 2023 and met the conditions at that date, and for individuals who acquired Portuguese tax residence by the end of 2024, who had not been resident in Portugal during the preceding five years, and who could show that a relocation to Portugal was already under way before the regime closed.

What counted as a relocation already under way was defined by reference to specific acts, each with its own cut-off date:

• An employment, secondment or promise of employment agreement to be performed in Portugal, concluded by 31 December 2023;
• A lease or other agreement conferring the use of Portuguese property, a reservation or promissory agreement for the acquisition of Portuguese real estate, or the enrolment of dependent children in a Portuguese school, in each case by 10 October 2023;
• A residence visa or permit valid at 31 December 2023, or an application for one lodged by that date.

Members of the household of a person satisfying one of those conditions could also qualify.

Registration under the transitional framework is requested through the Finance Portal. A request made by 31 March 2025 took effect from 2024; a later request is still accepted, but takes effect only from the year in which it is made, for the balance of the ten years.

Late registration after the 2026 uniformising judgment

Registration under the regime has consistently been treated by the arbitral tribunals and the Supreme Administrative Court as declaratory rather than constitutive.

The right to be taxed under the regime arises from satisfying the substantive conditions: tax residence in Portugal and the absence of residence in the preceding five years.

In a uniformising judgment of 28 January 2026 (Acórdão n.º 7/2026, proc. 084/25.9BALSB), the Supreme Administrative Court nevertheless held that registration is a condition of access to the regime.

A late request therefore takes effect only from the year in which it is made.

An individual who became resident before the regime closed, who met those conditions, but who never registered may therefore still register and benefit from the regime for the remaining period, though not for the years already elapsed.

The declaratory character of registration remains useful defensively, where the tax authority has purported to withdraw a status already granted or has refused a timely request on procedural grounds.

In those cases the question is whether the substantive conditions were met.

Whether a late registration is worth pursuing depends on the amounts involved and on how many of the ten years remain, read against the individual’s wider position. We run the numbers before recommending a course.

Registering as a non-habitual resident is not, by itself, sufficient to benefit from the regime.

It is applied year by year through the income tax return, filed in the months following the year to which it relates, and the treatment obtained depends on what is declared and how.

Holding the status does not simplify the return.

In most cases it makes it more complex than that of an ordinary resident, because the whole of a person’s worldwide position has to be presented correctly before any advantage can be claimed.

What has to be reported

Foreign income must be declared whether or not it is exempt.

Exempt amounts may also affect the rate applied to income that remains taxable in Portugal, so an omission affects the whole return and not only the line concerned.

Foreign accounts are separately reportable, and that obligation is independent of whether the accounts produced income.

Each source of income has to be characterised by category and attributed to the correct source state, and foreign currency amounts converted on a consistent and defensible basis.

Where foreign tax has been paid, the treaty position determines whether relief is given by exemption or by credit, and the two can produce very different outcomes.

The annual election

The return also carries a choice.

For each category of income, a beneficiary may compare the treatment available under the regime against the ordinary rules and adopt whichever produces the better result, without prejudicing the status in later years.

The better answer is not always the special one, particularly where foreign tax credits are available or where the composition of income has changed.

In practice the election is often made by default, and last year’s answer is not necessarily this year’s.

Where returns go wrong

The recurring errors are consistent and are almost always discovered years later.

Foreign income omitted on the assumption that exemption made it irrelevant.

Income characterised in the wrong category: distributions treated as dividends where they are something else, or foreign pension drawdowns treated as pension income.

Gains on the disposal of securities treated as exempt, when under most treaties they are taxable only in the state of residence and were therefore taxable in Portugal throughout.

The source state identified by reference to where a payment was made from instead of by reference to the treaty.

Activity codes claimed for the reduced rate that do not correspond to the work actually performed.

Each of these is straightforward to correct in the year it occurs and expensive to correct once repeated across several returns.

Correcting what has already been filed

A return already submitted can be replaced, and a position already assessed can be reopened, within limits that depend upon the year and the nature of the error.

Where a correction produces a refund, interest may also be due, principally where the error is attributable to the tax authority.

Where a correction produces additional tax, voluntary regularisation is less costly than the same correction arriving through an inspection.

We advise on which category a given error falls into and on the sequence in which corrections should be made.

This work is conducted with the Tax Compliance team, which prepares the returns themselves.

The tax authority has become more active in reviewing non-habitual resident positions, and much of what is now being examined concerns years the taxpayer had long regarded as settled.

The reason is largely mechanical: automatic exchange of financial account information between jurisdictions has given the authority a view of foreign income and foreign accounts that it did not previously have, and inconsistencies between that data and what was declared are now identified systematically.

Foreign income and the conditions for exemption

This is the largest category of dispute.

For most categories of income the exemption depended on whether the treaty allowed the source state to tax the income, not on whether it actually did so.

Foreign employment income was the exception, since it had to have been taxed in the source state.

The authority may accept that income arose abroad while denying that the treaty allowed the source state to tax it.

It may also take a different view of the category into which income falls, since the treaty allocation follows the characterisation.

Where no treaty applies the analysis proceeds differently, and income arising in jurisdictions on the list of favourable tax regimes is treated differently again.

Cases involving transparent entities, foreign partnerships and limited liability companies whose treatment differs between the two states are common and rarely straightforward.

Pensions and foreign retirement schemes

Whether a payment is a pension at all is contested more often than whether a pension is taxable.

Lump sums, partial drawdowns, transfers between schemes and payments from arrangements that are not pensions in the Portuguese sense all raise the question.

The applicable treatment then depends on when the individual registered, which can produce markedly different outcomes for people whose circumstances are otherwise identical.

Activities of high added value

The reduced rate applied only to income from activities on the prescribed list.

Disputes turn on whether the work actually performed corresponds to the code claimed, on the evidence supporting that correspondence, and on where the activity was carried out.

A claim accepted without comment for several years may still be examined afterwards.

Which table governs is itself a frequent issue: the 2019 table applies to activities carried out from 2020, and earlier registrants may rely on either the 2010 or the 2019 table.

Residence and the status itself

Some disputes go to the status itself.

The authority may contend that the individual was in fact resident in Portugal during part of the five years preceding the year in which residence was acquired, relying on property, addresses registered for tax purposes, family presence or the pattern of days spent.

Others involve the withdrawal of a status already granted, or a dispute over the year in which the ten-year period began, which determines when it ends.

Routes, deadlines and strategy

A taxpayer disagreeing with an assessment has a choice of routes, including complaint to the authority itself, appeal to a higher officer within it, challenge before the administrative and tax courts, and arbitration before the tax arbitration centre.

They differ in deadline, in cost, in the time they take and in the kind of argument they suit, and the deadlines are short and run from events that are easy to miss.

There is also a route by which the authority may be asked to review an assessment after the ordinary period has passed, which is the only avenue available for older years and is regularly overlooked.

The choice of route is a strategic decision.

It should be taken with a view to the whole exposure, not only the assessment immediately in front of the client, since the position adopted in one year tends to determine the outcome in the others.

These matters are conducted with the Litigation team.

Recovering tax paid in error

Not every dispute begins with a demand.

Where tax has been paid that was not due, for example because the regime was not applied in a year for which the individual was registered, or an available exemption was not claimed, it may be recovered, with interest where the error is attributable to the authority.

Reviews of past returns undertaken for that purpose often pay for themselves.

Every beneficiary’s status ends on a known date, yet expiry is seldom planned for.

On the first day of the eleventh year the individual becomes an ordinary Portuguese tax resident, with no transitional taper.

What changes

Foreign income that was exempt becomes taxable at progressive rates, with the additional surcharge applying at higher levels.

Pension income moves from its favourable treatment to the ordinary scale.

Employment and self-employment income taxed at the reduced flat rate becomes subject to the progressive rates in the ordinary way.

For an individual whose income is largely foreign, the effective rate can more than double from one year to the next, and the increase falls on income that has not changed at all.

The planning window

The work is worth beginning around two years before expiry, because most of what can be done requires time.

Income that will become taxable may be capable of being realised or distributed early while the favourable treatment still applies.

Assets and holding structures can be reviewed and, where necessary, reorganised, which is rarely quick and is sometimes taxable in itself.

Pension arrangements often permit choices as to timing and form that are unavailable once payments have commenced.

And where the intention is to leave Portugal, the timing of departure and the establishment of residence elsewhere require planning across two tax years, with attention to the treaty position in the destination state.

The alternatives, and choosing between them

The broad choice is between remaining and leaving, and either may be combined with restructuring.

Remaining in Portugal under the ordinary rules is often more favourable than clients expect once the position is properly modelled.

Relocating raises exit and treaty questions and, for many, immigration questions addressed with the Immigration & Citizenship team.

Restructuring, whether of holdings or of the timing of realisations, is often undertaken with succession in view and is addressed with the Estate Planning & Wills team since the same structures ordinarily serve both purposes.

We model the position under each before recommending one.

The first cohorts have already reached expiry and further cohorts will do so annually until 2033.

Planning two years in advance is cheaper than planning in the final December.

Individuals relocating to Portugal at present should consider the tax incentive for scientific research and innovation, which replaced this regime for new arrivals and operates on a different basis and with different conditions.

Former Portuguese residents returning after an absence of at least five years may instead qualify for the regime for former residents, which excludes half of their employment and business income from tax for five years, subject to a cap.

See IFICI Tax Benefits, and Moving to Portugal for the wider position on relocation.

The regime was introduced in 2009 to attract qualified professionals, entrepreneurs, investors and pensioners to Portugal through favourable personal income tax treatment.

It was available to any individual who had not been a Portuguese tax resident in the five years preceding the acquisition of residence.

Residence itself followed the ordinary tests, principally presence in Portugal for more than 183 days in a tax year, with alternative tests also available.

Once granted, the treatment applied for ten consecutive years.

As a general rule, foreign-source income was exempt from Portuguese tax where the applicable double taxation treaty permitted the source state to tax it, irrespective of whether or at what rate it did so.

Foreign employment income followed a stricter rule and was exempt only where actually taxed in the source state.

Portugal has concluded more than seventy such treaties.

The exemption applied principally to passive income, including dividends and interest, and to foreign employment income taxed abroad.

It did not extend to every category.

Gains on the disposal of securities were, under most treaties, taxable only in the state of residence, and therefore remained taxable in Portugal notwithstanding a widespread assumption to the contrary.

Portuguese-source employment and self-employment income derived from activities of a scientific, artistic or technical nature recognised as being of high added value was taxed at a flat rate of 20% in place of the progressive rates.

Foreign self-employment income from such activities was exempt where the treaty allowed the source state to tax it, and otherwise taxed at the same 20% rate.

The recognised activities were set out in a list and covered, in summary:

• Company directors and executive managers, including directors of administrative, commercial, production and specialised services, and of hotel, catering, retail and other services;
• Specialists in physics, mathematics, engineering and related technical fields;
• Physicians, dentists and other medical professions;
• University and higher education teachers;
• Specialists and technicians in information and communication technologies;
• Authors, journalists, linguists, and creative and performing artists;
• Intermediate-level science and engineering technicians;
• Qualified industrial, construction and craft workers, including in metallurgy, metalworking, food processing, woodwork, clothing, handicrafts, printing, precision instruments, jewellery and electrical work;
• Market-oriented farmers and qualified agricultural, livestock, forestry and fisheries workers;
• Operators of fixed installations and machinery and assembly workers.

Those in the professional categories had to hold at least an EQF level 4 qualification, or ISCED level 35, or have five years of documented professional experience.

Portuguese-source employment or self-employment income that did not qualify was taxed at the ordinary rates applicable to residents.

The treatment of pension income changed during the life of the regime, and an individual’s position depends on when they registered, not on the rules as they now read.

Under the original treatment, private pensions could escape taxation both in the source state and in Portugal.

Amendments enacted in 2020 introduced a flat rate of 10% on pension income for those registering thereafter, while individuals who had already qualified retained the earlier treatment.

Several features of Portuguese tax law that made the regime attractive were never part of it and remain unchanged by its closure.

Portugal levies no general wealth tax, and transfers on death or by gift to a spouse, descendants or ascendants are exempt from the stamp duty that otherwise applies to gratuitous transfers.

The remittance of funds into Portugal is not itself a taxable event.

These continue to apply to ordinary residents and are relevant to anyone modelling their position after the ten years expire.