Non habitual residency updates – 20% rate
New rules will be implemented by the Portuguese Tax Authorities regarding high added-value activities of non-habitual residents.
The non-habitual resident regime provides certain professionals are eligible to a special Personal Income Tax of 20% applicable to earned income or an exemption if requirements are met.
For salaries and self-employment income derived from an economic activity, the non-habitual resident tax regime will allow those professionals to be taxed at a 20% flat rate, instead of the regular progressive tax rates up to 48%.
However, the procedure to recognize the existence of high value-added activity was rather obscure and confusing, requiring previous validation by the Tax Authorities and filing of multiple documentation. High added-value activities are listed, but the tax benefit would require prior validation.
This process was lengthy and was not governed by clear guidelines on how to correctly instruct and file an application.
Considering the hardships of obtaining approval, the Portuguese Tax Authorities amended the procedure and preapproval is no longer required. The recognition of the added value of a certain activity will now take place upon the submission of the applicant’s yearly income tax return.
Non-habitual residents should be aware that upon the submission of a tax return, documentation (attesting that they engaged in high value-added activities) will be required.
The new guidelines apply to future and pending applications. If you need to file an application or follow up on your application, or prepare the filing of your tax return, feel free to seek our legal advisory services.