Portugal -20% Low Tax Income Scheme & Tax Exemptions for Non Habitual Residents. How to achieve Portugal's reduced tax rates.

1. Qualifying Conditions
To benefit from the scheme applicable
to non-habitual residents, the taxpayer
The Portuguese Tax System
must cumulatively meet the following
For Non Habitual Residents
conditions:
 Low Income Tax Rate
- Malta A Schengen Participant
Visa Free Travel within the EU
1. he becomes resident for tax purposes
 Schengen Member
Malta’s International Legal &
Advisory Firm
in Portugal, in accordance with the
criteria laid down in the IRS Code; and
General Framework
2. he has not resided in Portugal in the
The Decree-law of 23
5 years before registering with this
September 2009 created the status of non-habitual tax
scheme;
resident both for non-residents who
3. when registering as a resident in
plan on establishing permanent
Portugal, he requests to be registered
residency in Portugal and for temporary
(with the tax authorities) as a
residents.
non-habitual resident.
Beneficiaries
Residency for tax purposes in Portugal
Persons who become tax resident in
Portugal and who, in the previous 5
years, have not resided in Portugal.
A person is regarded as being resident
for tax purposes in Portugal where,
over the course of a calendar year, he
Advantages
meets one of the following conditions:
Those enjoying non-habitual resident
A. he has stayed in Portugal for more
status benefit from a special 20% tax
than 183 days, whether consecutively
rate on certain Portuguese income and a
or not, or
tax exemption on foreign income.
B. on 31 December of that year, he has
Temporal Application
a home in Portugal under conditions
A taxpayer who is deemed to be
which demonstrate his intention to
non-habitually resident acquires the
maintain it and reside in it as his place
right to be taxed as such for a period of
of habitual residency; or
10 years consecutively starting from the
year of registration as a resident in
Portugal (since he is deemed, over this
period, as residing in Portugal).
At the end of this 10-year period, the
Schengen Area (EU) | Schengen Area
(Non—EU) | Will implement later |
EU State outside of Schengen
The Schengen area allows for free
movement of persons within its borders and includes the territory of the
following 26 European Union countries
and associated countries:
Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy,
Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherland, Norway,
Poland, Portugal, Slovakia, Slovenia,
Spain, Sweden, Switzerland.
Bulgaria, Cyprus, Ireland, Romania and
the United Kingdom do not participate
in the Schengen cooperation.
C. he is part of a household one
9/2012, a simple declaration to that
member of which is resident for tax
effect is sufficient).
purposes in Portugal.
Registration
If there is any doubt or evidence that
that declaration is not truthful, the tax
authority may request additional
taxpayer will be subject to tax in line
At the time of registration, taxpayers
with the traditional income tax rules
will be required to declare that, in the
applicable to Portuguese individuals
previous five years, they did not satisfy
In that case, the tax authority may
("Imposto sobre o Rendimento das
the conditions to become resident in
request a foreign residency certificate
pessoas Singulares"; "IRS").
Portugal (according to Circular No.
or documents attesting to the
evidence.
Acumum - Legal & Advisory
info@acumum.com | www.acumum.com | Skype ID: acumum
Malta Office: +356 2778 1700
260 Triq San Albert, Gzira, GZR 1150, Malta (EU)
Information for guidance purposes only
© Acumum 2014

2. income earned in Portugal which does
not qualify for the special 20% rate in
Malta’s International Legal &
Advisory Firm
order to determine which of the pro-
The Portuguese Tax System
For Non Habitual Residents
gressive tax rates applies to the total
Conditions
income).
governing the
Circular No. 2/2010 provides that
 Low Income Tax Rate
income in categories A and B earned
 Schengen Member
abroad, to which the exemption
existence of close personal and
method does not apply (because they
economic ties to another state.
do not meet the qualifying conditions)
are to be taxed at the special rate of
Taxation
20% where this income is derived from
Income earned in Portugal
a high added value activity.
Income in Category A (income from
application of
the exemption in
respect of
category B, E, F
or G income, (professional income,
entrepreneurial income, income from
land, capital income & capital gains)
It is sufficient that one of the following
conditions is met:
employment) and B (income from
Conditions governing the exemption
entrepreneurial and professional work)
in respect of Category A income (paid
1. such income is liable to be taxed in
of the IRS are subject to a special tax
work)
another Contracting State in
rate of 20%, provided that it comes
It is sufficient that one of the following
from high added value activities -
avoidance of double taxation entered
conditions is met:
into by Portugal with that state; or
1. such income is, in effect, subject to
2. where no such convention exists, it is
tax in the other Contracting State in
liable to be taxed in the other country,
Other Income
accordance with the Convention for
territory or region, according to the
Included in other categories of the IRS,
the elimination of double taxation
OECD Model Tax Convention on
are subject to tax in accordance with
entered into by Portugal with that
Income and on Capital, provided that
the general taxation rules applicable to
state, or
such income does not come from a
2. where no such convention exists,
territory classified as a tax haven by
the income is, in effect, taxed in the
Portugal and is not considered as
other country, territory or region,
having been earned in Portugal.
provided it is not considered as having
It is not necessary, in this scenario, that
being earned in Portugal
such income is actually subject to tax
supplementary tax of 2.5% will be
If such income is not taxed in the
abroad, but they could potentially be.
imposed).
source State, it will benefit from the
Where income is not taxed by the
preferential 20% tax rate.
source State, it will be able, however,
Note: a non-habitual resident can al-
to benefit from the preferential tax
ways opt for the tax credit method to
rate of 20%.
be applied, in which case he is obliged
Conditions governing the application
to include his income for tax purposes.
of the exemption in respect of cate-
activities which are defined in Order
No. 12/2010 of 7 January (see Annex).
habitual residents and, therefore,
subject to the progressive tax rates
applicable to Portuguese income (up
to a maximum rate of 46.5%, in
addition to which, on any taxable
income exceeding €153,300, a
Income earned abroad
Elimination of international double
taxation through the application of the
exemption method: if certain
conditions are met, income earned
accordance with the Convention for the
gory H income (pensions): the special
abroad will not be taxed in Portugal, it
case of foreign retirees
will however be counted for
accounting purposes together with
Acumum - Legal & Advisory
info@acumum.com | www.acumum.com | Skype ID: acumum
Malta Office: +356 2778 1700
260 Triq San Albert, Gzira, GZR 1150, Malta (EU)
Information for guidance purposes only
© Acumum 2014

3. It is sufficient that one of the following
conditions is met:
408 – Medical physiotherapists;
409 – Gastroenterologists;
410 – Ophthalmologists;
411 – Orthopaedists;
412 – Otolaryngologists (ENT);
413 – Paediatricians;
414 – Radiologists;
415 – Doctors - other specialised
5 – Teachers:501 – University professors.
6 – Psychologists: 601 – Psychologists.
7 – Liberal, technical & related professions:
701 – Archaeologists;
702 – Biologists and experts in life sciences;
703 – Computer programmers;
704 – Computer consultancy and programming activities related to information and
computer technology;
705 – Computer programming activities;
706 – Information technology consultancy;
707 – Management and operation of computer hardware;
708 – Information services activities;
710 – Data processing, hosting & elated
activities;
711 – Other information service activities;
712 – Media activities;
713 – Other information service activities;
714 – Scientific research and development;
715 – Research and development related to
natural and physical sciences;
716 – Biotechnology research and development; 717 – Designers.
8 – Investors, Managers and Administrators:
801 – Investors, administrators and managers who foster productive investment if attached to projects which are eligible and
employed under contracts which confer tax
benefits entered into in accordance with the
General Tax Code, approved by Decree-Law
No. 249/2009 of 23 September; 802 – Senior
business executives.
public pensions are, in principle, subject to tax exclusively in the state of
1. such income is taxed in the other
the paying agency.
Contracting State in accordance with the
Example: The tax convention between
Convention for the avoidance of double
France and Portugal grants the
taxation entered into by Portugal with
exclusive right to tax private pensions
that state, or
to the state of residency. Persons
2. it is not considered as having been
earned in Portugal.
resident for more than 183 days in
Portugal who were not resident for tax
purposes in Portugal in the previous 5
IMPORTANT: This scheme is very attrac-
years may therefore benefit from
tive for foreign retirees whose pensions
being non-habitual resident in
are from States which, under the Con-
Portugal. In these circumstances,
vention for the avoidance of double
private pensions from France will not
taxation entered into between Portugal
be subject to tax in France and will,
and the state, grant the exclusive right
moreover, be exempt from taxation in
to tax pensions to the state in which the
Portugal.
pension recipient resides (e.g. United
ANNEX—Order No. 12/2010 high
States, Switzerland, Luxembourg, Malta,
added value activities
1 - Architects, engineers and similar
technicians
101 – Architects; 102 – Engineers;
103 – Geologists.
2 – Artists, actors and musicians:
201 – Theatre, ballet, cinema, radio and
television performers;
202 – Singers; 203 – Sculptors;
204 – Musicians; 205 – Painters.
301 – Auditors; 302 – Tax Consultants.
4 - Doctors and dentists:
401 – Dentists; 402 – Analysts;
403 – Surgeons; 404 – Ship's doctors;
405 – GPs; 406 – Dentists;
407 – Stomatologists;
Spain, etc.) double non-taxation,
namely, the income is not subject to tax
in the source state and is exempt in the
state of residency.
In practice, this device can often result
in the income not being subject to tax in
either the source state or Portugal, since
the majority of tax treaties entered into
by Portugal, based on the OECD model,
provide that, in respect of private pensions, the taxpayer may be subject to tax
only in the state where he resides. Only
Acumum - Legal & Advisory
‘Uniquely local - Uniquely International’
Located in the EU tax efficient jurisdiction of Malta, Acumum Legal & Advisory employs Maltese, UK, & international lawyers &
tax accountants - with extensive on-location & off-shore international experience - providing appropriate, bespoke solutions.
Taxation
Corporate & Company Formation
Financial Services Licenses
Gaming
Aviation
Insurance Licenses
Intellectual Property
Trusts & Foundations
Maritime & Yachts
Telco, Tech, Media
Estate & Wealth Management
Arbitration & Litigation
Immigration & Residency
Divisions
Compliance
Accounting, Tax & Back Office
Outsourcing
info@acumum.com | www.acumum.com | Skype ID: acumum Malta Office: +356 2778 1700
260 Triq San Albert, Gzira, GZR 1150, Malta (EU)
Information for guidance purposes only
© Acumum 2014