Foreigners who become tax residents in Portugal can benefit from regimes such as the IFICI (Fiscal Incentive for Scientific Research and Innovation) or the Regressar Programme, enjoying reduced IRS tax rates of 20% and exemptions on certain foreign income for a limited period.
The main tax benefits available include:
1. Fiscal Incentive for Scientific Research and Innovation (IFICI)
Replacing the former Non-Habitual Resident (NHR) regime, this programme applies to new residents working in qualified professions, such as research and teaching.
• 20% IRS Rate: Applicable to net income from employment or self-employment (Category A and B) earned in Portugal in high-value-added activities.
• Foreign-sourced income: Exemption from Portuguese tax on income like dividends, interest, and capital gains obtained abroad, provided they can be taxed in the country of origin under double taxation treaties.
• Duration: Valid for 10 consecutive years starting from the year of registration as a tax resident.
2. Exemption on Capital Gains Reinvestment
Under housing incentive measures, immigrants who sell a property in Portugal and reinvest the proceeds into buying another home in the country for their primary residence can be exempt from capital gains tax, subject to specific conditions.
3. Regressar Programme
Designed for former residents (Portuguese or other citizens) who lived abroad and return to Portugal, offering a tax relief to promote repatriation. [1]
• IRS Exclusion: 50% of employment and self-employment income is completely exempt from IRS.
• Duration: Applicable in the year of return and the following 4 years (5 years in total).
4. General Resident vs. Non-Resident Status
Those who do not qualify for special regimes are taxed under the general Portuguese IRS rules, where tax rates are progressive (up to 53% depending on the income bracket). It is mandatory to declare global income (earned in Portugal and abroad) to the Portal das Finanças using the Modelo 3 declaration and Anexo J.
To ensure the correct application of any of these regimes, you must formally register as a tax resident with the Portuguese Tax and Customs Authority (Finanças).