End of Portugal’s Non-Habitual Resident Tax Scheme: Details

Portugal launched the Portugal’s Non-Habitual Resident Tax Scheme in 2009 to attract talent, investors, and retirees from around the world. This scheme offered preferential tax treatment for ten years, including a flat tax rate on certain types of income and broad exemptions for qualifying foreign income, subject to specific conditions.

Over time, Portugal’s Non-Habitual Resident Tax Scheme faced increasing criticism due to rising property prices, political pressures related to the cost of living, and the government’s decision to redirect tax incentives toward sectors with greater economic value. As a result, applications for new applicants were permanently closed after the transition period ended on March 31, 2025, while individuals already registered in the scheme continued to enjoy its benefits until the end of their original ten-year term.

Replacement of Portugal’s Non-Habitual Resident Tax Scheme

Following the end of Portugal’s Non-Habitual Resident Tax Scheme, Portugal launched the IFICI program, a tax incentive focused on scientific research, innovation, and highly skilled professional activities.

Although some refer to it as “NHR 2.0,” this description can be misleading, as the new system is not a direct extension of the previous one. It differs significantly in its eligibility requirements and the categories of individuals it benefits from.

The IFICI program offers a flat 20% tax rate on income from eligible employment and self-employment for up to ten consecutive years. However, applicants must be engaged in professional activities recognized by the Portuguese government, including scientific research and technology, higher education, and certain approved innovative companies.

Who benefits and who is no longer eligible?

One of the defining features of Portugal’s Non-Habitual Resident Tax Scheme was its accessibility, allowing many new tax residents to qualify regardless of their profession. Today, however, the eligibility requirements are much more stringent.

Retirees who previously benefited from preferential tax treatment on foreign pensions no longer receive the same benefits under the IFICI scheme. Similarly, individuals with passive income or those working in professions not included in the list of eligible activities will generally be subject to Portugal’s standard income tax rules.

On the other hand, researchers, university professors, engineers, and certain professionals working in the innovation and technology sectors may still be eligible, provided they meet all legal requirements and continue to practice their eligible professional activities throughout the benefit period.

How can you register for the new IFICI scheme?

The new scheme does not automatically grant tax benefits upon moving to Portugal. Applicants must first prove their tax residency in Portugal and ensure that their professional activity meets the eligibility requirements.

Applications must be submitted via the official Portuguese tax authority’s online portal by the deadline, which is usually January 15th of the year following the year in which tax residency was obtained in Portugal. The system also requires ongoing compliance with eligibility criteria, making it important to stay informed of future regulatory developments.

What do this mean for people planning to move to Portugal?

The end of Portugal’s Non-Habitual Resident Tax Scheme does not mean that Portugal has lost its appeal as a tourist destination. However, it does mean that tax planning is more important than ever.

Individuals who previously relied on this scheme due to its generous exemptions—especially retirees—will find that the situation has changed significantly. Nevertheless, Portugal may remain an attractive option for professionals working in innovation-related industries or for individuals seeking residency through other investment immigration pathways, such as the Golden Visa, the D7 Visa, or the D8 Digital Nomad Visa, provided they carefully assess the tax implications of each option.

It is also important to recognize that tax legislation evolves in response to economic and political developments. Therefore, a long-term relocation strategy should not rely on a single tax incentive but should be based on a more comprehensive plan that considers residency options, investment opportunities, and future tax obligations.

The end of Portugal’s Non-Habitual Resident Tax Scheme represents a significant shift in the country’s tax policy. Portugal has moved from a broad incentive system available to many new residents to a more targeted system specifically designed for highly skilled professionals in particular sectors. Understanding the differences between the two systems is crucial for anyone considering relocating to Portugal before making any decisions regarding residency or tax planning.

If you would like to learn more about Portugal’s Non-Habitual Resident Tax Scheme and the alternatives currently available – including the Portugal Residence by Investment Scheme and Citizenship through Investment Schemes – or if you are looking for European Residency options that suit your circumstances, you can contact Global Citizen Consultants for tailored professional guidance in accordance with the latest regulations.