The Portuguese government does have several tax regimes and schemes which are designed to simplify tax payments and to make Portugal more appealing to outsiders. The most famous is the NHR tax regime, which is designed to reduce the amount of tax you pay in Portugal for the first 10 years and, in many cases, allows you to pay your tax elsewhere.
Established in 2009[1], NHR, Portugal’s non-habitual residency tax regime, is something that has gained a lot of international excitement and attention. But as anyone who has tried delving into the scheme will know, it can quickly become a confusing topic.
It doesn’t help that NHR status is quite a broad tax incentive but one that has different implications for pensioners, freelancers, and company owners — to name just a few groups. Some people may also have different sources of personal income (e.g. some income from a pension, but also some income from dividends) and each might be taxed differently under NHR — and some forms of income perhaps not eligible for NHR.
Another issue is the name: non-habitual residency sounds like it’s aimed at people who don’t live in Portugal. The opposite is actually true, and to be eligible for the NHR scheme you need to first be a tax resident in Portugal.
Some people make the mistake of thinking that non-habitual residency is a form of visa, like the D7 or golden visa. It’s not: NHR is a tax regime not a residency permit. You’ll need to obtain residency separately and then apply for NHR[2].
But even though the topic can be confusing, the intentions of the Portuguese government are positive and the aim of the NHR regime is to attract financially self-sufficient foreigners to Portugal.
Pensions:
As of March 2020, pensions are now taxed at a flat-rate of 10% under the NHR scheme[9]. It may be exempt from Portuguese taxes if taxed at source[10]. Pensioners may also choose to be taxed under normal Portuguese tax rates which, due to the small annual tax-free allowance, may work out more beneficial in some instances. You should speak to an accountant who can estimate how you would be taxed under both tax systems.
Resource:
Lei n.º 2/2020 de 31 de março, Orçamento do Estado para 2020, published in the country’s official gazette, Diário da República n.º 64/2020, Série I de 2020-03-31. See a version of the Law (in Portuguese) here.
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