RFNH (NON-REGULAR TAX REGIME FOR NON-REGULAR RESIDENTS) - Tax Advantages

Living in Portugal with Tax Advantages & Foreign pension origins

Living in Portugal offers benefits to non-habitual residents, ie, recognition by the Portuguese tax authorities the status of RFNH (NON-REGULAR TAX REGIME FOR NON-REGULAR RESIDENTS), is for the taxpayer the right to be taxed as such for a period of 10 consecutive years. Expiry of that period will be taxed under the general scheme CIRS (tax on Portuguese income). It should be noted that the system serves not only for French citizens but to all nationals of OECD (Organisation for Economic Co-operation and Development) countries foreign. The scheme resulted in first line of the Decree Law 249/2009 of 23 September that has created a new type of taxpayer: ?non-regular resident?
The ordinance nº 12/2010 7 January and other legislation develop the scheme.
The acquisition of the status of RFNH (NON-REGULAR TAX REGIME FOR NON-REGULAR RESIDENTS) is a process that involves the consideration and approval by the tax authorities. Is not acquired automatically.
This procedure of assessment and allocation of the scheme takes several months and is only effective after been granted.

Criteria and Requirements for obtaining the status:

The interested in the entry for the procedure RFNH (NON-REGULAR TAX REGIME FOR NON-REGULAR RESIDENTS) shall comply with the following conditions:

  1. The person concerned has not been taxed as tax resident in Portugal in the five years preceding the application;
  2. The applicant should be able to be considered tax resident in Portugal, which is possible, particularly under the following conditions: a) Remained in Portuguese territory more than 183 days, consecutive or OR b) Having remained less time, has had in Portuguese territory, on 31 December of the year, of accommodation such as to suggest that you intend it to be and occupy as habitual residence (This may include owning of real property, but also other rights, eg lease or usufruct, etc.).
  3. Submit an application for status assignment RFNH (NON-REGULAR TAX REGIME FOR NON-REGULAR RESIDENTS) with the Directorate of International Relations Services until 31 March of the year following that in which the award of the status due to take effect.

Tax benefits (for 10 years):

The recognition of this regime, and subjecting the same, gives access to a tax treatment with some possible advantages, and for 10 years, where we highlight:

  1. Exemption from taxation of passive income. Passive income, as better explained below, is income earned abroad and provided that the source State can tax the - excludes states with tax systems listed in the ordinance known in Portugal as ?black list?, which basically includes all tax havens, as well as those non-OECD (Organisation for Economic Co-operation and Development).
    Source States are basically those where there is double taxation agreement with Portugal .
  2. Included in income above the pension reform, capital income, property, capital gains, the asset increases, intellectual or industrial property, scientific income, artistic and technical .
  3. The earned income ( independent or dependent) obtained in Portugal and those from high value-added activities in Portugal pay a flat rate of 20% IRS.

In summary and in particular on pensions, the same, since generated outside the Portuguese territory, although they have not been taxed in the country of origin benefit from IRS exemption in Portugal .

Tax advantages for the following types of income:

A distinction is made essentially as income in the analysis are obtained in Portugal or outside. like this:

INCOME OBTAINED IN PORTUGAL

The earner from employment and / or self-employment benefit from the application of a reduced rate of IRS 20%, provided that such income following exercise of high value-added activities as defined by law, principally activities with scientific, artistic or technical, for example:

  • Architects, engineers and related technical;
  • Artists, actors and musicians;
  • Auditors and tax consultants
  • Doctors and dentists;
  • university professors;
  • psychologists;
  • Professionals, technicians and assimilated;
  • Senior;
  • Investors, administrators and managers.

In addition to the applicable special rate (of 20%), may also focus on the income earned extraordinary surcharge IRS 3,5%.

Other types of output obtained by RFNH (NON-REGULAR TAX REGIME FOR NON-REGULAR RESIDENTS) will be taxed at progressive rates and general IRS (até 48%), that accrue to extraordinary surcharge 3,5% over the amount of compensation that exceeds the guaranteed minimum monthly remuneration, and the additional fee of solidarity, applicable progressive form part of the taxable income exceeding 80.000?. The share of income that exceeds EUR 250,000 will, in turn, taxed at 5%.
In certain situations the interest earned is subject to special or withholding tax, which may result in a lower tax to the IRS progressive rates. By way of example may find yourself interest, dividends and capital gains, subject to rate 28%.

INCOME OBTAINED ABROAD

There are several situations that matter separate assessment:

i) PROFESSIONAL INCOME AND ROYALTIES

Labor income dependent obtained abroad, are exempt from income tax if they are actually taxed in the source State, in accordance with double taxation agreement between Portugal and the State, or, in the absence of double taxation agreement, such income is taxed in the source State and can not be considered obtained in Portuguese territory, according to the rules of the IRS Code.

Income from self-employment resulting from high value -added activities, (or royalties), both will be exempt from income tax, provided that, alternatively, may be taxed in the source State in accordance with double taxation agreement between Portugal and the State, or, in the absence of double taxation agreement: (i) such income may be taxed in the source State in accordance with the Model Tax Convention on Income and Heritage OECD (Organisation for Economic Co-operation and Development); (ii) income are not considering obtained in Portuguese territory, according to the IRS Code, and(iii) the country, territory or income source in the region is not part of the Portuguese list of tax havens ( commonly known in Portugal as " black list").

As noted above is crucial to distinguish: effective taxation OR mere subjection of income by the source State.
Is that while in the case of income from employment, the exemption is dependent on the effective taxation of income in the source State; in the case of income from self-employment, the legislator conditioned the application of the exemption to the mere possibility of taxation of such income at the source State.

As for capital gains property: most double taxation agreements concluded by Portugal provides for taxation of such income only by the State where the taxpayer is resident, which rules from the outset the application of IRS exemption

ii) PENSION INCOME

Are exempt from taxation in Portugal if they are taxed in the source State in accordance with double taxation agreement between Portugal and the State, or, alternatively, by the criteria of the IRS Code, such income is not considering obtained in Portuguese territory .

iii) INCOME LIABILITIES

With regard to passive income such as interest, dividends, other income from capital, income and capital gains earned abroad, the same shall be exempt from taxation in Portugal since, alternatively, may be taxed in the source State, in accordance with double taxation agreement between Portugal and the State, or, in the absence of double taxation agreement,

  1. such income may be taxed in the source State in accordance with the Model Tax Convention on Income and Heritage OECD (Organisation for Economic Co-operation and Development);
  2. income are not considering obtained in Portuguese territory, according to the IRS Code, and
  3. the country, territory or income source in the region is not part of the Portuguese list of tax havens.

In this respect, and with regard to the taxation of real estate capital gains, it should be noted that most of the double taxation agreements concluded by Portugal provides for taxation of such income only by the State where the taxpayer is resident, frustrating, to departure, the application of the above exemption

other Situations

Importantly, because often asked, that the legal and tax regime Portuguese does not currently cover wealth tax or the fortunes.
Similarly, and as regards the taxation of gratuitous transfers, including death ( inheritance) or donation, are exempt from stamp duty transmissions free to the spouse or de facto united, descendants or ascendants ( to mention, however, that the stamp duty is always due on transfers of real property located in Portugal).