The State Budget for 2024 ended the well-known Non-Habitual Resident Status (ERNH), which had operated for more than a decade. The Non-Habitual Resident (RNH) tax regime began in 2009 under Decree-Law no. 249/2009 of 23 September, amending Articles 16, 22, 72 and 81 of the IRS Code. It was supplemented by Order no. 12/2010 of 7 January, amended by Order no. 230/2019 of 23 July, which approved a new table of high added-value activities (EVA) for the purposes of Articles 72(10) and 81(5) of the IRS Code.
ERNH was a special regime offering favourable tax status and a reduction in personal income tax for 10 years to new foreign residents of any nationality and Portuguese citizens who had spent more than 5 years abroad.
To benefit, a non-habitual resident had to pursue a professional activity considered to have high added value or be a pension recipient, such as a retiree. The regime aimed to attract qualified professionals in important activities and recipients of pensions earned abroad. Recipients of certain foreign-source passive income, including investment income, property income and capital gains, could also benefit.
Although it repealed ERNH, the State Budget for 2024 protected established situations. Article 236(3) therefore continues the regime in the following cases:
“a) On the date the law enters into force, the person is already registered as a non-habitual resident in the AT taxpayer register, until the period referred to in Article 16(9) to (12) of the IRS Code expires;
b) On 31 December 2023, the person meets the conditions in Article 16 of the IRS Code to qualify as tax-resident in Portugal;
c) The person becomes tax-resident by 31 December 2024 and declares, for non-habitual resident registration, that they possess one of the following:
i) A promise of employment or employment contract, or a promise or agreement for a secondment, concluded by 31 December 2023, with duties to be performed in Portugal;
ii) A lease or other agreement granting use or possession of property in Portugal, concluded by 10 October 2023;
iii) A reservation agreement or preliminary agreement to acquire a right in property in Portugal, concluded by 10 October 2023;
iv) Enrolment or registration of dependants at an educational establishment in Portugal, completed by 10 October 2023;
v) A residence visa or residence permit valid until 31 December 2023;
vi) A procedure initiated by 31 December 2023 with the competent authorities to obtain a residence visa or permit under the applicable immigration legislation, including a request for an appointment, an appointment actually scheduled to submit the application, or submission of the visa or permit application itself;
d) The person is a member of the household of a taxpayer referred to in the preceding points.”
This protected the expectations of taxpayers already benefiting from the regime and those in the process of acquiring the status. Some situations under the transitional provisions of Article 236 are likely to raise questions that the tax authorities will clarify.
For the situations in points (c) and (d), taxpayers must apply electronically for non-habitual resident registration through the Portal das Finanças. The deadline is 31/03/2024 for those who became resident in 2023 and 31/03/2025 for those who became resident in 2024. This application must follow registration as resident in Portugal.
Alongside the transitional rules for the repealed regime, the State Budget for 2024 introduced the Tax Incentive for Scientific Research and Innovation (IFICI), in the newly added Article 58-A of the Tax Benefits Statute. The successor to ERNH is less extensive in terms of both beneficiaries and eligible activities. The new IFICI regime will be analysed and discussed in our next article…
Dr. Pedro Emanuel de OLIVEIRA
Lawyer