Madeira’s Non-Habitual Residency scheme is a special taxation regime, available under certain eligibility criteria, to ex-pats and remote workers who have recently moved to Portugal and Madeira.
NHR Status grants certain tax privileges and exemptions for a period of ten years.
Madeira’s stunning landscapes, temperate climate, varied gastronomy, and low crime rate make the Island an attractive destination for those looking to work remotely, live, and invest in Portugal. Created in 2009, the Non-Habitual Residency Scheme was designed to promote foreign investment by offering special tax conditions for ex-pats who want to live in Portugal either full or part-time.
Tax residents in Portugal can access the NHR scheme, provided they have not been a personal income (IRS) taxpayer in Portugal in any of the five years before moving to the country.
*Whilst some people make the mistake that NHR is a form of visa, like the D7 or Golden Visa, it is important to note that NHR is a tax regime and not a residency permit. Applicants must first obtain residency separately, before submitting an NHR application.
- Be over 18 years of age
- Acquire Tax residency in Portugal
- Not held tax residency in Portugal in any of the previous 5 years.
What do I need to apply for NHR?
- EU Passport or Residency in Portugal
- Proof of Fiscal Address in Portugal
- NIF – Portuguese Tax Identification Number
- Bank Statements, with a substance minimum of EUR 9500 over 12 months.
When can I register for NHR?
If you arrive in Madeira between the 1st of April and the 31st of December, you have until March 31st the following year to apply for Madeira’s Non-habitual residency scheme. If you arrive between 1st January and 31st of March, you have until 31st March the following year to register.
As part of Madeira’s Non-habitual residency scheme all residents are subject to personal income taxation. Any income generated in Madeira is subject to a rate of 20% income tax, provided you fall into a list of High Value-Added Activities with ‘Technical, Scientific or Artistic Character
Similar to employees, freelancers and self-employed individuals are required to fall into the high-value category to benefit from NHR. Typically you would be subject to 20% income tax plus social security contributions if no tax is paid on the income where it was earned.
Definition of High Value-Added Activities
- Managing Directors and Executive Managers of companies
- Directors of Hotels, Restaurants, and commerce
- Administrative Service Directors
- Physicians, Dentists and Stomatologists
- ICT Specialists
- Authors and Journalists
- University Professors
- Creative and Performing Artists
Capital Gains, Dividends and Passive Income
Capital Gains, interest, dividends, income from intellectual property and other forms of passive income are exempt from taxation in Madeira and Portugal, provided they are taxed in the country they are obtained in, and Portugal has a double taxation treaty in place. If the income has been obtained in a country considered by Portuguese law to be a ‘tax haven’, then an aggravated tax rate of 35% is applied.
Pensions and retirement for Non-Habitual Residents
Net Pension Income earned by NHR citizens is taxed at a flat rate of 10% for ten years. Portugal has treaties in place with EU member countries and Social-Security agreements with some non-EU member countries. Through the UK/Portugal Tax Agreement, most UK Pensions are taxable only in Portugal at 10% for the first 10 years through the Non-Habitual Residence Scheme. Always consult with a financial advisor to ensure your pension is managed in the most efficient way possible.
MIBC – Madeira International Business Centre
The Portuguese Autonomous Region of Madeira benefits from one of the most favourable tax regimes in Europe. The Madeira International Business Centre (MIBC) or Madeira Free Trade Zone (Zona Franca da Madeira) as it is commonly known, offer businesses and corporations a range of tax benefits, designed to attract foreign investment to the region.
- Reduced 5% corporate tax rate for income obtained outside Portugal.
- Reduced flat rate of 20% for salaries of workers with activities considered of high added value (see above)
- Exemption from withholding tax on the payment of services, royalties, and interest to non-resident shareholders and on other forms of remuneration such as shareholder loans, capital advances, or allowances
- Reduced rates of stamp duty, property taxes (IMI and IMT), local authority taxes, autonomous taxation, and other fees and costs
See our article on the Madeira Free Trade Zone here.
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