Relocation to Portugal: The Portuguese Tax Incentive Regime for Scientific Research and Innovation (NHR 2.0)

With the changes to the UK tax regime for individuals with a foreign domicile of origin, who reside in the UK but without the intention to remain in the UK permanently or indefinitely, so-called “non-doms”, and to the UK inheritance tax regime generally, many high-net-worth and ultra-high-net-worth individuals have been considering leaving the UK.[1]  A possible relocation destination is Portugal, which offers a desirable lifestyle as well as an interesting tax incentive regime.

The new Portuguese Tax Incentive Regime for Scientific Research and Innovation (commonly known as the NHR 2.0)[2] replaced the popular Non-Habitual Resident tax regime.  Despite being more restrictive than its predecessor, the NHR 2.0 still offers competitive tax benefits to attract highly skilled and talented individuals to Portugal.

Who is eligible for the NHR 2.0?

Individuals who (i) become tax resident in Portugal from 2024 onwards, (ii) have not been tax resident in Portugal in the previous five years, and (iii) source their income from employment or self-employment derived from scientific research, innovation or other specified activities are eligible for the NHR 2.0.  Individuals who previously benefitted from the original NHR tax regime or the “Return Programme” are not eligible.

The highly qualified professions considered eligible include: company directors; natural sciences’ experts, mathematicians, and engineers; industrial product or equipment designers; medical doctors; university professors; accountants; IT specialists. These individuals must hold a bachelor’s or equivalent degree (i.e., an ISCED Level 6 – EQF Level 6 qualification) and have a minimum of three years’ experience.

Eligible economic activities include: extractive and manufacturing industries; construction; hospitality; information and communication activities; insurance; scientific and technical consulting; administrative activities; higher education; natural sciences’ research and development; health.

What are the NHR 2.0’s tax benefits?

• Portuguese-sourced income and gains
  Eligible individuals will benefit from a flat 20% special tax rate on their Portuguese-sourced income from employment and self-employment in any of the specified activities.
  
  All other Portuguese-sourced income and gains will not benefit from the NHR 2.0 and will be taxed at the applicable general rates.  Income will be taxed at progressive rates (currently varying between 13% and 48% – plus an additional solidarity rate, which varies between 2.5% and 5%, applicable to individuals with a taxable income exceeding EUR 80,000 and EUR 250,000, respectively).  As a general rule, capital gains will be taxed at a flat rate of 28%.  However, there are special rules depending on the asset class.  For instance, 50% of the net gains arising from the sale of real estate will usually be treated as income and taxed at the progressive rates.  It is, therefore, crucial to take specialist advice to ascertain how these rules will apply in someone’s particular circumstances.

• Foreign-sourced income and gains
  Foreign-sourced income and gains, including employment and self-employment income, rental income, dividends, interest, and capital gains, are exempt from tax.  The exceptions are foreign-sourced pension income and income and gains derived from tax havens.

How long can one benefit from the NHR 2.0?

The tax benefits under the NHR 2.0 are available for a single period of ten consecutive years starting from the year when the individual first became tax resident in Portugal.

The individual must continue to earn income from an eligible activity each year during that decade, and there is a grace period of six months if someone is in-between jobs or activities.  If someone stops being eligible during one or more of those years and later becomes engaged in an eligible activity, they can resume benefitting from the NHR 2.0 for the remaining years in their ten-year period.

How to apply for the NHR 2.0?

Eligible individuals must register for the NHR 2.0 by 15 January on the year following the one when they became tax resident in Portugal.  Applications are submitted to specific entities depending on the individual’s eligible economic activity and using an official form.[3]

How can we help?

For individuals wishing to relocate to Portugal, there are many aspects to consider in advance and our team is expertly positioned to assist with the required tax and estate planning from a UK perspective.  These include:

• Loss of UK tax residence
  An individual looking to move from the UK to Portugal will need advice on becoming non-UK resident under the UK’s statutory residence test.  For someone who has been UK resident for more than three tax years, this can involve quite a significant reduction in the number of days (i.e., midnights) that they can still spend in the UK, depending in turn on the number of UK connections they will also retain.
   
• Exposure to the UK inheritance tax (IHT) regime
  Since 6 April 2025, domicile is no longer a connecting factor for IHT purposes. Instead, a new residence-based test has been introduced and individuals who qualify as “long-term residents” (LTR) are in principle exposed to IHT on their worldwide assets. Generally, an individual will be an LTR in any tax year in which it is the case that ten or more of the 20 preceding tax years were years of UK residence.  The default position is that if an LTR ceases to be UK resident, that individual will remain an LTR for ten years.  In other words, there is a “tail” of full exposure to IHT, by default lasting ten years from the date of departure from the UK.  This “tail” will be reduced in certain circumstances, including where the individual has been UK resident for fewer than 20 tax years prior to their relocation.

It is very important for individuals planning to relocate to Portugal to obtain both UK and Portuguese specialist advice.

[1] These changes are covered in our briefing note here: Internationally competitive? The post-April 2025 tax rules for non-doms.

[2] Estatuto dos Benefícios Fiscais - Artigo 58.º-A | DR; Código do IRS - Imposto sobre o Rendimento das Pessoas Singulares - CIRS - Artigo 81.º | DR; Portaria n.º 352/2024/1 | DR; Aviso n.º 4812/2025/2 | DR; Despacho n.º 2416-A/2025 | DR.

[3] Published on 20 February 2025 and available here: Despacho n.º 2416-A/2025 | DR.