Planning to live and work in Portugal? There is a tax incentive you should know about!

Portugal has become an attractive destination for many people. Whether for those who wish to discover our country as tourists or for so many others who wish to establish their residence and work here, seeking quality of life and safety.

It was precisely with these latter individuals in mind, and with the intention of attracting qualified talent, that the Government enacted, through Ordinance 352/2024, dated 23 December 2024, a tax incentive for scientific research and innovation, provided for in Article 58-A of the Tax Benefits Statute, better known as "IFICI" and also referred to as "NHR 2.0" – as it succeeds the previous Non-Habitual Resident (NHR) regime, sharing some similarities with it.

This new regime is aimed at highly qualified workers who move to Portugal to live and work for entities based here, enabling them to benefit from special, more favourable taxation under the Personal Income Tax (IRS), provided they carry out activities specified by law as highly qualified, serving companies established in Portugal that operate in strategic sectors or meet a set of legally defined criteria.

The "IFICI" succeeds the previous non-habitual resident (NHR) regime. However, its application is less wide-ranging, limited to individuals who become residents in Portugal and carry out qualified activities in strategic companies. In turn, the benefits granted are broader than those under the former NHR regime.

The "IFICI" is, therefore, a tax incentive intended for:

1. Individuals who become residents in Portuguese territory

2. Who have not been residents here in any of the previous five years

3. Who carry out activities falling under paragraphs a) to f) of no. 1 of Article 58-A of the Tax Benefits Statute.

4. Who do not benefit from nor have benefited from the non-habitual resident regime, do not choose taxation under Article 12-A of the Personal Income Tax Code (commonly known as the "Return Programme"), and have not previously benefited from IFICI.

Taxpayers who meet the requirements to benefit from the IFICI regime must submit their application for registration by 15 January of the year following that in which they become tax residents in Portugal. This application should be made to the Tax Authority and accompanied by sufficient documents to prove the taxpayer’s eligibility for IFICI and compliance with the associated requirements (such as employment contract, proof of academic qualifications, declaration confirming the compliance with requirements related to the professional activity, information about the employer, etc.).

The competent entity responsible for analysing the application will assess compliance with the activity requirements by 15 February, and the taxpayer is informed by 31 March, by the Tax Authority, of the final decision on their application.

If you meet the requirements for IFICI, what tax advantage can you expect?

The taxpayer who benefits from "IFICI" sees their income sourced in Portugal and from their dependent or independent work (categories A and B) arising from eligible activities taxed at a flat, single rate of 20% under IRS – instead of the regular progressive taxation of these earnings, which can reach up to 48%, plus an additional surcharge of 2.5% or 5% on income exceeding €80,000.00.

As for foreign-sourced income, these are, as a rule, exempt from taxation, except for rare exceptions, such as pensions and some income originating from tax havens.

IFICI is a tax incentive with a duration of 10 consecutive years, and, in the event of interruption due to non-verification of the requirements for its allocation, it may be resumed for the remaining years – provided the beneficiary once again meets all necessary requirements for this purpose.

Throughout the 10-year period (non-extendable), the taxpayer must notify the Tax Authority of any change in their situation (namely change of residence, activity or company for which it is carried out).

If we add to the tax incentives brought by IFICI the good weather, safety and quality of life, we are certain that Portugal will be the right destination for much talent and entrepreneurship.

Contact us for more information about this tax incentive and to ensure its proper and optimised application to your specific situation.

For more information: geral@matlaw.pt | (+351) 210 434 150