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RNH: Transition period, how does it work?

The State Finance Act for 2024 has determined the end of the special Non-Habitual Resident (RNH) regime on January 1, 2024. However, the law provides for a transition period. The RNH regime, introduced by Decree-Law no. 249/2009 of September 23, 2009, with the aim of attracting wealthy individuals and highly qualified professionals, has boosted tax competitiveness and attracted foreign investment to Portugal.

However, considering that the scheme had already produced the desired effects, the government decided to announce, in October 2023, its termination, subsequently specifying its terms in the new Finance Act.

What are the RNH mitigation rules?

Among the various changes approved by the finance act 2024, which came into force on January 1, 2024, certain mitigation rules for the RNH regime have been determined, with the aim of protecting the cases of taxpayers who, meeting the established criteria, wish to move to Portugal under this special regime from 2024, including applicants who :

a) are already registered as RNH in Portugal at the date of entry into force of this proposal;

b) on December 31, 2023, qualify as residents for tax purposes in Portugal;

c) become resident for tax purposes by December 31, 2024 and declare, for the purposes of their registration as non-habitual residents, that they have one of the following :

  • promise or contract of employment, promise or agreement of secondment concluded until December 31, 2023, the performance of which must take place on national territory;
  • lease or other agreement granting use or possession of real estate on Portuguese territory signed until October 10, 2023; or
  • reservation contract or preliminary contract for the acquisition of a right in rem over real estate in Portugal signed until October 10, 2023;
  • enrolment or registration of dependants in an educational establishment on Portuguese territory before October 10, 2023;
  • residence visa or residence permit valid until December 31, 2023 ;
  • procedure, initiated until December 31, 2023, for the granting of a residence visa or residence permit, before the competent authorities, in accordance with current legislation applicable to immigration, in particular by requesting an appointment or an actual appointment for the submission of the visa or residence permit application;

d) family members of applicants in one of the above situations.

In all cases, the scheme applies for a period of 10 consecutive years and under the terms previously in force, thus maintaining the obligation to apply for registration as an RNH until March 31 of the year following the year in which the tax residence began.

Without prejudice, if registration is effected after this deadline, special taxation under the transitional regime takes effect from the year in which said registration is effected and only for the period remaining within the 10-year period.

The advantages of the non-habitual resident regime

Similar to what was previously in force, the transition period of the NHA regime maintains all previous benefits for those registering from 2024 onwards, in particular the exemptions applicable to certain types of income from foreign sources and the special tax rates.

More specifically, with regard to income from foreign sources, the non-habitual resident regime allows exemption from personal income tax for various types of income, including, among others, dividends, interest, rental income and capital gains, provided that, under the applicable double taxation treaty or, in the absence thereof, under the OECD Model Convention, taxing rights are attributed to the source state.

In addition, pensions from a foreign source, when received by non-habitual residents, are taxed at a flat rate of 10 %, even if they are not taxed in the source state.

On the other hand, income from dependent or self-employed work, when derived from high value-added activities of a scientific, artistic or technical nature, included in the officially published list, may benefit from taxation at a special rate of 20 %, compared with progressive taxation under the general plan, which can reach 53 %.

In practice, and depending on the type and source of income, as well as the rules laid down in each of the double taxation treaties signed by Portugal, the non-habitual resident regime remains very attractive for those intending to move to Portugal in 2024, provided they meet the requirements described above, being a country that offers, in addition, no inheritance or gift tax to spouses, descendants or direct ascendants, as well as a very pleasant Mediterranean climate.


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