FAQ ON NON-HABITUAL RESIDENT STATUS

For several months now, we have been receiving numerous questions related to non-habitual resident status and particularly concerning double taxation.

We decided to create a FAQ bringing together the The 21 Most Relevant Questions to which we provide answers.

It's important to remember, however, that every tax and expatriation situation is different, even if it's true that a lot of information is available free of charge on Google.

Keep in mind, however, that this information found on the internet is general in nature and may not apply 100% to your tax situation. Each person has a different career path or situation (supplemental income, disability, investments, etc.).

It's important to carry out an analysis of your tax situation before taking any steps, because after that it'll be too late.

F.A.Q

1. What is non-habitual resident (RNH) status?

On September 23, 2009, the Portuguese government implemented the tax regime for Non-Habitual Residents (RNH). The main objective of this regime is to attract foreign nationals through a tax credit. 

RNH status offers a tax rate of 10% for a period of 10 years to individuals receiving their retirement income outside of Portugal, and a tax rate of 20 % to anyone earning income from employment within Portugal. 

2. How can I qualify for non-habitual resident status in Portugal?

To qualify for RNH status, you must not have been a tax resident in Portugal during the previous five years.

You must also have your tax residence there and spend more than 183 days there during the calendar tax year.

3. Is RNH status valid in countries other than France?

Only countries that have signed a tax treaty with Portugal allow individuals to obtain RNH status.  

4. I own a primary residence in France that would become a second home. Am I required to sell my property in order to qualify for non-habitual resident status in Portugal?

RNH status requires full relocation to Portugal. You may retain one or more secondary residences in France. You will remain liable for taxes on those assets.

5. What is the processing time for approval of non-habitual resident status?

Contrary to what some people think, the status of RNH is not granted automatically. It is granted only after review of the application.

This generally takes 8 to 12 months, with retroactive effect. Only the Portuguese tax authority has the authority to determine whether you meet the RNH criteria.

6. Do I have to report all my income in Portugal, including my French income?

Portugal taxes worldwide income. You must report all your income there, including income earned in your home country; the tax credit will be applied to avoid double taxation under the agreements between Portugal and the signatory countries.

7. I have just established my tax residence in Portugal as a non-habitual resident. Do I still need to file my tax returns in France?

Unfortunately, even if you are no longer a resident of France, you will not be able to avoid filing an income tax return in France (or another country). 

The tax credit for your retirement pensions received in France will be deducted after you file your tax return.

8. If we are negligent or make a mistake on our tax return, is there a risk that we could end up being taxed in both countries—in the same year?

A tax treaty signed between France and Portugal has eliminated double taxation on income. These bilateral agreements allow the French tax authorities to determine in which countries you are required to pay taxes.

9. I am a retiree from the public sector in France. Am I exempt from taxes on my retirement income while living in Portugal?

No, tax exemptions are available for pensions from the civil service in France.

10. I am a retiree from the private sector in France. Am I exempt from taxes on my retirement income while living in Portugal?

Yes, for pensions from the private sector, tax exemption is possible under certain conditions.

11. I receive a pension from the CNAV or CARSAT. Is it possible to be exempt from taxes as a non-habitual resident?

For this complex situation, a in-depth study An assessment of your tax situation will be necessary. Our team of tax specialists is available to review your situation.

12. Does non-habitual resident (NHR) status allow me to claim an exemption on my dividends?

No, non-habitual resident (RNH) status does not provide an exemption for dividends; it only provides an exemption for retirement pensions and, for working individuals, a cap on their earned income.

13. As a resident of Portugal, can I claim an exemption for my French rental income?  

No, income from movable and immovable property remains taxable in the country where the property is located.

14. Is there a property tax in Portugal?

Yes, there is a tax real estate In Portugal, it's called the IMI, and payment is made in three installments.

15. How is the IMI calculated? 

IMI is due annually upon the purchase of real estate. IMI is calculated based on the taxable property value (VPT) of rural and urban properties located in Portugal. This taxable property value is generally lower than the purchase price.

16. What is the tax-related estate value?

This is the value listed in the cadastral registry. This registry includes a description of the property, its location, its tax assessed value, and the identities of the owners. 

17. Is there a wealth tax in Portugal?

There is no IFI in Portugal; as in many countries, the IFI remains a distinctly French institution, much like the 35-hour workweek. However, there is a similar tax: the annual stamp tax (Imposto do Selo), which applies only to real estate with a value of €1,000,000.00 or more.

18. Is there a tax on rental income?

Yes, if you rent out your property, the income tax rate is set at 28% of the annual rent received. 

19. Is there a tax on capital gains from real estate?

When you sell your property, you will be required to pay a capital gains tax at a fixed rate of 28%.

20. Is there an inheritance tax in Portugal?

On January 1, 2004, Portugal officially abolished inheritance taxes and taxes on gifts made without consideration. A stamp tax is due on real estate located in Portugal. The tax rate is 10%; in addition, a supplementary tax of 0.8% applies when the transfer involves real estate. 

21. How can you avoid a tax audit as a habitual resident of Portugal?

Yet it should be interpreted according to its legal definition. The 183-day rule is often understood in the common sense of the term.

To be exempt from taxes in France, you must, among other requirements, reside in Portugal for 183 days a year. Since border checks have become very unpredictable, we strongly advise you to carry proof of residence (such as utility bills). 

Please note: Tax authorities have a variety of tools at their disposal that allow them to determine your tax status. However, to avoid being subject to a tax audit or having your expatriation status reclassified, we strongly recommend that you conduct a comprehensive review of your situation.