Understanding the New Inpatriate Regime (NIR) After the End of NHR
Portugal repealed the long standing Non-Habitual Resident (NHR) regime for new entrants with effect from 1 January 2024. However, a new special regime was introduced: the New Inpatriate Regime (NIR), often referred to as “NHR 2.0”. The NIR targets active professionals in high value-added sectors and offers a 20% flat rate on qualifying Portuguese source employment and self-employment income, alongside exemptions for most foreign source income.
Key Features of the New Inpatriate Regime (NIR)
General Eligibility Criteria
The NIR was introduced in the 2024 Portuguese State Budget and applies to individuals who become Portuguese tax resident from 2024 onwards. To qualify, individuals must:
- Not have been Portuguese tax resident in the previous five years
- Become tax resident in Portugal from 2024
- Apply for the NIR by 15 January of the year following the individual becomes tax resident
- Not have previously benefited from NHR or the “Regressar” regime
- Carry out a qualifying high value-added activity and receive income from it throughout the duration of the regime
Qualifying Activities and Entities
Qualifying activities must be performed for recognised entities, including:
- Qualified job roles or governing body positions in entities recognised by AICEP or IAPMEI
- Start-up roles in companies certified under Portugal’s start-up law
- Highly qualified professions in companies benefiting from the RFAI regime or industrial and services companies exporting at least 50% of turnover
- Teaching or research in higher education or national science and technology networks
- Roles in Madeira or the Azores (subject to regional rules)
Tax Treatment and Benefits
The NIR applies for 10 consecutive years. Portuguese-source employment and self-employment income that qualifies for the regime is taxed at a 20% flat rate.
Foreign-source income, including employment, self-employment, dividends, interest, rental income and capital gains, is exempt from Portuguese taxation, except for foreign pensions, which are never exempt.
Clients for Whom the Regime Is Suitable
The NIR is attractive for:
- Internationally mobile professionals relocating for work
- Clients with significant foreign-source investment income, as this is generally exempt
- Senior individuals in high value-added sectors
- Executives relocating from multinational structures
- Professionals expecting a medium-term residence in Portugal (up to 10 years)
Clients with diversified global income streams often gain the most, as the combination of a 20% flat rate and broad foreign-income exemption can significantly reduce their tax exposure.
Clients for Whom the Regime Is Not Suitable
The NIR is not suitable for:
- Retirees, or individuals relying on pension income
- Digital nomads working for foreign employers without ties to qualifying Portuguese entities
- Individuals with foreign income from blacklisted jurisdictions, taxed at 35%
- Clients who cannot meet the qualifying activity requirements each year
Foreign-source pensions are never exempt, so the regime offers limited benefit to clients whose main income is pension-based.
Considerations for Advisers
- Qualifying Portuguese-source employment or self-employment income is taxed at 20%, while most foreign-source income is exempt, except foreign pensions.
- Foreign income from blacklisted jurisdictions is not exempt and is taxed at 35%.
- Clients must maintain a qualifying activity for the full ten-year period to preserve the regime.
- The NIR requires timely administrative compliance, including meeting the 15 January application deadline.
- If clients do not meet the annual qualifying-activity conditions, they risk losing access to the regime and returning to standard Portuguese tax rates.
Given the narrow eligibility criteria, advisers should verify the client’s employment status, confirm the eligibility of the employer or entity, and assess whether the client’s overall global income profile is well-aligned with the structure and intent of the regime.