Incentivised Tax Status (ITS) in Portugal: The New Non-Habitual Resident (NHR) Tax Regime

Portugal's Incentivised Tax Status (ITS), also known as the IFICI regime (Incentivo Fiscal à Investigação Científica e Inovação), replaced the former Non-Habitual Resident (NHR) tax regime from January 1, 2024. This is now enacted law — not a proposal. This guide covers who qualifies, what the tax benefits are, and how it differs from the old NHR.

What Is the ITS / IFICI Regime?

The IFICI regime is a special tax status designed to attract highly qualified professionals, researchers, and innovators to Portugal. It offers a flat 20% income tax rate on Portuguese-sourced employment and self-employment income for a period of 10 consecutive years.

Unlike the old NHR, which broadly covered retirees and remote workers, the IFICI is specifically targeted at professionals in qualifying activities that contribute to Portugal's scientific, technological, and economic development.

Key Benefits of IFICI

20% Flat Tax Rate: Qualifying individuals pay a flat 20% rate on Portuguese-sourced employment and self-employment income, instead of the standard progressive rates (which can reach 48%).
Foreign Income: Certain categories of foreign-sourced income (dividends, interest, royalties, capital gains, rental income) may be exempt from Portuguese taxation, depending on the applicable double tax treaty and specific conditions.
Duration: The special status applies for 10 consecutive tax years from the year of registration as a Portuguese tax resident.
No Wealth Tax: Portugal does not impose a general wealth tax, benefiting IFICI holders with international assets.

Who Is Eligible for IFICI?

Qualifying Activities

The IFICI regime is available to individuals engaged in specific professional activities, including:

• Scientific research and innovation — researchers, scientists, and academics at recognised institutions
• Highly qualified professionals — in activities defined by ministerial order (Portaria), including technology, engineering, and other specialised fields
• Jobs within the scope of investment tax benefits — positions in companies benefiting from contractual tax incentives for productive investment
• Startup employees and founders — professionals working for certified Portuguese startups
• Investment fund managers and venture capital — managing qualifying Portuguese-based funds
• Roles in industrial and technological free zones — specifically in the Madeira Free Zone (CINM)

Who Does NOT Qualify

The IFICI regime does not cover:

• Retirees and pensioners — unlike the old NHR, there are no pension tax exemptions under IFICI
• General remote workers — working remotely for a foreign employer without a qualifying activity does not qualify
• Passive income earners — individuals whose sole income is from investments, pensions, or rental income

Residency Requirements

• You must not have been a Portuguese tax resident in any of the previous five tax years
• You must become a Portuguese tax resident (spending more than 183 days per year in Portugal, or having a habitual residence in Portugal)
• You must not have any outstanding tax debts in Portugal

How to Apply for IFICI

Step-by-Step Process

1. Establish Tax Residency: Register as a Portuguese tax resident and obtain your NIF (tax identification number).
2. Confirm Qualifying Activity: Ensure your professional activity falls within one of the eligible categories. Your employer or contracting entity may need to provide supporting documentation.
3. Submit Application: Apply for IFICI status through the Portuguese Tax Authority (Autoridade Tributária) by March 15 of the year following the year you become a tax resident.
4. Receive Confirmation: The Tax Authority will review your application and confirm your eligibility.

IFICI vs. the Old NHR: Key Differences

Scope: NHR was broadly available to any new tax resident; IFICI is restricted to specific qualifying activities.
Retirees: NHR offered favourable pension taxation (originally 0%, later 10%); IFICI provides no pension benefits.
Tax Rate: Both offer a 20% flat rate on qualifying Portuguese-sourced income. The NHR also had a list of "high value-added activities"; IFICI uses a different, more specific list.
Foreign Income: Both regimes offer potential exemptions on foreign-sourced income, though the specific rules differ.
Duration: Both provide benefits for 10 years.

Frequently Asked Questions

Q: Is the IFICI regime currently active?
A: Yes. The IFICI regime has been in effect since January 1, 2024, replacing the NHR for new applicants.

Q: Can existing NHR holders keep their status?
A: Yes. Individuals who were already registered under the NHR before it ended (December 31, 2023) retain their NHR benefits for the remainder of their 10-year period.

Q: I am a retiree — can I benefit from IFICI?
A: No. The IFICI regime does not offer tax benefits for pension income. Retirees who missed the NHR deadline are subject to standard Portuguese tax rates on their pensions.

Q: I work remotely for a foreign company — do I qualify?
A: Only if your role falls within one of the specific qualifying activities listed in the legislation. General remote work does not qualify.

Q: How long does the IFICI tax benefit last?
A: 10 consecutive tax years from the year you first register as a Portuguese tax resident under the regime.

Conclusion

The IFICI/ITS regime represents Portugal's updated approach to attracting international talent — more targeted than the NHR but still offering significant tax advantages for qualifying professionals. If you work in research, technology, startups, or fund management, the 20% flat rate for 10 years remains a compelling incentive to establish your tax residency in Portugal.

For personalised advice on whether you qualify for the IFICI regime, consult with a Portuguese tax professional or immigration lawyer.