Understanding the Changes to the NHR Regime and Article 236.º of the IRS Code in Portugal

The Non-Habitual Resident (NHR) regime in Portugal has been a popular option for foreign professionals, freelancers, and retirees looking for tax benefits. Recent changes in Portuguese tax law, particularly in Article 236.º, introduce new rules that will affect those already under the NHR regime and those considering applying. Here’s a simple guide to what these changes mean for you.

Key Points of Article 236.º

1. Tax Exemption on Profit-Sharing for Employees
   If you’re an employee and your company gives you a bonus as part of profit-sharing, this bonus may be exempt from income tax (IRS). However, there are a few conditions:
   • The company must increase its employees’ fixed salaries by at least 5% in 2024.
   • The tax exemption applies up to five times the minimum monthly wage.

   Why does this matter?
   If your company meets these conditions, part of your bonus won’t be taxed, which could result in more money in your pocket.

2. Income Must Still Be Considered for Tax Rate
   Even though the profit-sharing bonus may be exempt from IRS, it will still be considered when calculating the tax rate for your other income. This means the bonus won’t affect how much tax you owe on other income, but it will help determine your overall tax bracket.
3. Grandfathering of Existing NHR Residents
   If you’re already registered as a Non-Habitual Resident (NHR) or meet the conditions by the end of 2023, you can continue to benefit from the old NHR rules. These rules will apply for the rest of your 10-year NHR period.
   • New NHR applicants in 2024 will face updated rules, but if you act before the end of 2023, you can still benefit from the older, more favorable tax conditions.
4. Conditions to Qualify for the NHR in 2024
   If you want to apply for NHR status under the old rules, you need to meet one of the following conditions before the end of 2023:
   • Have a job offer or work contract in Portugal.
   • Sign a rental contract or a property purchase agreement before October 10, 2023.
   • Have your children enrolled in a Portuguese school by October 10, 2023.
   • Hold a valid residence visa or permit by the end of 2023, or have started the process of applying for one.
5. Applying for NHR Status
   If you meet the conditions, you must apply for NHR status electronically through the Portal das Finanças. Be sure to apply within the deadlines, or you may lose the chance to benefit from the old NHR rules. If you miss the deadline, you may still qualify for the remaining period of the NHR program, but only under the new rules.

What Does This Mean for You?

• If you already have NHR status, nothing changes for you, and you will continue to benefit from the favorable tax regime for the rest of your 10-year period.
• If you’re thinking about applying for NHR, make sure to meet the deadlines before the end of 2023. If you wait until 2024, you will be subject to the new, less favorable rules.

The government is offering some flexibility with these transitional rules, but timing is critical. If you meet the 2023 deadlines, you can still benefit from the current NHR tax benefits.

How Can GoalSeek Help?

At GoalSeek, we can help you navigate these changes, whether you’re currently an NHR resident or planning to apply. We’ll guide you through the application process, explain how these tax changes affect you, and make sure you stay compliant with Portuguese tax laws.
Contact us today to get expert advice tailored to your specific situation.