Portugal’s New NHR 2.0 and What Expats Need to Know in 2025

For years, Portugal’s Non-Habitual Residency (NHR) program was one of Europe’s most attractive tax regimes, drawing in thousands of expats, entrepreneurs, and retirees. It offered a 10-year window of generous tax breaks, including a flat 20% income tax rate and wide-ranging exemptions on foreign income.

That chapter has closed. The original NHR stopped accepting new applicants in January 2024, and the last transition window shut in March 2025. What comes next is a very different system.

Portugal has now introduced the Tax Incentive for Scientific Research and Innovation (IFICI), widely called NHR 2.0. It’s still a 10-year regime with notable tax advantages, but it is no longer for everyone.

Instead of opening the door broadly, the new rules are aimed at skilled professionals and innovators whose work strengthens Portugal’s economy in areas like technology, science, education, and research.

For the right profile, NHR 2.0 remains one of Europe’s most appealing opportunities. But the days of blanket tax breaks are over.

What Changed: From NHR to NHR 2.0

The original NHR program was broad in scope. Almost anyone who became a tax resident of Portugal could apply, regardless of their profession.

That openness, paired with a 20 percent flat tax rate on local income and exemptions on most foreign income, made it one of the easiest tax regimes to access in Europe.

NHR 2.0, officially the Tax Incentive for Scientific Research and Innovation (IFICI), is more selective.

The government has shifted focus from attracting anyone seeking tax relief to drawing in highly-skilled individuals who can contribute directly to the country’s strategic sectors.

Here are the main differences:

Eligibility

• NHR (old system): Open to nearly all new residents, from retirees with pensions to entrepreneurs and freelancers
• NHR 2.0 (IFICI): Limited to qualified professionals in fields such as science, technology, education, and research, or those working for certified companies and startups

Income Requirements

• NHR: Allowed almost all types of foreign income to qualify for exemptions, including pensions and investment income
• NHR 2.0: Still offers exemptions, but applicants must actively earn income from eligible activities and maintain that status each year

Geographic Scope

• NHR: Uniform benefits across all of Portugal
• NHR 2.0: Maintains national coverage but encourages residency in Madeira and the Azores with wider eligibility.

Overall Aim

• NHR: Aimed to attract foreign residents in general.
• NHR 2.0: Specifically designed to bring in talent that strengthens Portugal’s long-term competitiveness in innovation and knowledge-driven industries.

Key Benefits of NHR 2.0 (IFICI)

Portugal’s new tax regime may be more selective, but for those who qualify, the incentives remain highly attractive.

NHR 2.0 continues the tradition of offering a decade of favourable tax treatment, while aligning benefits with Portugal’s long-term economic strategy.

Here are the core advantages:

1. Flat 20% Tax on Portuguese Income

Under Portugal’s standard system, personal income tax is progressive and can climb to 48% for high earners. NHR 2.0 instead applies a fixed 20% rate on Portuguese-sourced income earned through eligible activities.

This is particularly valuable for professionals and entrepreneurs in science, technology, research, and other high-demand sectors, as it provides both predictability and savings.

2. Exemptions on Foreign-Sourced Income

One of the most appealing aspects of NHR 2.0 is its treatment of global income. Qualified residents are exempt from Portuguese tax on many types of income earned abroad, including:

• Salaries from foreign employers
• Self-employment income performed for non-Portuguese clients
• Dividends, royalties, and interest from overseas investments
• Capital gains on securities, crypto assets, and other investments
• Rental income from properties located outside Portugal
• Royalties and intellectual property income

This means professionals can base themselves in Portugal while continuing to earn abroad without being taxed twice, provided they structure their income correctly and comply with double taxation agreements.

3. Ten Years of Certainty

Just like the original NHR, the new regime applies for 10 consecutive years. This long duration offers stability for tax planning, business development, and family relocation. Once approved, the status is locked in for the full period, as long as the conditions are maintained.

4. Regional Flexibility in Madeira and the Azores

A notable new feature is that Portugal’s autonomous regions, Madeira and the Azores, can define their own list of qualifying activities.

This opens opportunities for professionals and investors interested in combining tax advantages with the already attractive economic incentives available on the islands.

5. An Attractive Base for Global Professionals

For digital nomads, entrepreneurs, consultants, and investors, the mix of a reduced local tax rate and exemptions on foreign income makes Portugal one of the few EU destinations where you can live comfortably, enjoy high-quality infrastructure, and optimise your global tax position at the same time.

Eligibility and Requirements for NHR 2.0

While the old NHR was known for its broad accessibility, NHR 2.0 sets stricter standards.

The regime is specifically targeted at skilled professionals, researchers, and entrepreneurs whose work supports Portugal’s economic development.

To qualify, applicants must meet all of the following conditions:

1. Become a Portuguese Tax Resident

You must register as a tax resident in Portugal. This is usually achieved by either:

• Spending more than 183 days in the country within a 12-month period, or
• Establishing a permanent home in Portugal that indicates an intention to reside long-term.

2. No Tax Residency in the Past Five Years

Applicants cannot have been considered Portuguese tax residents at any time during the previous five years. This rule ensures that the regime only benefits new arrivals rather than returning residents.

3. Academic or Professional Credentials

You must prove one of the following:

• Relevant academic qualifications, such as a university degree in your field, or
• At least three years of professional experience in a qualifying sector.

4. Work in an Eligible Activity

Eligibility is tied to professional activity. The government has outlined specific areas that qualify, including:

• Science, education, and research
• Information technology and digital services
• Tourism and hospitality projects of national interest
• Manufacturing and high-tech industries
• Agriculture, aquaculture, and forestry
• Energy, environment, and telecommunications
• Audiovisual, multimedia, and creative industries
• Shared service centres and certified startups

In addition, professionals working for companies certified by agencies such as AICEP, EPE, IAPMEI, or IP may also qualify if their role supports the national economy.

5. Exclusions

Certain applicants cannot access NHR 2.0, including:

• Individuals already benefiting from the old NHR regime.
• Individuals under the special tax framework for former residents.

How to Apply for NHR 2.0 in Portugal

Applying for Portugal’s new NHR 2.0 (IFICI) is a structured process.

While it follows the same foundation as the old NHR regime, applicants now need to provide stronger documentation to prove their eligibility.

Careful preparation is essential, as missing a requirement can result in delays or rejection.

Step 1: Establish Portuguese Tax Residency

Before applying, you must become a Portuguese tax resident. This is done by:

• Spending at least 183 days in Portugal during a 12-month period, or
• Owning and maintaining a permanent home in Portugal that signals your intent to stay long-term.

Step 2: Obtain a Portuguese Tax Identification Number (NIF)

The NIF (Número de Identificação Fiscal) is required for almost every financial, legal, and tax-related transaction in Portugal. Without it, you cannot proceed with residency or tax applications.

Step 3: Register with the Portuguese Tax Authorities (AT)

Once you relocate, you need to register your Portuguese address with the Autoridade Tributária (AT). This step confirms your new status as a tax resident.

Step 4: Submit Your NHR 2.0 (IFICI) Application

Applications are submitted online through the Portal das Finanças. Here, you’ll need to present documents proving your eligibility.

Typical documentation includes:

• Proof you were not a Portuguese tax resident in the past five years.
• Evidence of academic qualifications or at least three years of relevant professional experience.
• Proof of employment or self-employment in an eligible activity (e.g., employment contract, startup certification, academic appointment, or research contract).
• Valid residence permit or visa, depending on your nationality.
• Proof of permanent residence in Portugal (rental agreement, property deed, or long-term housing contract).

Step 5: Wait for Approval

If your application is approved, you’ll be officially granted NHR 2.0 status. The benefits last for 10 consecutive years, provided you continue to meet the requirements each year.

How Long Does It Take?

• Application deadline: March 31 of the year following your move to Portugal.
• Processing time: Typically 2 to 4 weeks, though complex cases may take longer.

Do You Need Professional Support?

While it’s possible to complete the process on your own, many applicants choose to work with tax and legal advisors.

This is especially useful if you have multiple income streams across countries, if your professional role needs careful classification, or if you’re restructuring assets before becoming a Portuguese tax resident.

NHR vs. NHR 2.0: The Key Differences

The original NHR regime was broad and simple. Almost anyone who became a tax resident of Portugal and hadn’t lived there in the past five years could qualify.

This openness helped Portugal attract tens of thousands of expats, but it also created challenges in housing and taxation policy.

NHR 2.0 (IFICI) takes a different approach. It keeps the same 10-year benefit period but narrows eligibility, tying tax breaks directly to professional activity and contribution to the economy.

Here’s how the two regimes compare:

In short:

• The old NHR was about attracting as many global residents as possible.
• The new NHR 2.0 is about attracting the right kind of residents, professionals in science, innovation, and knowledge-driven industries.

Those who already hold NHR keep their benefits until their 10-year term ends. But for new movers, NHR 2.0 is the only available option.

Tax Planning and Real-World Scenarios

NHR 2.0 is more restrictive than the old regime, but with careful planning, it can still provide major advantages.

The key is understanding how income is sourced and structured, and how different profiles can optimise their setup before and after moving to Portugal.

Retirees: Fewer Benefits, But Transitional Rules Still Apply

Under the old NHR, retirees enjoyed some of the strongest benefits, including low fixed rates on pensions.

That’s no longer the case under NHR 2.0, which doesn’t specifically cover pension income.

• Who benefits now? Only those who secured NHR before the cut-off will continue to enjoy the reduced pension tax rates for the full 10 years.
• Planning point: For retirees arriving after 2025, other residency options (like the D7 visa) may still pair with tax treaties to reduce pension tax exposure.

Remote Workers: Structuring Foreign Income

Digital nomads and consultants can gain the most from NHR 2.0, especially if their work is for non-Portuguese clients.

• Income from abroad may qualify for exemption in Portugal if sourced correctly.
• Contracts and invoices should clearly establish the foreign source of income to avoid it being classified as Portuguese-sourced.
• Planning point: Remote workers in eligible professions (e.g., IT, research, consulting) can combine the 20% flat rate for local work with full exemption on foreign earnings.

Investors: Managing Dividends and Capital Gains

NHR 2.0 still provides strong incentives for investors with international holdings.

• Foreign dividends, royalties, and interest may remain exempt if taxed abroad under treaty rules.
• Capital gains on securities and crypto assets earned outside Portugal may also qualify for exemption.
• Planning point: Many investors restructure portfolios before relocating to ensure assets fall within treaty-friendly jurisdictions.

Entrepreneurs: Avoiding CFC Traps

Business owners face a unique challenge: Portugal applies Controlled Foreign Corporation (CFC) rules if a foreign company is seen as being effectively managed from Portugal.

• This can bring foreign company profits under Portuguese tax, even if the entity is registered abroad.
• Planning point: Entrepreneurs often appoint non-resident directors, hold board meetings outside Portugal, and use international management structures to keep their companies compliant.

Comparing Portugal with Other Tax Regimes

With the shift from NHR to NHR 2.0, Portugal has moved from a broad-based tax incentive to a more focused, sector-driven model.

While this narrows the pool of eligible applicants, it still places Portugal among Europe’s leading destinations for internationally-mobile professionals. But how does it compare with other options?

European Alternatives

Several EU countries have introduced special tax regimes for expats, though most are narrower in scope or shorter in duration than Portugal’s 10-year framework.

Portugal’s advantage: a longer 10-year period and broad exemptions on foreign income, combined with EU residency rights and a path to citizenship. The main drawback is that it is now restricted to certain professions, unlike some competing regimes.

Global Competitors Outside Europe

Outside the EU, several countries compete aggressively by offering low or zero personal income tax.

Portugal’s advantage: Unlike zero-tax jurisdictions, Portugal offers EU residence, Schengen access, and credibility with global financial institutions, while still providing highly favourable tax treatment under NHR 2.0.

FAQs on Portugal’s NHR 2.0 in 2025

1. Is the NHR program still available in 2025?

The original NHR closed to new applicants on December 31, 2023, with a transition period ending on March 31 2025. Anyone already approved will keep their benefits for the full 10-year term. For new arrivals, only the replacement program, NHR 2.0 (IFICI), is available.

2. What exactly is replacing the NHR?

The replacement is the Tax Incentive for Scientific Research and Innovation (IFICI), widely called NHR 2.0. It offers a flat 20% rate on Portuguese income in qualifying activities and exemptions on many types of foreign income, but eligibility is limited to professionals in specific sectors.

3. If I already have NHR, will I lose it under the new rules?

No. If you were granted NHR before the deadlines, you keep it. Your 10-year period remains valid as long as you continue to file taxes in Portugal correctly and maintain residency.

4. Can retirees still benefit from NHR 2.0?

Not in the same way. Pension income is no longer a qualifying category under NHR 2.0. Retirees who secured NHR before 2024 keep their favourable 10% pension tax rate, but newcomers will need to rely on double taxation treaties and other planning strategies.

5. Do I still need to file Portuguese tax returns if my income is exempt?

Yes. Even exempt income must be declared annually on your Portuguese tax return (Modelo 3). Using the correct exemption codes is essential to avoid audits or penalties.

References

Garrigues. (2025). Portugal: The new incentive for scientific research and innovation (IFICI) was finally regulated. Garrigues. Retrieved from https://www.garrigues.com/en_GB/new/portugal-new-incentive-scientific-research-and-innovation-ifici-was-finally-regulated

PwC Portugal. (2025). Tax incentive for scientific research and innovation (NHR 2.0). PwC. Retrieved from https://www.pwc.pt/en/services/tax/individuals-taxation/tax-incentive-for-scientific-research-and-innovation-nhr-2-0.html

International Tax Review. (2025). Portugal’s NHR 2.0: The gift that keeps on giving. International Tax Review. Retrieved from https://www.internationaltaxreview.com/article/2enqd2nkpj1kh5qxsbri8/sponsored/portugals-nhr-2-0-the-gift-that-keeps-on-giving

Perez-Llorca. (2025). IFICI regulation (NHR 2.0). Perez-Llorca. Retrieved from https://www.perezllorca.com/en/news/legal-briefing/ifici-regulation-nhr-2-0