How to pay less tax and start a business in Portugal

— A residence permit is essential, of course, but we know that Portugal attracts not only with its climate and affordable living but also with its tax benefits. It was especially advantageous under the former NHR regime. From what I understand, that program was discontinued in 2024. Is there any chance it might return? I’ve heard there’s a new tax regime now.

— Yes, the NHR (Non-Habitual Resident) regime was a fantastic tax option. I personally benefited from it. But as of 2024, it has ended. It’s now been replaced with a new scheme called IFICI. The good news? It’s already active, and we’re helping our clients apply for it.

The deadline to apply for those who arrived in Portugal in 2024 is March 15. One of the main changes in this new regime is that there’s now a limit on the number of applicants. There’s also more thorough scrutiny of diplomas and proof of professional experience. Previously, 5 years of experience were required for a residence permit; for IFICI, 3 years may be enough, depending on the profession.

NHR used to last 10 years, but the new regime is valid for 5 years. While long-term predictions are hard to make, 5 years of tax benefits is still a great opportunity — especially since it aligns with the 5-year timeline for Portuguese citizenship.

We’re already actively assisting clients with IFICI. Some benefit from 0% tax, others use a fixed rate (Flex Rate). It depends on income type: some is taxed at a flat rate, some at 0%. Each case is unique and depends on supporting documents.

— What are the main conditions? I recall NHR had a 20% rate for income earned in Portugal and 0% for certain foreign-source passive income and dividends.

— That’s correct. But under IFICI, documentation is now strictly required to meet eligibility criteria. Requirements have become tougher. For instance, previously self-employed individuals could qualify under many activity codes, but the list has now been shortened. Each case needs to be checked individually.

The key rule is this: if your annual income is under €250,000, you may qualify for 0% tax for five years. Beyond that, either 0% or a flat 20% applies depending on your documents. Domestic income is taxed as before — no changes there.

Not many people know about the value of consulting an International Tax Lawyer. Most people stick to local accountants, but if your income comes from places like the U.S., Israel, or Canada, understanding your tax residency and obligations is crucial.

A consultation with an international tax expert helps properly structure your tax load, both personally and for your business.

Often people tell us, “I want to live in Portugal, but I’m worried about high taxes.” Let me share a real case: we recently advised a client with dual citizenship — France and Canada — living in Switzerland, earning €200,000 a year. He assumed Portugal’s progressive tax system would apply. But after a consultation with our international tax lawyer, he discovered he could benefit from a special tax regime and save €70,000 a year. Incredible, right?

Based on his documents, a recommendation was prepared, and he applied and received tax benefits.

There’s always a way! You just need to structure your taxes correctly for your personal and business needs. Every case is unique and requires a tailored approach.

— Do IT specialists qualify for this regime?

— Yes, I’ve seen articles saying this regime is mainly for scientific fields, but that’s not entirely true. It depends on your specific profession.

Based on our clients’ experience, developers, designers, and other IT professionals are eligible. The list includes many tech-related jobs. Again, it’s essential to check on a case-by-case basis.

— How can one open a business in Portugal? Are there tax incentives?

— Opening a business in Portugal is quite straightforward. You can register as a sole proprietor (called “empresário em nome individual”) or establish a full-fledged company. The best option depends on your business type, income structure, expected profit, and other factors.

There are some incentives for entrepreneurs, such as temporary VAT (IVA) exemptions and potential reductions in income tax (IRS), depending on how the business or sole proprietorship is registered.

— Let’s talk about the Golden Visa. Recently, it was announced that applications would now be processed faster and more transparently. What’s the current status of the program?

— To be honest, since the end of 2023, when real estate investment was removed as a qualifying option, Golden Visa applications have dropped sharply. That’s understandable, as real estate was the most popular route. However, the program is still available — the terms have just changed.

Now, you can make a non-refundable contribution of €250,000 to Portugal’s economy, invest €500,000 in an investment fund, or start a business that creates jobs. These are the new paths — no more real estate purchases.

Who is this program for? Mainly for those who don’t plan to live full-time in Portugal but want a strong second passport. Portugal’s passport currently ranks fifth in the world. The Golden Visa requires just 7 days of presence in Portugal per year — ideal for those who want citizenship without relocating.

Despite lower demand, the program is still running. There are interesting investment funds too — for instance, I recently spoke to a fund that plants cork trees. It’s a big industry here: Portugal leads the world in cork exports. Cork trees are protected by law, and each one belongs to someone. Funds now focus heavily on sustainability, renewable energy, and nature conservation. The minimum investment remains €500,000 — but it’s still a real opportunity to obtain citizenship through investment.