Anyone who is nearing or at retirement age wants to protect his or her hard-earned pension. Many want to do this in a safe country with a warm climate, friendly people and a great lifestyle. Now one country has made it easy to do all the above.

Portugal, voted the world’s best golfing destination and Europe’s best beach destination by the World Travel Awards, has improved legislation aimed at attracting foreign residents and investors to the country. The Non-Habitual Resident (NHR) law previously allowed qualifying individuals who have not been resident in Portugal during the previous five (5) years, to become resident in the country and receive a private foreign pension or non-Portuguese income, while paying a 10% tax for 10 years.

Foreign or non-Portuguese income was exempt from taxation if the country from which it is paid has the right to tax the payment (even if it does not).

Qualifying individuals include EU/EEA/Swiss nationals and those who qualify based on special programs such as retirement, dependent employee, entrepreneurship, study, business investment or the Golden Visa.

The formal requirement for residency is 183 days.

Under the NHR law, a flat rate of 20%* (less than half the highest taxpayer rate of tax) will be levied on any income originating from Portuguese sources, work conducted in the country or foreign income not taxed or subject to taxes at source.

According to most double tax treaties (conventions) taxation of pension income occurs in the country where the person is resident. It thus follows that, under the NHR law, most eligible foreign income will be liable to reduced tax at a rate of 10%. An important exception to the law involves pensions paid to anyone previously employed by their government, in that each country typically reserves the right to deduct tax at source which means that full exemption will not be possible. People who fall into this category can nonetheless offset or mitigate any tax due using the double taxation treatment between Portugal and the country of origin.

It is also important to analyse each sub-category of assets, such as dividends, royalties, bank interest, etc. in order to ensure that maximum tax relief is obtained in each case. The process for eligible applicants (i.e. those who meet the prerequisites explained above) is simple: it involves registration with the local Finanças (or tax office) in order to obtain a tax number, indication of a place of residence (either proof of ownership or of a long-term rental contract) and a written request to the relevant government department. All applications must be submitted by the 31st of March of the year following that to which the application refers.

Applications which used to take 4-8 months to process are now much quicker with the implementation of an online application process. It is highly recommended that all prospective applicants liaise with firms such as Portugal Senior Living, experienced in assisting with multiple aspects of the NHR process: when to apply, obtaining a NIF, obtaining rental or purchased accommodation, and obtaining proof of residency.