Portugal has introduced the Tax Incentive for Scientific Research and Innovation (IFICI), commonly referred to as NHR 2.0, to replace the previous Non-Habitual Resident (NHR) tax regime. This new scheme, effective from January 1, 2024, aims to attract highly qualified professionals in scientific research and innovation sectors. This is everything you need to know.
Eligibility requirements
To qualify for the IFICI/NHR 2.0 regime, individuals must:
- New tax residency: Establish tax residency in Portugal, having not been a tax resident in the country for the preceding five years.
- Professional engagement: Be employed in highly qualified roles within eligible entities, such as recognised technological and innovation centers, certified start-ups, or companies benefiting from specific investment incentives like Portugal’s Investment Support Tax Regime (RFAI).
- Economic activity: Work in sectors including extractive industries, manufacturing, information and communication activities, or research and development in physical and natural sciences.
Tax benefits
The IFICI/NHR 2.0 regime offers several tax incentives:
- Flat tax rate: A 20% flat tax rate on income derived from eligible employment and self-employment activities for up to 10 years.
- Foreign income exemption: Exemption on most foreign-sourced income, such as dividends, interest, capital gains, and rents, provided it is declared for tax progression purposes. Notably, pension income is excluded from this exemption.
Key differences from the previous NHR scheme
The transition from the original NHR to the IFICI/NHR 2.0 regime introduces several changes:
- Scope of eligibility: The original NHR offered broad tax benefits to a wide range of professionals. In contrast, the IFICI/NHR 2.0 specifically targets highly qualified individuals in scientific research and innovation sectors.
- Employer requirements: Under the new regime, eligible professionals must be employed by entities with substantial economic presence in Portugal, excluding freelancers or those working for non-resident companies without operations in the country.
- Foreign income taxation: While the original NHR provided exemptions on most foreign-sourced income, including pensions, the IFICI/NHR 2.0 excludes pension income from this exemption.
In summary, Portugal's IFICI/NHR 2.0 regime is designed to attract top-tier talent in scientific and innovative fields by offering competitive tax benefits. However, it imposes more specific eligibility criteria and focuses on sectors that align with the country's strategic economic objectives.
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