Portugal

2024 State Budget

In the 2019 State Budget, a new tax regime was introduced to encourage the return of emigrants to Portugal. The regime consists of a 50% relief from taxation of employment or self-employment income received after their return to Portugal.

With the 2024 State Budget, this tax relief is extended to taxpayers who become tax residents in the years 2024, 2025, and 2026, provided that they: 

• did not qualify as tax residents in Portuguese territory in any of the five years prior to their return
• qualified as tax residents in Portugal in any period prior to those five years
• have their tax situation regularised, and 
• did not apply for the register in the non-habitual residents (NHR) regime. 

This tax relief (capped at 250,000 euros [EUR]for those returning in 2024, 2025, and 2026) is applicable to income earned in the first year of residency after the return to Portugal and in the following four years, expiring after this period.

While the regime applies, entities required to withhold tax on the income covered by this regime shall apply the withholding tax (WHT) rates determined based on half of the income paid or made available (keeping in mind the EUR 250,000 cap). 

Tax Incentive Scheme for Scientific Research and Innovation (IFICI) 

With the 2024 State Budget, a tax incentive for research and innovation is created. 

The regime applies to individuals who (i) become Portuguese tax residents, under Portuguese domestic law, in a specific year, (ii) have not qualified as tax residents in Portugal in any of the previous five years, (iii) do not benefit or have benefited from the NHR regime or the former resident regime, and (iv) carry out activities provided for in the applicable legislation.

Different procedures should be enacted in order to apply for the regime, depending on the activity performed / on the criteria of eligibility.

The regime shall provide for:  

• A special 20% rate on net employment income (category A) and business and professional income (category B) from the activities identified in the applicable legislation.  

• An exemption on foreign-sourced employment income, business and professional income, investment income, rental income, and capital gains. 

Gains from share plans

In May 2023, Portugal introduced a special tax regime applicable to income/gains arising from share plans granted for the benefit of employees or board members (in the last case with some limitations for 2023). This regime establishes a deferral from taxation to one of the first moments foreseen in the legislation (e.g. sale of the shares/rights) and also states that gains derived from said share plans shall be taxable only on 50% of the respective amount at a flat rate of 28%, provided certain requirements and conditions are met (both by the employer and the employee).

The application of this special tax regime depends on the maintenance of the rights underlying the assets generating the gains or of the equivalent rights, for a minimum period of one year. 

Finally, this special tax regime does not apply to individuals who directly or indirectly hold a stake equal to or higher than 20% of the share capital or voting rights of the entity granting the plan.