Portugal has introduced a new tax regime aiming to attract highly skilled professionals. The Tax Incentive for Scientific Research and Innovation (IFICI), or “NHR2.0”, was designed to replace the former Non-Habitual Resident (NHR) tax regime and foster an innovation-driven economy.
The legal framework was established by the 2024 State Budget Law and detailed on 23 December 2024.
Purpose and scope
The IFICI is intended to boost the Economy by focussing on innovation and digital transformation, enhancing the competitiveness of Portuguese organisations. But the regime’s scope is broader, targeting individuals who were not tax residents in Portugal in the five years prior to application and who will be carrying out activities falling within the following categories:
- Higher education teaching and scientific research
- Qualified jobs (including governing bodies) within the scope of contractual benefits to productive investment
- Job positions carried out by tax residents in the autonomous regions of Madeira and Azores islands
- Research and development personnel whose costs are eligible in accordance with the Investment Tax Code
- Positions (including governing bodies) in certified startups
- Qualified positions in entities with economic activities recognised as relevant to the national economy by the Agency for Competitiveness and Innovation (IAPMEI) or the Agency for Investment and Foreign Trade of Portugal (AICEP)
- Highly qualified professions in (i) organisations with relevant applications, or (ii) industrial and service organisations, whose main activity corresponds to one of the predefined activity codes and which export at least 50% of their turnover.
Tax benefits and conditions
Under this regime, net income from employment and self-employment is subject to a 20% flat tax rate. This benefit is granted for a period of 10 years, starting from the year of registration as a resident in Portugal.
To be eligible for this tax treatment each year, the taxpayer must be considered a tax resident in Portugal and continue to earn income from one of the listed activities.
In addition to the flat tax rate on employment and self-employment income, the regime also provides a tax exemption for foreign income, excluding pensions.
However, income derived from entities in blacklisted jurisdictions, without a permanent establishment in Portugal, is subject to a 35% tax rate.
It is important to note that individuals who have previously benefited from the NHR regime or the Return Programme (“Regressar“) are not eligible.
Highly qualified professions and eligible organisations
Highly qualified professions are based on the Portuguese Classification of Professions:
- General and executive managers
- Managers of administrative and commercial services
- Production and specialised services managers
- Experts in physics, mathematics, engineering and related fields
- Industrial and equipment designers
- Physicians
- University and higher education professors
- IT and communication experts
Applicants in those professions must hold a doctorate or a bachelor’s degree with three years of proven professional experience.
The regime applies to highly qualified professions in industrial and service companies that export at least 50% of their turnover and operate within specific activity codes.
Notice from IAPMEI and AICEP
The IAPMEI and the AICEP have published a notice defining qualified jobs and economic activities considered strategic for the economy, expanding the list of qualified jobs.
They also recognise other activities as relevant to the national economy, thus a proper analysis is recommended to evaluate the feasibility of the project.
Additionally, economic activities developed within the scope of investment projects recognised as having Potential National Interest (PIN) or as Investment Projects for the Interior (PII) are also considered of national importance and compliant with this tax regime.
Challenges and conclusion
Even with the regulatory framework, the implementation of the IFICI is expected to present practical challenges. The novelty of the regime and the involvement of multiple entities, or the necessary adjustments to IT systems for compliance with the registration procedures, may lead to initial difficulties.
Despite these challenges, the benefits offered by the IFICI, including the exemption on non-Portuguese income and the 20% flat tax rate, are highly appealing. While the regime has a strict scope regarding eligible taxpayers and activities, it presents a significant opportunity to attract highly skilled professionals and to boost Portugal’s economy.
By Rogério Fernandes Ferreira, Duarte Ornelas Monteiro & Joana Marques Alves, www.rfflawyers.pt
