Portugal’s IFICI tax incentive regime for new tax residents
The Portuguese government issued regulations under Ordinance 352/2024/1 for the Tax Incentive for Scientific Research and Innovation (IFICI), which came into force on 24 December 2024 but had retroactive application to 1 January 2024.
The IFICI replaced the previous Non-Habitual Resident (NHR) special tax regime, which was closed to new entrants at the end of 2023, and is therefore commonly also known as ‘NHR 2.0’.
It should be noted that termination of the NHR regime did not affect those individuals who were already NHR-registered or who met the conditions for NHR registration by 31 December 2023.
The IFICI / NHR 2.0 offers significant tax benefits and generous tax exemptions to new tax residents in Portugal but is more technical in scope than the previous NHR regime. It applies to highly qualified professionals who carry out eligible jobs relating to eligible approved scientific research and innovation activities in Portugal.
Key benefits of the IFICI (NHR 2.0) regime
The Ordinance regulates and defines the eligible jobs, the eligible activities, the criteria and procedures, as well as the requirements necessary for confirming the applicable conditions.
Like the previous NHR regime, the key tax benefits under the IFICI tax regime, which are available for 10 calendar years from the time the applicant becomes tax resident in Portugal, are as follows:
- A special Personal Income Tax (IRS) flat tax rate of 20% on employment income (category A) and professional income (category B) obtained in the Portuguese territory.
- In addition, non-Portuguese income in most categories – A (dependent work), B (professional activities), E (capital income), F (rental income) and G (capital gains) – will be exempt from Portuguese personal income tax provided that:– The source country has the right to tax that income under the terms of a Double Tax Agreement (DTA) signed between Portugal and that country; or
– The income is taxed in the other country and is not considered as obtained in Portugal; or
– The income is taxable in any other country under the OECD Model Tax Convention.
Unlike the previous NHR regime, which taxed foreign pension income at a flat tax rate of 10%, foreign pension income is fully taxable in Portugal under the IFICI
Additionally, any income earned in countries listed by the Portuguese Finance Department as ‘preferential tax regimes’ – the so-called ‘blacklist’ – will not qualify for the IFICI regime unless the listed country has a Double Tax Agreement with Portugal.
IFICI Application process
The Ordinance provides that taxable persons who are resident in Portuguese territory must submit their application for the IFICI by 15 January in the year following the year in which they become tax resident in Portugal. A transitional period was applied to applicants who became tax resident between 1 January and 31 December 2024, with a deadline of 15 March 2025.
Individuals can either establish tax residency in Portugal voluntarily by securing a residence permit and establishing a permanent address, or by residing in Portugal for more than 183 days within any 12-month period or by establishing a habitual residence.
Applicants must generally not have been tax resident in Portugal in the five years preceding their application. They must also not have previously benefited under the former NHR regime or Portugal’s ongoing Return Programme.
The application of the IFICI is dependent on prior registration with the Portuguese Tax Authority (AT) and the relevant government agencies listed below, as well as on accreditation by the respective employers or those contracting their services:
These agencies are responsible for receiving and verifying registration applications, as well as ensuring compliance with the specific requirements for the IFICI regime.
Scope of IFICI regime
A. Eligible employment positions
The list of eligible employment positions comprises:
- General Director and Executive Manager
- Director of Administrative and Commercial Services
- Director of Production and Specialized Services
- Director of Hospitality, Catering, Trade and Other Services
- Specialists in Physical Sciences, Mathematics, Engineering and Related Fields
- Doctors
- University and Higher Education Professors
- Finance and Accounting Specialists (except auditors and accountants)
- ICT Specialists
- Directors, Producers and Stage Managers in Film, Theatre, TV and Radio
- Technicians and Intermediate-Level Science and Engineering Professions
Highly qualified professionals in these fields must have at least either a level 8 qualification (Doctorate) under the European Qualifications Framework (EQF) or an EQF level 6 qualification (bachelor’s degree) plus three years of verified professional experience.
It is important to note that IFICI is designed to attract talent and foster the growth of Portuguese companies. Eligible businesses must have economic substance in Portugal, so the regime does not apply to freelancers or employees of non-resident companies that are not operating in Portugal.
B. Eligible Activities under IFICI
Highly qualified professionals that can benefit under the IFICI regime must be employed by eligible companies, which include recognised technological and innovation centres, entities certified as start-ups, and those benefiting from specified investment incentives such as Portugal’s Investment Support Tax Regime (RFAI).
The Ordinance sets out a list of codes from the Portuguese Classification of Economic Activities (CAE) for industrial and service companies, which must also export at least 50% of their turnover in the fiscal year in which the applicant commences employment or in any of the two previous years, as follows:
- Extractive Industries
- Manufacturing Industries
- Utilities Sector (water, electricity, gas, etc.)
- Construction
- Hospitality and Restaurants
- Information and Communication activities
- Financial activities (holding companies and fund managers)
- Consulting, Scientific and Technical Activities (activities of head offices, engineering and R&D)
- Administrative and Support Services
- Education
- Human Health and Social Support activities
- Projects of Natural Interest
- Interior Investment Projects
Documentation
Applicants are required to submit the following documents, as applicable:
- If the activity is a job – copy of the individual employment contract.
- If the activity involves being a member of a corporate body – valid permanent commercial certificate.
- If the activity involves scientific research – copy of grant contract.
- For highly qualified professions – proof of applicable academic qualifications.
- Declaration from the competent government agency certifying compliance with the requirements related to the activity.
- Any other requested documents.
The relevant employer company must also prove compliance with the requirements established in article 58-A.1.c of the Tax Benefits Statute (EBF) by verifying that it meets the qualifying conditions and that the taxpayer works in a highly qualified profession.
Record-keeping and verification
Both the competent agencies and the respective employer companies are required to maintain and provide documentation that proves compliance with the IFICI regime requirements.
Taxpayers are required to keep a record of their activities and income earned during any of the years the IFICI regime is applied. This documentation must be presented at the request of the AT.
Duration
Like the previous NHR regime, the benefits under IFICI are available for 10 calendar years from the time the applicant become tax resident in Portugal.
Taxpayers are required to notify the relevant authority if they no longer meet the requirements to benefit from the IFICI regime or if there is a change in their registration details. Notification must be submitted by 15 January of the year after the year in which the change of circumstances occurred, specifying the date on which the eligibility ended.
Taxpayers are also required to submit a new registration application if there is a change in the company that must verify the requirements for highly qualified professions or in the agency to which the registration application is submitted.
Conclusion
The IFICI / NHR 2.0 has a much more targeted scope than the former NHR regime in terms of the eligibility criteria, but still offers highly significant tax benefits and generous tax exemptions for a 10-year period for expats and investors seeking long-term residence in Europe.
Designed to position Portugal as a hub for scientific research and innovation, when placed alongside the other attractive residency options, the IFICI regime further consolidates Portugal’s status as a leading destination for residency and inward investment in the European Union.
For further information or assistance, please contact Shelley Wren, Head of Business Development at Sovereign Portugal.
Sovereign Concierge Service
Sovereign offers a concierge service for clients wishing to become resident in Portugal under the IFICI regime, which requires close liaison with the Portuguese Tax Department (Serviço de Finanças), local councils (Câmara Municipal), the Immigration Agency (Agência para a Integração Migrações e Asilo (AIMA)) and social security (Segurança Social).
Sovereign’s concierge service includes:
The following services are not included in the concierge fee and would be charged separately:
Once the residency application has been completed, our team of fully qualified accountants and administrators will continue to assist clients with their fiscal obligations and queries, providing support and keeping them informed of fiscal matters that may affect them in Portugal.
For more information, contact us by telephone on +351 282 340480 or by email to serviceinfo@sovereigngroup.com
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