Income obtained in Portugal is eligible to benefit from the application of a reduced Personal Income Tax (PIT) rate of 20%. The income must come from one of the high-added value activities of a scientific, artistic, or technical nature such as:

• General directors and executive managers of companies;
• Directors of commercial and administrative services;
• Directors of production and specialized services;
• Directors of hotels, restaurants, commerce, and other services;
• Doctors, dentists, and stomatologists;
• University and college professors;
• Experts in physical sciences, mathematics, engineering, information and communication technologies (ICT), among others;
• Authors, journalists, and linguists;
• Creative artists and performing artists;
• Science and engineering technicians and professionals (intermediate level), and technicians and professionals in information and communication technologies;
• Market-oriented farmers and skilled workers in agriculture and animal production, forestry, fishing, and hunting.
• Skilled workers in the industry, construction, and crafts, including skilled workers in metalworking, metalworking, food processing, woodworking, garment production, crafts, printing, precision instrument manufacturing, jewellery making, craftsmen, electrical and electronic workers.

At the end of the 10-year period, they will be subject to and taxed under the general rules set out in the Personal Income Tax Code (IRS).

Under the NHR regime, the following categories of income and capital gains from foreign sources will be exempt from income tax in Portugal*:

• Dividends, interest, and real estate income;
• Capital gains from the sale of real estate;
• Royalties and associated income (but note that under some conventions the source country is precluded from taxing this income, in which case it will be taxed in Portugal);
• Profits derived from eligible occupations;
• Capital gains from the disposal of movable property (other than shares deriving more than 50% of their value from immovable property, or ships/aircraft operated in international traffic) will be tax-exempt if the respective double taxation agreement provides that they may be taxed in the source country, but this is not the case with the OECD model or most conventions, so some tax advice may be needed.

*This doesn't apply to blacklisted tax havens with no double taxation agreements in Portugal. If they can be taxed in their source country they will be exempt from income tax in Portugal as well.

Employment income obtained abroad is exempt from the IRS as long as it is effectively taxed in the source state, in accordance with the double taxation agreement between Portugal and the country. If there is no double taxation agreement, the income will be exempt if it is taxed in the State of source and cannot be considered as earned in Portugal, according to the rules established in the IRS Code.

Income from self-employment providing high-added value services of a scientific, artistic, or technical nature, and certain royalties, will be exempt from income tax, provided that one of the following conditions is met:

• That the income may be taxed in the source state under a double taxation agreement concluded between Portugal and that state; or
• Where no such double taxation agreement exists, the income in question may be taxed in the source state in accordance with the OECD Model Tax Convention on Income and Capital. In this case, the income must not be considered earned in Portugal and must not come from a country, territory, or region with a clearly more favorable privileged tax regime that appears on the list approved by Portuguese law.

Taxpayers who become tax residents in Portugal on or after April 1, 2020, and who meet the requirements to obtain NHR status are subject to a personal income tax (PIT) rate of 10% on pension income earned abroad. However, if they prefer, they may choose to aggregate their income and eliminate international double taxation by applying the tax credit method.

In addition, the exemption method applies to taxpayers who obtained NHR status before April 1, 2020, and to those who were considered tax residents in Portugal by that date (who apply for NHR status within the legal time limits). They can only use this method if:

They are taxed in the source state in accordance with a double taxation agreement between Portugal and this state, or when, according to the criteria of the IRS Code, the income is not considered as having been obtained in Portugal.

Taxpayers who have already benefited from the NHR regime or who enrolled in it before April 1, 2020, may choose between one or the other:

The old rules, under which they maintain the exemption from taxation of pensions earned abroad when they meet the conditions established by law for this purpose, or join the new regime under which their pensions will be subject to taxation at a 10% rate for as long as the regime is applicable.

Passive income is all income derived from interest, dividends, royalties (certain types), property income (certain types) and capital gains.

Under NHR rules, passive income earned abroad is exempt from personal income tax, provided that:

• They can be taxed in the source state under a double taxation agreement concluded between Portugal and that state; or
• In cases where there is no such double taxation agreement, the income in question may be taxed by the source state in accordance with the OECD Model Tax Convention on Income and Capital.
• In those cases, the income must not be considered earned in Portugal and must not come from a country, territory, or region with a clearly more favorable privileged tax regime that appears on the list approved by Portuguese law.