IFICI and NHR 2.0

IFICI and NHR 2.0: The New Tax Regime in Portugal for Skilled Professionals

The Incentivo Fiscal à Investigação Científica e Inovação (IFICI), also known as NHR 2.0, is Portugal’s updated tax regime designed to attract highly skilled professionals in scientific research, technological innovation, and other key economic sectors. Officially implemented in 2024, IFICI replaces the Non-Habitual Resident (NHR) program and provides significant tax benefits for individuals working in strategic fields. Here’s everything you need to know about IFICI and its relevant laws, including its relation to NHR Portugal and the impact of the NHR 2.0 update.

What is IFICI (NHR 2.0)?

The IFICI regime, introduced as part of Portugal’s ongoing effort to foster innovation and attract global talent, is a tax incentive for highly qualified professionals in sectors such as scientific research, technology, and key industrial activities. It is a direct response to the Non-Habitual Resident (NHR) program’s conclusion, offering new opportunities for those looking to establish tax residency in Portugal.

This new regime is regulated by the Portaria n.º 352/2024, which came into effect on January 1, 2024. It follows the guidelines set in Article 58.º-A of the Estatuto dos Benefícios Fiscais (EBF), updating the framework for tax residents in Portugal. The IFICI aims to keep Portugal competitive globally by making it a welcoming destination for talented professionals in various high-value sectors.

Who Can Apply for IFICI (NHR 2.0)?

To qualify for IFICI, individuals must meet specific criteria. These include:

1. Non-Previous Tax Residency in Portugal: Individuals must not have been tax residents in Portugal for the last five years before applying for the regime.

2. New Tax Residents in Portugal: Applicants must establish tax residency in Portugal from January 1, 2024, onwards.

3. Eligible Professions and Activities: The applicant must work in professions related to scientific research, technological innovation, higher education, or manufacturing in relevant industries, such as those listed in the Portaria n.º 352/2024 and the Estatuto dos Benefícios Fiscais (EBF).

What Are the Key Benefits of IFICI (NHR 2.0)?

• Flat Tax Rate of 20%: The IFICI regime offers a special flat tax rate of 20% on income derived from qualifying professions and activities, for a period of 10 years. This makes it an attractive option for professionals seeking to reduce their tax burden while benefiting from Portugal’s high standard of living.

• Exemption of Foreign Income: Individuals benefiting from the IFICI may also be eligible for exemptions on foreign-sourced income under the Double Taxation Agreements (DTA) signed by Portugal.

• Extended Benefits for Key Professions: The new regime is designed to attract professionals in areas such as scientific research, information and communication technologies (ICT), medicine, engineering, manufacturing, and higher education.

• Pension Taxation: Unlike the NHR regime, which offered a special flat rate of 10% on foreign pensions, IFICI may subject pension income to standard tax rates depending on the source of the income.

Relevant Laws for IFICI (NHR 2.0)

The IFICI (NHR 2.0) regime is based on the following laws and regulations:

1. Estatuto dos Benefícios Fiscais (EBF) – Article 58.º-A: This article lays the foundation for the implementation of the IFICI, outlining the tax incentives for research, technological innovation, and other qualifying sectors.

2. Portaria n.º 352/2024: This decree-law details the operational aspects of the IFICI regime, including which sectors and professions qualify for the tax benefits, and the registration and application procedures.

3. NHR Portugal (Previous Regime): Although replaced by IFICI, the NHR regime provided tax incentives for individuals in high-value professions and remains relevant for individuals who opted for the program before its replacement.

Eligible Sectors and Professions for IFICI

The IFICI is particularly focused on professionals who are involved in activities essential to Portugal’s economic growth and development. Some of the key eligible sectors include:

1. Scientific Research and Development: Professionals engaged in physical and natural sciences, or any other research-focused industries.

2. Information and Communication Technologies (ICT): Technology experts, including software developers and IT consultants.

3. Medical and Health Professions: Doctors, surgeons, and medical researchers working in Portugal’s healthcare sector.

4. Higher Education: University professors and researchers who contribute to the development of education in Portugal.

5. Manufacturing and Industrial Innovation: Professionals involved in innovative manufacturing sectors, such as engineering and design.

How to Apply for IFICI (NHR 2.0)?

The application process for the IFICI involves registering with the Portal das Finanças, Portugal’s online tax portal. Individuals must submit the necessary documentation proving their qualifications, profession, and residency status. Applicants must apply before 15th January of the year following their establishment of residency in Portugal.

Conclusion: Why IFICI (NHR 2.0) Is Beneficial for Skilled Professionals

Portugal’s IFICI (NHR 2.0) regime provides significant tax advantages for individuals engaged in high-value sectors such as scientific research, ICT, and higher education. With a flat tax rate of 20% on eligible income, it offers a compelling alternative for highly skilled professionals seeking to relocate to Portugal and benefit from its strategic economic position within the European Union.

By offering these tax incentives, Portugal continues to attract talent in science, technology, and other key sectors. With the implementation of the Portaria n.º 352/2024, Portugal is reinforcing its reputation as a prime destination for innovation and expertise, making NHR 2.0 a powerful tool for professionals in relevant fields.

Key Takeaways:

• NHR 2.0 replaces the old NHR Portugal program, offering tax incentives to highly skilled professionals.

• Portugal offers a 20% flat tax rate on income from qualifying sectors, including science, technology, and healthcare.

• The regime is governed by Article 58.º-A of the Estatuto dos Benefícios Fiscais (EBF) and Portaria n.º 352/2024.

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