Foreign residents applying for Non-Habitual Resident status with high-value-added business activities (“VTA”) may now receive prompt approval for a flat-rate tax of 20% on earned income in income categories A or B (salaries and sole trader income). Under previous practice, “VTA” approval was individualised and could take a year or more for consideration. Nevertheless, taxpayers must still be prepared to provide proof of their qualifications and effective exercise of the business activity upon request from the tax authorities (“AT”) at any time during the “NHR” 10-year period. These new procedures came into effect for applications made after 26 June 2019. This streamlined application follows other “Simplex” actions launched earlier this year. For example, the Portuguese Tax Authority (“AT”) overhauled the list of qualifying Non-Habitual Residency professions (“VTA”) eligible for the 20% flat-rate tax that were initially put in place in 2009.
If you exercise the “high value ” profession associated with your Non Habitual Resident application in Category B, the levy is customarily based on 75% of gross income, taxed at a flat rate of 20%. This leaves a final flat rate assessment of 15%, as compared to +40% as a typical higher rate taxpayer.
If your business activity is different from your NHR status, tax is commonly based on 35% of the gross income in the Simplified Regime, then assessed at marginal rates. This leads to a typical final assessment of 10-15%