NHR program from a company abroad

[whocares61]

Hello again,

I would love your input on the NHR program, because I am confused by the different information on different sources.


I am currently a citizen of Belgium. I am willing to move to become a Portugal tax resident and enjoy the NHR program.
I have a self-employed activity now (I don't employ anyone, just a freelancer).
I am renting my house to someone and I am not living in Belgium anymore (i started nomading) and not planning to be in Belgium for more than 183 days in a year (planning to be much less).
My customers are international, not just from Belgium.

That's what I understood. Please correct me if I am wrong:

1. I can become a Portugal Tax resident by renting a livable apartment (not just for show) or by staying in Portugal more than 183 days. I would prefer the 1st option.
2. Since i will not be staying in Portugal most of the time (just renting apartment), my income will be cosnidered not dirived in Portugal and it will be ok for the NHR program.
3. I will need to open a company in a country with low corporate tax - please advise me on this part especially.

Thank you in advance.
As I said, I just gathered info from the webs. I am not saying that it's just so easy to pay 0% tax and all that.

I forgot to mention that my activity is in the list of the required activities for NHR (data, software consulting)

 

[Larin]

I'm in the process of moving to Portugal myself, so most of my information is based on research, rather than practice, but I'll give it a try:

That's what I understood. Please correct me if I am wrong:

1. I can become a Portugal Tax resident by renting a livable apartment (not just for show) or by staying in Portugal more than 183 days. I would prefer the 1st option.

You automatically deemed to be a Portuguese tax resident by staying in the country more than 183 days in a year, or maintaining a habitual residence.
In practice, I've been advised that Portugal is, unsurprisingly, quite happy to accept new tax residents, so you can file your taxes there and as such become a tax resident in Portugal.

2. Since i will not be staying in Portugal most of the time (just renting apartment), my income will be cosnidered not dirived in Portugal and it will be ok for the NHR program.

Income from work physically performed outside of Portugal is indeed not taxed in Portugal. However, just because you are a tax resident in Portugal does not mean that you are not a tax resident elsewhere; say where you perform said services. Double Tax treaties and other considerations would be applicable here.

3. I will need to open a company in a country with low corporate tax - please advise me on this part especially.

From my understanding, most NHRs create companies in Malta, or Cyprus. I have also been advised to look at US LLC as an alternative. However, increasingly, I am considering just paying the tax in Portugal on the freelance work, as the rates are relatively favourable.

 

[whocares61]

Thanks for the input!

2. I can manage it in such a way not to become taxable anywhere else. That's no problem for me.
3. What are you expecting to pay if you will choose the Portugal option?

 

[Larin]

Thanks for the input!

2. I can manage it in such a way not to become taxable anywhere else. That's no problem for me.
3. What are you expecting to pay if you will choose the Portugal option?

Provided your activities fall under the NHR and your freelance income is below 200k, you can pay tax through a simplified regime where you pay 20% (NHR tax rate) on 75% of the revenue (the other 25% is assumed to be business expenses, so no need to keep detailed receipts, etc). So that’s an effective tax rate of 12.5%

 

[CyprusLaw]

I'm in the process of moving to Portugal myself, so most of my information is based on research, rather than practice, but I'll give it a try:

You automatically deemed to be a Portuguese tax resident by staying in the country more than 183 days in a year, or maintaining a habitual residence.
In practice, I've been advised that Portugal is, unsurprisingly, quite happy to accept new tax residents, so you can file your taxes there and as such become a tax resident in Portugal.

Income from work physically performed outside of Portugal is indeed not taxed in Portugal. However, just because you are a tax resident in Portugal does not mean that you are not a tax resident elsewhere; say where you perform said services. Double Tax treaties and other considerations would be applicable here.


From my understanding, most NHRs create companies in Malta, or Cyprus. I have also been advised to look at US LLC as an alternative. However, increasingly, I am considering just paying the tax in Portugal on the freelance work, as the rates are relatively favourable.

One of the most usual options is for an NHR individual to have a Cyprus company. 12.5% corporate tax plus 2.65% on dividends paid to the NHR individual at the Cyprus level. And then as the dividends paid to the individual by the Cyprus company are considered as foreign income there is no tax in Portugal.

 

[whocares61]

Provided your activities fall under the NHR and your freelance income is below 200k, you can pay tax through a simplified regime where you pay 20% (NHR tax rate) on 75% of the revenue (the other 25% is assumed to be business expenses, so no need to keep detailed receipts, etc). So that’s an effective tax rate of 12.5%

That's interesting. Thanks!
Also checking Madeira option which has 5% if i understood.

Hey, can we get in touch? I don't see an option to send you a message through the website. Can you try sending me one?

One of the most usual options is for an NHR individual to have a Cyprus company. 12.5% corporate tax plus 2.65% on dividends paid to the NHR individual at the Cyprus level. And then as the dividends paid to the individual by the Cyprus company are considered as foreign income there is no tax in Portugal.

Thanks, interesting option as well!

Have you checked the Romania micro company option of 3%?

 

[Larin]

That's interesting. Thanks!
Also checking Madeira option which has 5% if i understood.

Hey, can we get in touch? I don't see an option to send you a message through the website. Can you try sending me one?

Unfortunately, I have not yet earned that privilege either. I have set up a temporary email where you can reach me at: [email protected]

 

[Asterion]

What would be the situation for somebody
- becoming an NHR in Portugal
- working as a freelancer through a foreign company (say HK Ltd)
- working only with non-Portuguese clients
- only paying themselves dividends from the company, not a salary
?

Would those dividends be completely tax free under the NHR scheme?

Would income from a US LLC also be considered as such, or the pass-through entity of the LLC would make it count as income and not dividends?

 

[cinquepalli]

To avoid Permanent Establishment (PE) rules in Portugal - would a LTD in Ireland with a local director and an office presence be sufficient?

By taking only dividends (Which should not be taxed in Ireland from what I understand) would mean effectively only paying 12.5% taxes on corporation profit and 0 on personal dividends.

Would the above work?

 

[Marzio]

Would the above work?

Yes assuming that you don't manage the LTD from Portugal and you demonstrate that the director is doing some work and is paid a correct amount for the job he is doing.

 

[cinquepalli]

@marzio demonstrate to who - Is the Portuguese tax authority going to ask for these evidence?

 

[Barney2201]

I believe Madeira is another option for NHR using the IBC scheme. It's a little more complicated as you have to make a €75K 'investment; onto the island within the first two years, this could be a property or transfer of something like IP or copyright. You need 1 x employee, I have been told if you live in Portugal this could be yourself as you would be Portugese resident....

The interesting thing about Madeira is it's still Portugal so it 'might' mean if you live in mainland Portugal you can escape the substance and PE issues with setups in places like Cyprus, Malta, USA etc