Portugal's Non-Habitual Resident (NHR) regime was one of the most attractive tax deals in Europe: a flat 20% tax on qualifying income for 10 years. It attracted tens of thousands of entrepreneurs, freelancers, and retirees to Lisbon and Porto.
Then the government closed it to new applicants at the end of 2023.
If you were planning on NHR, or you are one of the many people whose 10-year window is running out, here is what the alternative looks like.
What NHR Actually Gave You
Under NHR, qualifying foreign income (and some Portuguese-source income) was taxed at a flat 20% rate instead of the standard progressive rates that go up to 48%. Pensions from certain countries came in at 0% or 10%. Dividends and interest from foreign sources were often exempt.
The problem: it had an expiry date. 10 years for each individual. And once the regime closed in January 2024, no new applications were accepted (with limited exceptions under the new IFICI regime, which is more restrictive).
The IFICI Replacement
Portugal created the "Tax Incentive for Scientific Research and Innovation" (IFICI) as a replacement. The target audience is narrower: researchers, academics, highly qualified professionals in specific sectors, and startup founders.
If you are a remote developer, consultant, or online entrepreneur, IFICI probably does not apply to you.
Standard rates in Portugal: up to 48% income tax, plus mandatory social contributions. On 80,000 EUR income, you are looking at roughly 30% effective.
Cyprus as the Alternative
Cyprus was already competing with Portugal for relocating entrepreneurs before NHR closed. Now the comparison is even more one-sided.
The Cyprus structure for a Non-Dom resident with a Cyprus Ltd:
- 15% corporate tax on company profits
- 0% tax on dividends under Non-Dom status (no cap, no time limit, just 17 years)
- 2.65% GHS health contribution on dividends
- 50% salary exemption if salary exceeds 55,000 EUR and you are a new resident (for 17 years)
- 60-day rule: qualify as tax resident with just 60 days in Cyprus per year
On 80,000 EUR through an optimized structure, effective rate drops to roughly 5-7%. Compare that to Portugal's current 30% without NHR.
The full breakdown is here: Cyprus vs Portugal tax comparison
The 17-Year Window vs Portugal's 10
NHR lasted 10 years. Cyprus Non-Dom status lasts 17 years (counting from the year you first became a Cyprus tax resident). For most people relocating, that means the favorable regime outlasts their likely stay in the country anyway.
There is no application for Non-Dom status. If you were not born in Cyprus and have not been a tax resident there for 17 of the last 20 years, you qualify automatically. Which is essentially everyone relocating.
Practical Differences
Portugal wins on lifestyle for many people: the food, the culture, the language, the size of the expat community in Lisbon.
Cyprus wins on:
- Effective tax rate (5-7% vs 30%+ without NHR)
- English widely spoken in business
- EU membership with lower cost of living than Lisbon
- Year-round sunshine (320+ days)
- Simpler corporate structure (no NHR application, no requalification)
More details on the Non-Dom regime in Cyprus and what qualifies.
Is There Anything Comparable to NHR Left in Europe?
A few regimes still exist but they are narrower:
- Italy: Flat 100,000 EUR tax for inbound individuals (expensive upfront)
- Malta: Qualifying Employment scheme (requires Maltese employment)
- Greece: Flat 100,000 EUR tax (similar to Italy)
- Cyprus: Not technically a special regime, just how the normal system works for Non-Dom residents
The difference with Cyprus is that you do not need a special application or ministerial approval. If you move, form a company, and establish residency, the normal tax rules apply and they happen to be very favorable.
I am Miriam, founder of Cyprus Tax Life. I moved from Spain (not Portugal, but close enough) and built a practical resource for entrepreneurs going through the relocation process. Questions in the comments.
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