NHR is gone — how IFICI ('NHR 2.0') works in Portugal

For over a decade, Portugal's Non-Habitual Resident regime (NHR) was one of the main reasons foreign professionals and retirees chose to move here. It offered a 20% flat rate on Portuguese employment and self-employment income, plus generous exemptions on many types of foreign income.

That chapter is closed. NHR was shut to new applicants at the end of 2023 (with limited transition rules for people already in the process of moving). In its place, Portugal introduced a new regime with a long official name — the Incentivo Fiscal à Investigação Científica e Inovação (Tax Incentive for Scientific Research and Innovation), usually shortened to IFICI and informally called "NHR 2.0". This article explains what it offers, who qualifies, and what to do if you don't.

What IFICI actually offers

The headline benefits are similar to the old NHR:

• A 20% flat rate of IRS (Portuguese personal income tax — not to be confused with the American IRS) on employment and self-employment income earned from eligible activities in Portugal;
• An exemption on most categories of foreign-source income, such as foreign employment income, business income, dividends, interest and capital gains (with anti-abuse rules for blacklisted jurisdictions);
• A duration of 10 consecutive years, non-renewable.

There is one important difference from the old NHR: foreign pensions are not covered. Under the original regime, foreign pension income enjoyed favourable treatment; under IFICI it is taxed at normal progressive rates. This is why IFICI is aimed at working professionals rather than retirees.

Who can qualify

IFICI is deliberately narrower than NHR. The basic residency conditions are:

• You become tax resident in Portugal in the relevant year; and
• You were not tax resident in Portugal in any of the previous five years; and
• You never benefited from the old NHR regime or the "return to Portugal" (regressar) programme.

On top of that — and this is the big change — you must actually work in an eligible activity. The categories include, among others:

• Teaching in higher education and scientific research roles;
• Qualified jobs and members of governing bodies in companies carrying out relevant economic activities, including certain industrial and service activities and companies that export a significant share of their turnover;
• Jobs in entities certified as startups under Portuguese law;
• Highly qualified professions defined in the implementing legislation (many technology, engineering, science and management roles fall here);
• Certain roles in entities benefiting from investment support schemes.

The exact list of eligible activities and profession codes is set out in ministerial orders and has been refined since the regime launched, so it is worth confirming your specific role before relying on it.

Tip: Eligibility often depends on both your profession and your employer's activity or export profile. Two people with identical job titles can get different answers — have your specific situation assessed before you move.

How and when to apply

Unlike the old NHR, where you simply registered on the tax portal, IFICI applications go through different entities depending on your category — for example, universities and research bodies for academic roles, the startup agency for startup employees, and the tax authority (Autoridade Tributária, managed through Finanças, the Portuguese tax office) for other categories.

The registration deadline is, as a rule, 15 January of the year following the year you became tax resident. Missing the window does not necessarily kill your eligibility forever, but late registration can delay the start of the benefit — so treat the deadline seriously.

You will need a NIF (Número de Identificação Fiscal, the Portuguese tax identification number) and registered Portuguese tax residency before anything else can happen.

What if you don't qualify?

Many expats — freelancers with foreign clients, remote employees of ordinary foreign companies — will find they do not fit neatly into the eligible categories. That does not mean Portugal is unattractive; it means you plan differently:

• The simplified regime for freelancers taxes only a coefficient of your gross income (often 75% for professional services), which softens the progressive rates;
• Portugal's double taxation treaties prevent most income from being taxed twice;
• Long-term crypto gains held over 365 days are generally exempt for private individuals;
• Careful structuring of how you invoice (as a sole trader or through a company) can materially change your tax bill.

Tip: Do the math before you move. Comparing "IFICI vs. standard progressive rates vs. simplified regime" on your actual numbers is a one-hour exercise that can save you from an unpleasant surprise in your first Portuguese tax return.

IFICI vs. old NHR at a glance

Conclusion

IFICI keeps the core of what made NHR attractive — a 20% flat rate and broad foreign income exemptions for 10 years — but reserves it for people working in research, innovation, startups and qualifying companies. Foreign pensions are out, the eligibility test is real, and the application process depends on your category.

If you are planning a move to Portugal, or you arrived recently and think you might qualify, the time to check is now: the registration deadline of 15 January after your arrival year comes around faster than you expect, and the difference between qualifying and not qualifying can be worth thousands of euros per year.