IFICI: The new Portuguese tax regime that replaces RNH

Portugal has initiated a new stage in its international tax strategy with the implementation of IFICI, also known as RNH 2.0. This new regime seeks to strengthen the attraction of foreign talent and investment, maintaining competitive tax advantages while introducing stricter requirements in the application and eligibility process. Its main features are explained below.

Key benefits of the IFICI
The IFICI maintains some of the most salient benefits of RNH 1.0, adapting them to an updated regulatory framework:

1. 20% flat rate on qualifying Portuguese-sourced employment and self employment.
2. Tax exemption on foreign-sourced business profits, employment, dividends, interest, royalties, rents and capital gains.

It is important to note that pensions and income from tax havens, according to the official Portuguese list, are outside the scope of RNH 2.0 benefits.

Initial regulation and pending issues
The publication of the first IFICI Ordinance has made it possible to define certain key aspects, although there are still elements to be regulated.

In terms of eligibility criteria, three main avenues have been regulated to date:

1. Highly qualified professions developed in companies with relevant qualified investments under the RFAI (a Portuguese investment support tax regime).
2. Highly qualified professions in companies in certain industrial or service sectors that export at least 50% of their turnover in the fiscal year in which the applicant began its activity or in any of the two previous fiscal years.
3. Other qualified jobs and members of governing bodies, in entities carrying out economic activities recognized by AICEP, E. P. E., or by IAPME. E., or by IAPMEI, I. P., as being relevant to the national economy, namely in terms of attracting productive investment and reducing regional asymmetries.

In particular, the second track has the potential to generate a greater impact by promoting strategic sectors such as technology, manufacturing and research.

What is a highly qualified profession?
Eligible professions include: (i) company directors (e.g., board members, board chairmen, CEOs); (ii) directors of administrative and commercial services; (iii) information and communication technology (ICT) specialists; (iv) specialists in physical sciences, mathematics and engineering; (v) designers of industrial products or equipment; (vi) medical doctors; (vii) university professors.

The applicant must possess at least a degree equivalent to level 6 of the European Qualifications Framework (higher education) combined with at least three years of proven professional experience. Alternatively, candidates holding a PhD (level 8) are exempt from the professional experience requirement.

How and when can I apply for the new RNH?
Applicants must submit their application by January 15 of the year following the year in which they acquire residence in Portugal, a much tighter deadline than the March 31 provided for in RNH 1.0. An exception is made for those who became tax residents in Portugal in 2024, extending the deadline to March 15, 2025.

The body in charge of analyzing each application depends the route chosen for NHR 2.0.

Documentation required for the application process
Applicants must submit the following documentation:

• Copy of employment contract (when applicable);
• Updated company registration certificate (when applicable);
• Copy of scholarship contract/scientifict grant (when applicable);
• Proof of applicable academic qualifications;
• Statement from the employer attesting to compliance with the requirements related to the activity carried out.

Additionally, companies must confirm their eligibility through the Tax Authorities Portal (Portal das Finanças) by March 15. Finally, other documents may be required throughout the process, and the tax administration must confirm the NHR 2.0 status before March 31 of each year.

In conclusion

RNH 2.0 offers a highly competitive package of tax incentives, even more extensive than RNH 1.0, and can be combined with other favorable tax features of Portugal (e.g., the absence of inheritance tax on assets located outside the country).

However, the new regime introduces a more demanding application process, which will involve a more detailed exchange of information between applicants and the companies involved.