As it’s reporting season, a lot of questions recently on NHR and how is it applied to different types of income. 

Trying to summarise the core principles of NHR:- If you live in Portugal and work from Portugal, Portugal wants you to pay tax in Portugal. 

- If you live in Portugal but work overseas (when you actually go there and work from an office), Portugal normally won’t tax you, but you need to say that on your tax return. 

- If you have income from investments / business profits overseas, Portugal normally won’t tax you unless it’s pension and you applied to NHR recently and then it’s 10%. 

- If you are American, the US always wants to tax you (but often grants an exemption), which means Portugal may not. 

- If you classify work income (normally pay tax in Portugal) as foreign profits (normally doesn’t pay) by channelling income via an overseas company, Portugal can try to treat the company as registered in Portugal.  

You will hear different things from different people but in reality there simply are a lot of grey areas.

Frequently Asked Questions

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How does Portugal tax income if I live and work there?
If you live in Portugal and work from Portugal, you are expected to pay tax in Portugal.
What happens if I live in Portugal but work overseas?
If you live in Portugal but work overseas, Portugal normally won’t tax you, but you must declare this on your tax return.
Is overseas investment income taxed under NHR in Portugal?
Portugal generally does not tax overseas investment income unless it is pension income and you have recently applied for NHR, in which case it is taxed at 10%.
How does the US tax system affect Americans living in Portugal under NHR?
The US always seeks to tax its citizens, but often grants exemptions, which may mean Portugal does not tax you under NHR.
Can I classify my work income as foreign profits to avoid taxes in Portugal?
If you classify work income as foreign profits by using an overseas company, Portugal may attempt to treat the company as registered in Portugal, potentially subjecting it to Portuguese taxes.