We’re going to talk about a very serious topic (taxes) but I promise I’ll do it without putting you to sleep ! Because if you already live in Portugal, or if you’re seriously thinking about moving here in “new life in the sun + smart tax planning” mode, you’ve definitely heard this acronym : NHR. In full : Non-Habitual Resident. Or, in Portuguese (if you prefer) : Residente Não Habitual. So : what exactly was this famous NHR status ? Why was everyone talking about it ? Why did it attract so many people to Portugal ? And most importantly… what changed in 2025 ? Let’s break it down calmly, coffee in hand (and pastel de nata on the side).

The NHR, originally, what was it ?

The NHR regime, created in 2009 by the Portuguese government, had a simple goal : attract people to Portugal. Talent, investors, financially comfortable retirees, and so-called “high value-added professions”. In other words : boost the Portuguese economy after some not-so-easy years (economic crises, high unemployment, brain drain, etc.).

The “deal” under NHR was basically :
- You became a tax resident in Portugal.
- You had not been a Portuguese tax resident in the previous 5 years.
- You registered under the NHR regime.

…And in exchange, you got access to a series of tax benefits for 10 years ! And when I say “tax benefits”, I don’t mean a tiny 5% voucher at checkout…

In practice, under NHR : A large portion of foreign-source income (pensions, dividends, rental income, royalties…) could be exempt from Portuguese taxation, if that income was liable to tax in another country under a tax treaty.

Income from activities considered “high value-added” carried out in Portugal (think : engineers, architects, doctors, specialist consultants, senior executives, researchers, artists…) could be taxed at a flat 20% personal income tax rate, instead of Portugal’s normal progressive IRS brackets, which can go much higher.

Foreign retirees benefited from a very favorable tax treatment on their pensions. In the early days, some foreign pensions could even be taxed at 0% in Portugal (!). Then, starting in 2020, Portugal tightened things : pensions for new NHR applicants were generally taxed at 10%, which was still very competitive compared to many other European countries.

Translation : live in Portugal, enjoy the weather, enjoy the (at the time) relatively lower cost of living… and pay less tax ! You can see why suddenly everyone became very interested in Lisbon, the Algarve… and the idea of working remotely from a café with Atlantic views.

Why did this attract so many people ?

You can imagine : telling international executives, tech freelancers, independent consultants and yes, retirees from Northern Europe “move here, keep your income, and you’ll be taxed less”… of course it took off !

Portugal became extremely attractive for pre-digital-nomad digital nomads, who could work for a foreign employer while living in the sun ; retirees, especially from Northern Europe, looking for a milder climate + light taxation (a lot of them in the Algarve) ; highly qualified professionals, tempted by the combo : cool Lisbon / Porto, growing tech scene, and a capped 20% tax rate on certain income.

Result : boom in new residents ! Portugal’s international image shifted. The country wasn’t just “the land of surf and fado” anymore, it was also “the country where you can relocate, work from your laptop, and enjoy smart taxation” (the dream combo, honestly).

Bonus effect : money flowed in ! Less cute side effect : rents shot up in some areas, especially Lisbon and Porto, and locals began to say (fairly) “ok, nice for attracting outsiders, but how are we supposed to afford housing ?”.

So : political pressure. And inevitably, reform.

© ivan-rohovchenko

And now ? What happened in 2024-2025 ?

The original NHR regime, as we’ve just described it, was gradually shut to most new applicants. Concretely Portugal stopped accepting most new “classic” NHR applications. There was a short transition period up to March 2025 for certain people who were already in the pipeline. After that, the door closed on the traditional version of NHR.

But… not everything disappeared for everyone. Things changed shape.

Portugal introduced a new tax regime to attract a more specific type of profile : the IFICI, which stands for “Incentivo Fiscal à Investigação Científica e Inovação” (in English often called the “Tax Incentive for Scientific Research and Innovation”), but informally you’ll also hear people call it “NHR 2.0”. Yes, the nickname stuck.

This new regime, in place in 2025, keeps some of what made NHR famous… but in a more selective way.

The main ideas behind IFICI (“NHR 2.0”) :
- You can still get tax advantages for 10 years. So the “10 golden years” logic is still there.
- Certain Portugal-sourced professional income (only in sectors considered strategic : science, research, technological innovation, energy transition, high-end technical skills, etc.) can still be taxed at a flat 20% rate, instead of standard progressive tax brackets. So yes, the goal is still : attract highly qualified talent.
- Many types of foreign income can still benefit from exemptions / reductions, under conditions, like before. But here’s the catch : it’s no longer “everyone is welcome”. It’s “you’re welcome if you match what Portugal wants to develop economically.”

In plain English : as of 2025, a special tax regime still exists — but it’s no longer designed as a universal tax holiday for any comfortably retired foreigner or laptop freelancer. It’s now focused on innovation, research, tech, knowledge economy. Portugal is basically saying : “We want people who help grow the future economy of the country, not just purchasing power that pushes up rents.”

Who can benefit now ?

Under IFICI, we’re talking about profiles like :
- Researchers, scientists, high-level academics
- Specialized engineers, especially in tech, energy, digital.
- Founders, executives leading innovative projects considered of strategic national interest.
- Qualified hires in officially defined “high value-added activities” (yes, it’s now more bureaucratic, more structured, less freestyle).

So if you’re, for example, a well-off retiree who just wanted sun + low tax on your pension : it’s no longer as easy as before.

But if you’re, say, a senior AI engineer hired by a Lisbon startup, a renewable energy engineer in Porto, a bioengineering researcher in Coimbra… Portugal still very much rolls out the tax carpet for you.

NHR / IFICI : how does it actually work if you want to move now ?

Here’s the short version for 2025 !

Step 1 : become a Portuguese tax resident
- Either you spend more than 183 days per year in Portugal (and can prove it),
- Or you have a home in Portugal considered your main residence (a place available to you that shows intent to live here).

Step 2 : check if you meet IFICI eligibility
- Your professional activity must fall within an eligible strategic sector.
- Your contract or project must actually be considered “innovative, scientific, strategic”. Not just “I work remotely for some random overseas company”.

Step 3 : apply on time
- Like old NHR, it’s not automatic. You must formally apply to the Portuguese tax authority (Autoridade Tributária) and submit documentation.
- Once approved, you get the special tax treatment for 10 years starting with your first eligible tax year.

Reality check : this is not always super easy to navigate (especially if you don’t yet speak Portuguese), so people often get help from a local accountant, tax advisor or lawyer.

Important : the “old school” NHR is no longer open to brand new applicants in 2025, except for very narrow transitional cases (people who had already started the process before the regime ended). For new arrivals, the relevant regime is IFICI / “NHR 2.0”.

Is it still worth moving ?

Honest answer : it depends on you.

You’re in a strategic sector (research, innovation, high-end tech) ?
Yes, it can absolutely still be worth it. You can still get a flat 20% tax rate on certain Portuguese income and benefit from a framework designed to attract people like you. Plus you get Portugal itself : stable, sunny, good quality of life.

You’re a more “classic” international freelancer, or a retiree dreaming of Algarve + light taxation on a foreign pension ?
The doors aren’t as wide open anymore. Portugal made a political decision that the regime couldn’t just stay an unlimited fiscal magnet with no strings attached for the local economy (housing pressure, salary pressure, etc.). That’s the new deal.

Basically, Portugal moved from “everyone’s welcome” to “you’re welcome if you help build the country’s future economy.” It’s more selective, but also more politically sustainable.

Practical tips if you’re thinking of moving

Plan housing early : Lisbon and Porto are still tight (and pricey) rental markets. Don’t just show up and hope to find something in two days.

Talk to a Portuguese accountant or tax advisor BEFORE you move. Really. The rules are technical and the savings (or non-savings) depend on details.

Keep your paperwork : contracts, job offers, job descriptions, proof that your activity falls under “innovation / research / strategic value”. Without that, no IFICI.

Be realistic : Portugal is fantastic, but it is not a museum. Rules change — sometimes fast. The NHR of yesterday is not the IFICI of today, and today’s IFICI may still evolve.

NHR was the glamorous front door. IFICI / “NHR 2.0” is the more focused, grown-up, 2025 version. It’s less “tax holiday retirement fantasy in the Algarve”, and more “sustainable Atlantic Silicon Valley”.

Is it less sexy ? Maybe, for some.

Is it still interesting ? Absolutely, if you match the profile.

Does it mean Portugal is still one of the smartest countries in Europe when it comes to attracting talent ? Let’s just say… yes. It’s just decided to be a bit more selective. Now it’s your call : sun + pastel de nata + research & innovation… tempting or not ?