Portugal’s NHR 2.0: How Costa Killed a Golden Program—and Why It’s Back, Tougher Than Ever
For over a decade, Portugal’s Non-Habitual Resident (NHR) regime was a poster child for smart, targeted immigration policy. It attracted retirees, remote workers, entrepreneurs, and investors from around the world. It turned Lisbon from a sleepy, crumbling capital into a cosmopolitan tech hub. It put Portugal on the map—not just as a sunny holiday destination, but as a serious place to live, build, and thrive.
And then, inexplicably, they killed it.
Well, not quite inexplicably. Like so many destructive decisions in modern politics, it was driven by a toxic cocktail of populism, envy, and political survival. António Costa, Portugal’s former socialist prime minister, saw the NHR regime not as a strategic asset, but as a liability with the angry urban left. So in a final act of political desperation, he pulled the plug on NHR—just before being chased out of office in a corruption scandal so embarrassing that even Brussels seemed like a better place for him than Lisbon.
But history has a funny way of correcting itself. In 2024, Portugal held snap elections. The socialists were crushed. The center-right, supported by rising conservative voices, returned to power. And now, just one year later, NHR is back—unofficially.
The new regime is officially called IFICI (Incentivo Fiscal para o Incentivo Científico e Inovação). But most people are already calling it NHR 2.0—because that’s what it is: a reboot of Portugal’s golden tax regime, this time with tighter rules and a sharp focus on innovation, science, and tech.
The Original NHR: A Golden Decade
Portugal introduced the Non-Habitual Resident regime in 2009, during the fallout of the global financial crisis. The country was desperate for foreign capital and talent. NHR offered a generous ten-year tax break: zero tax on most foreign-source income (including pensions and investment income), a flat 20% rate on qualifying Portuguese-source employment, and exemptions on wealth and inheritance taxes.
It was a success. A roaring success.
Tens of thousands of well-off individuals moved to Portugal. Many bought properties, sent their children to international schools, and set up local businesses. Entire neighborhoods in Lisbon and Porto were rejuvenated. Foreign pensioners flocked to the Algarve. Remote workers brought new energy to cities like Coimbra and Braga. Real estate boomed, co-working spaces thrived, and the tech scene flourished.
The rest of the EU looked on with envy. Portugal had managed to do what many others only talked about: attract the global elite without handing out passports or stirring up scandals.
But by the early 2020s, the political tide was turning.
António Costa and the Politics of Envy
António Costa’s Socialist Party, in power from 2015 to 2023, initially left the NHR regime alone. But as Portugal became a hotspot for digital nomads, crypto entrepreneurs, and yes—retirees with large pensions—local frustrations began to mount.
Rising housing prices, gentrification, and a visible gap between foreign newcomers and struggling locals became fodder for the far-left. Costa, ever the populist opportunist, took note.
In 2020, he watered down the NHR for pensioners, adding a 10% tax on foreign pensions. Then came the rhetoric: claims that NHR was distorting the housing market, contributing to inequality, and undermining social cohesion. The facts didn’t support this narrative—Portugal’s housing crisis was a long-standing structural problem—but foreigners made an easy scapegoat.
In 2023, Costa announced the full termination of NHR by the end of that year. By early 2024, the last applications were closed.
The damage was immediate.
Collapse, Scandal, and… Brussels
Real estate transactions collapsed. High-end rental markets cooled. Foreign interest dried up almost overnight. Law firms and consultancies reported a plunge in inquiries.
Then, the real fireworks began: Costa’s government was engulfed in a corruption scandal involving lithium mining and green hydrogen contracts. In November 2023, he resigned. His chief of staff was arrested. Police raided multiple ministries. And the man who killed NHR fled to Brussels, where—somehow—he was rewarded with the European Council presidency.
That says everything about the EU’s priorities. Reward failure. Insulate incompetence. And silence dissent.
The 2024 Election: A Conservative Wave
Portugal’s snap elections in March 2024 were a political earthquake. The Socialists were punished. The center-right Democratic Alliance (AD), led by Luís Montenegro, won the largest share of seats and formed a new minority government with tacit support from Chega and Initiative Liberal.
Among their top priorities? Rebuilding investor trust and offering a new tax incentive regime for international talent.
But this was not a return to the original NHR. Political optics mattered. So instead of reviving a program open to retirees and passive investors, the government crafted a narrow regime aligned with “national innovation objectives.”
Enter IFICI.
IFICI: Who Can Still Qualify?
The Incentivo Fiscal para o Incentivo Científico e Inovação (IFICI) came into effect in 2025. It replaces NHR—but only in spirit, not in substance. It is not a tax break for pensioners. It is not open to foreign landlords or crypto bros. It is a targeted incentive for highly qualified professionals working in Portugal.
To qualify, you must:
Be employed in Portugal or own a Portuguese company where you are actively employed
Work in one of the approved sectors, such as:
Scientific research and R&D
Tech and software development
Startups recognized by Portugal’s Startup Portugal agency
Certain industrial innovation projects
Have your role and company pre-approved by Portuguese authorities
Not have been a Portuguese tax resident in the previous 5 years
If you qualify, you get:
A 20% flat income tax rate on Portuguese-source employment income
Exemption from tax on certain foreign-source income, including capital gains—a major upgrade over the old NHR
A 10-year duration (same as before)
But if you’re a retiree with a large pension? Or a private investor? You are no longer welcome under IFICI.
Capital Gains: A Game-Changer
One overlooked but hugely important change under IFICI is the treatment of capital gains.
Under the original NHR, foreign-source capital gains were not automatically exempt. They were often taxed in Portugal unless a tax treaty or source-country taxation applied. This created uncertainty and led to unexpected liabilities.
Under IFICI, foreign capital gains are explicitly exempt, assuming they are not connected to a Portuguese PE or business. This makes Portugal—again—a serious destination for global tech entrepreneurs with equity stakes in startups or funds.
But remember: you must be employed in Portugal in an approved activity. You cannot just lounge on the beach and live off your dividends.
A Real-World Tax Optimization Example: Malta + Portugal
Let’s break down how savvy structuring under NHR 2.0 (IFICI) can still lead to exceptional tax outcomes—if you know what you’re doing.
Imagine you own a Maltese company generating €250,000 in annual profits. Thanks to Malta’s refund mechanism, your effective corporate tax rate is just 5%. So far, so good.
Now you relocate to Portugal and qualify for IFICI by setting up a small consulting firm in one of the approved sectors—research, tech, or innovation. You become the Managing Director of this new Portuguese firm.
Here’s what you do:
Your Portuguese company invoices your Maltese company €35,000 per year for strategic advisory or management services.
You draw a salary of around €2,500/month, which is taxed under the 20% flat rate IFICI provides.
You leave the remaining profits in Malta—or reinvest them elsewhere, completely tax-free in Portugal.
No dividends. No GILTI. No CFC headaches. Just clean, compliant structuring with minimal leakage.
Important caveat: The Maltese company must have proper substance—real contracts, a local director, board minutes, and actual activity. This isn’t a mailbox scheme. It works because both jurisdictions are real and respected, and the value flows make sense.
A Quiet Loophole for Excluded Pensioners?
Under IFICI, pensioners are officially excluded. You can no longer move to Portugal with your SIPP or Swiss pension and expect a tax holiday.
But there’s a wrinkle.
Portuguese tax law distinguishes between pensions and lump-sum disbursements from company pension schemes. The latter, if structured right, may not be taxed at all, especially if they’re classified as capital rather than income.
In other words:
A German doctor retiring with a payout from a UK or Swiss company pension fund could, in some cases, receive that lump sum tax-free.
You’d still need to qualify for IFICI via employment or company setup—but once you're in, that one-off payment might enjoy better treatment than under the old NHR.
No promises—but this is exactly the kind of structural nuance smart planning thrives on.
Still a Broken Housing Market
None of this fixes the deeper problem Costa tried to blame on foreigners: the cost of living.
Portugal still suffers from low wages, a rigid labor market, and an undersupplied housing sector. Rents in Lisbon and Porto remain high relative to local incomes. And in smaller towns, infrastructure hasn’t kept up with the inflow of remote workers and expats.
Costa used NHR as a scapegoat. But the root problems remain—and the new government must confront them.
To make IFICI politically sustainable, Portugal needs a real housing strategy and pro-growth reforms—not just another catchy acronym.
Final Thoughts: Cautious Optimism
IFICI is not NHR. It is stricter, narrower, and less welcoming to passive wealth. But it’s still a signal: Portugal wants to compete for global talent.
If you’re a scientist, coder, or startup founder looking to build something real in Europe, IFICI could be your ticket. But you need a plan. You need local ties. And you need to act while the political climate is still favorable.
Because if we’ve learned anything from the Costa debacle, it’s this:
Never take a good regime for granted.
What You Can Do Now
If you were hoping to move to Portugal under the old NHR as a retiree or passive investor: that ship has sailed.
But if you’re a builder, a founder, a scientist, or an executive in an innovative company—there may still be a path.
✅ We help you determine if you qualify under IFICI
✅ We structure your income and company to meet the requirements
✅ We walk you through pre-approval, setup, and compliance
✅ We create backup plans in case the rules change again
👉 Book a private consultation now and secure your place in Portugal—while the gates are still open.
