Recently, there have been some developments in Portugal’s non-habitual resident tax regime. Among others, an amendment to the list of High Value-Added Activities was published and a General Ruling changed the procedure to acknowledge the activities regarded as High Value-Added. In this newsletter we highlight these changes and share our insights. Contact us should you require personalised advice on these matters.

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Lisbon, November 12th, 2019
1. SUSPENDING THE NHR STATUS AND AMENDING INCORRECT
PRIOR TAX RESIDENT STATUS UPON NHR APPLICATION
The NHR tax regime is applicable for 10 consecutive years, from the year, inclusive, of the
registration as “tax resident” in the Portuguese territory. However, the individual can suspend
his/her tax registration as NHR – being considered, during the time of the suspension, as a “non-
resident” – and resume later the NHR status upon request. Earlier this year the Portuguese Tax
Authorities (PTA) clarified in a ruling that the NHR reinstatement can be made within the initial 10-
year period, regardless of the number of years of suspension. Recently, the PTA have also informed
that the request for NHR status should not be immediately denied even if the taxpayer was formally
registered as a tax resident in Portugal in the preceding year. An opportunity should be given to
verify this and eventually correct the registry towards a non-resident status in the previous year if
this was due to a mistake in order to still allow entry into the NHR regime by the individual.
2. NEW LIST OF HIGH VALUE-ADDED ACTIVITIES
An amendment to the list of High Value-Added Activities, applicable from 1st January 2020 onwards,
was published on 23rd July 2019 (Ministerial Order no. 230/2019, of 23 July). This is an in-depth
revision of the list of activities that has been in effect since 2010, in order to align them with the needs
of the labour market. These employment and self-employment occupations may benefit from a 20%
flat tax rate. Below are the main activities included in the new list:
• General manager (“director-geral”) and executive
manager (“gestor executivo”);
• Manager of administrative and commercial services
(v.g., financial, HR, and strategy);
• Production and specialized services’ managers
(v.g., farming, livestock, forestry, fishery, mining
industry, transports and others);
• Managers of hotel business, restaurants/catering,
trade and other services;
• Experts in physics, mathematics, engineering
and similar technical fields (v.g., chemistry,
statistics, urban planning, and others);
• Doctors (v.g., generalists and experts);
• Dentists and clinical dentists;
• University and Higher Education Professors;
• Technicians of information and
communication technologies (v.g.,
telecommunications and radio);
• Farmers and market-oriented skilled
agriculture and livestock production
workers;
• Market-oriented skilled forestry, fishery and
hunting workers;
• Skilled industry, construction and crafts
workers, including skilled workers of
metalwork, food processing, woodwork,
clothing, handicraft, printing, manufacture
of precision instruments, jewelers, artisans,
electricians and electronics professionals;
NON-HABITUAL
RESIDENT (NHR) TAX
REGIME
WHAT’S NEW?

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• IT and communication experts (v.g., software apps,
Web, etc.);
• Authors, journalists and linguists;
• Creative artists and performing artists (v.g.,
musicians, cinema producers, actors, dancers, etc.);
• Technicians as well as science and engineering
professions of intermediate level (v.g., mining
industry, life science and others);
• Facility and machinery operators and
assembly line workers, namely operators of
fixed installations and machinery;
• Directors and managers of companies
carrying out productive investment
activities, to the extent such personnel is
engaged in projects for which contractual tax
benefits have been granted under the
Investment Tax Code.
Only these activities may benefit from the NHR regime on employment and self-employment
income for people entering the regime in 2020 and subsequent years.
The previous list was based on economic activities codes but there was no detailed explanation for
them. The new Ministerial Order has now adopted a model that directly corresponds to and is based
on the Portuguese Classification of Professions (PCP), which allows for more immediate clarification
of interpretive doubts regarding the scope and range of each of the activities listed in the table.
This amendment is particularly relevant for general managers and executive managers, as well as
managers of administrative and commercial services, as these activities are now clearly included
(such activities before 2020 have some grey areas).
The workers included in the aforementioned professional activities (with the notable exception of
directors and managers of companies carrying out productive investment activities, to the extent such
personnel is engaged in projects for which contractual tax benefits have been granted under the
Investment Tax Code) shall possess at least:
• a level 4 qualification on the European Qualifications Framework – meaning that high school
education is required; or
• a level 35 on the International Standard Classification of Education – meaning upper secondary
vocational education; or
• 5 years of duly proven professional experience.
For individuals that were already granted the NHR status prior to 2020, both the old
and the new lists of activities may be considered until the end of the 10-year period
of NHR status. Similarly, individuals that have a pending NHR status application
on the 1st January 2020, or that until 31st March 2020 apply for such status (with effects
to 2019), shall be eligible to both the old and new activities’ lists, until the end of the
NHR status’ validity period of 10 years.
So, it is important to take note of the most relevant differences between them:
NEW ACTIVITIES INCLUDED NO LONGER INCLUDED
Managers of hotel business, restaurants/catering,
trade and other services, technicians as well as
science and engineering professions of intermediate
level, farmers, facility and machinery operators
Auditors, tax consultants,
archaeologists, psychologists

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Therefore, activities no longer included still have a chance to benefit from the regime for 10 years
if individuals apply with effects to 2019!
3. NEW PROCEDURE TO ACKNOWLEDGE HIGH VALUE-ADDED
ACTIVITIES
The PTA have now decided to change the way they control these activities. The changes were
communicated in a General Ruling issued on 8th October 2019.
Until now, an administrative procedure involving a prior recognition - that in principle took place
simultaneously with the request for registration as an NHR – was in place. This procedure, however,
was very lengthy and did not rule out a subsequent control, after the tax return delivery, with respect
to the compliance with the underlying requirements.
From now on, any NHR who wishes to benefit from the tax regime applicable to the high value-
added activities needs only to refer the respective activity code in the duly filled in annual tax return,
without any need to obtain a prior recognition for it.
This new procedure shall not prevent the PTA from subsequently requiring the NHR to prove that
he or she exercises the activity in question. It allows the worker to submit proof, namely an
employment or supply of services contract, a registration in a Professional Association, a document
proving that he or she has a specific administrative position, a tax and social security declaration
attesting the beginning of the activity - in the case of self-employed workers, or other official
documents that serve as evidence of the invoked activity.
OPEN ISSUES AND RPBA’S TAKE ON THE AMENDMENTS
1. The activities of managers are now clearly included in the list. However, the PTA instructions
still leave much room for nuance and they will continue to spark debate, especially since the
prior list of activities and a prior administrative ruling on the subject were not revoked. The
PTA’s instructions, by reference to the previous list of activities, kept the reference to the
need for a power of attorney - although they clarify that joint binding powers (in which case
the employee co-signs in a four-eyes scenario with a director) are enough, exclusive powers
on the part of employee not being strictly necessarily. Also, there is a strange reference to
«managing partners», i.e. directors who are also shareholders, which continues to be dubious
and will prompt discussion.
Notwithstanding, the General Ruling states that instructions on the relevant proof for the
new activities will still be published, implying that the above guidance on proof for the prior
list of activities is not necessarily applicable to the new one. So, one may ask if a manager
that is also an employee (and not a board of directors’ member) will still be required to
possess a power of attorney from the employing company?

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In our view, the benefits of the accuracy of the updated list are somewhat jeopardized by the
poorly drafted instructions from the PTA, so we hope that the new instructions still to be
published may provide more clarity on the new list of high value-added activities.
2. The change in procedure towards high value-added activities and the fact that it is no longer
necessary to apply for their prior recognition may be a misleading simplification and, in fact,
represents a decrease in legal certainty. From now on a NHR with a high value-added
activity is almost certainly to be inspected after submitting the tax return. The ease brought
on by removing the one-off initial constraint is offset by the subsequent increased post facto
control, eventually every year for a 10-year period. Tax audits can be many and varied.
Different tax officials in different geographical tax offices might have dissimilar views of the
appropriate documents for demonstrating an activity in a case-by-case manner. Contrarily,
until now a certain uniformity was assured given that the prior recognition was handled by
a central department of the PTA.
3. The clarification that, under the legal framework in place, there was never a need for prior
recognition, fundamentally contradicts the previous PTA’s actions. There is a vast number
of cases where tax returns were denied high value-added status simply due to the absence
of prior recognition. Some litigation is pending on such cases. In our view, the PTA should
be coherent and behave cooperatively, overturning ex officio their own tax assessments that
were grounded on the lack of prior recognition. It will be interesting to see how these
procedures will be handled.
4. Listing the examples of the documents being sufficient proof in the administrative ruling also
raises some doubts. For instance, a written supply of services’ contract is not in line with
some economic realities, in which such contracts are merely oral.
5. Finally, employers will now face a dilemma with the withholding tax rate on employee
salaries. The General Ruling and its instructions do not clarify on what terms the withholding
tax should be done. Under the previous procedure, upon PTA recognition of the high value-
added activity, a copy of the recognition order was delivered to the paying entities and they
applied the reduced 20% withholding tax rate. Under the new procedure there is no
indication on how to proceed. In our opinion, by the presentation and knowledge of the high
value-added activity supporting documents, paying entities may apply the 20% withholding
tax rate, but more cautious employers may withhold tax at the normal rates. In this case the
taxpayer will only recover the difference with the tax return final settlement, via refund.
Should you require further information on these issues please feel free to contact your usual contact
at RPBA or geral@rpba.pt if this is a new inquiry.