NHR, Foreign Income, and Visa Renewal in Portugal

Portugal has become a hotspot for digital nomads, freelancers, and global remote workers, thanks to its attractive NHR tax incentives and immigration policies.

If you're a foreigner living in Portugal or planning to move under the D8 visa, it's essential to understand the Non-Habitual Resident (NHR) tax regime, how foreign income is treated, and what’s required for visa renewal. This article explains the key tax and residency rules to help you stay compliant and avoid surprises.

The Non-Habitual Resident (NHR) Regime: Tax Benefits Explained

Portugal's NHR regime offers significant tax advantages for new residents. One of its main benefits is the potential exemption of foreign-sourced income from Portuguese tax.

Key Highlights:

• Article 81 of the Portuguese Personal Income Tax Code (CIRS) allows for the full exemption of foreign-sourced income if certain conditions are met.

• Before 2024, NHR holders could exempt income that was taxable in another country under a double tax treaty (DTA).

• Under the 2024 State Budget (Lei 82/2023), the exemption has been broadened: income from categories A, B, E, F, and G sourced abroad is exempt, provided it's not from a blacklisted offshore jurisdiction.

• Common misconception: There is no "75% tax rule" under NHR. That 75% figure comes from the simplified self-employment tax regime and social security calculations, not NHR exemptions.

In short, if you're under NHR and your income is from abroad (e.g., clients or employers in Pakistan or the US), it may be 100% exempt from Portuguese tax if you meet the criteria.

Foreign Income and the Portugal–Pakistan Double Tax Treaty (DTA)

Portugal and Pakistan have a double taxation agreement in place. This means:

• Income earned in Pakistan and taxed there can be exempted in Portugal under Article 81 of CIRS.

• To benefit, you must declare that income on Annex J of your Portuguese IRS return and provide evidence (like FBR tax payment certificates).

For example, a Pakistani consultant living in Lisbon under NHR can receive income from a Pakistani client, pay tax in Pakistan, and report it in Portugal—but not pay tax again.

D8 Visa Renewals: Why Declaring Income Matters

Portugal’s D8 visa is ideal for remote workers. However, many are unaware that visa renewal depends on proving ongoing income.

Requirements at renewal include:

• Evidence of continued income of at least 4× the national minimum wage (about €3,480/month in 2025).

• Documents such as contracts, bank statements, and IRS tax returns.

If you’re not declaring any income in Portugal, even if exempt under NHR, you may face issues renewing your visa. Immigration law (Lei 23/2007) and Portaria 1563/2007 both state that residence permits can only be renewed if the applicant shows they have adequate means of subsistence.

This requirement also applies to:

• Family reunification applications

• Permanent residency

• Bank loans and mortgages (proof of income is typically required)

Is Your Income Really "Foreign"? Source Matters

Many digital nomads assume all their income is foreign because their clients are abroad. But under Portuguese tax law:

• Income is Portuguese-sourced if paid by a company with residence or a permanent establishment in Portugal.

• Income is foreign-sourced if paid by an entity with no Portuguese ties.

So, if you live in Lisbon but work remotely for a US company, your income is likely foreign-source (exempt under NHR). But if you work for a Portuguese firm—even remotely—that income is taxable in Portugal.

Final Takeaways

• The NHR regime can offer 100% exemption on qualifying foreign income—but only with proper documentation.

• Visa renewals under D8 require proof of income, even if it's tax-exempt.

• The source of income matters: make sure you understand how Portuguese law treats your earnings.

• Use Annex J on your tax return to declare foreign income and attach proof of tax paid abroad.

Whether you're a freelancer, entrepreneur, or remote employee, staying compliant with both tax and immigration law in Portugal is key. When in doubt, consult a tax advisor or immigration specialist to make sure you're on the right track.

Need Help? INLIS Consulting helps expats in Portugal with tax filings, freelancer registration, and visa renewals. Get in touch if you need tailored advice for your situation.