By now many people will have heard the phrase ‘NHR 2.0’ which relates to the IFICI, Incentivo Fiscal à Investigação Científica e Inovação. This is the latest tax benefit regime available to Portuguese tax residents, granted that they meet the relevant criteria.
A common misconception is the deadline date to access the IFICI benefits. Whilst the Tax Authority state that the official deadline is 15 January, of the following year you become a tax resident, this deadline has a lot of flexibility. You can still apply after the respective deadline date, it’s just that you might miss out on a year or two of benefits.
Understanding the 10-year window
The IFICI is similar to the NHR; individuals who have been accepted onto the IFICI tax regime will be able to use the benefits for 10-years. So that individuals can access the full 10-year benefit, applications should be submitted by 15 January of the following year they become a tax resident in Portugal.
For example, if you become a tax resident on 1 September 2026 you should apply by 15 January 2027.
However, the 15 January deadline date allows for flexibility. So if you apply past the deadline, you might not necessarily be able to take advantage of the full 10-year window. Think of it like a ticket, you ‘purchase’ 10 tickets but since your attendance was late then you can only make use of 9 tickets; which is still a long period of time!
How late applications affect your benefits
Most people are aware of the NHR benefits, and the IFICI practically follows the same structure the only difference being you cannot take advantage of foreign source income exemption on pensions.
Generally, when declaring the IFICI on a personal tax return submission the IFICI benefits include:
- Special rate of 20% which is applicable to employment and self-employment income from ‘high-value added’ activites;
- Foreign sourced income exemptions as long as certain criteria is met.
If you changed your tax residency two years ago and apply today, you’ll obviously not be able to use the full 10-year advantage. However upon approval of the scheme, you’d still be eligible for the remaining 8-year benefit period. Some benefit is of course better than none.
Who should consider applying?
Anyone can consider applying, as long as you meet the relevant criteria to apply for the IFICI. To apply for the IFICI you must meet one of the below criteria:
- Individuals pursuing scientific research or are a part of a highly-qualified activity;
- Professionals that work across industries like technology, healthcare, academia and R&D;
- Start-up companies who are at the beginning of their venture;
- Individuals relocating to Portugal who wish to contribute as a leader in innovation.
The most important criteria to consider is that individuals applying for the IFICI scheme must have a bachelors degree, or above. Without a degree, it’s not possible to apply.
In most cases our clients have incorporated a company in Portugal, to qualify for the IFICI. The idea being that the company meets one of the job activity options shared by the Tax Authority – we have a list of all activities – and as long as the company qualifies for the IFICI, so will the individual as the manager of the company. We’ve found it to be the simplest way, to apply for the IFICI, make use of its benefits, and keep costs low.
So if you’re a tax resident of Portugal, or looking to become one, then perhaps the IFICI could be the tax saving regime you’ve been looking for.
Don’t miss out on the IFICI
A late application isn’t a failed or forgotten application, it’s just that you’ll only benefit from a shorter tax incentive period. Or maybe you’re planning ahead, and can make use of the full 10-year period. It doesn’t matter, as long as you meet the eligibility criteria we can assist.
If you’re ready to see if you’re eligible, or to discuss other tax planning options, feel free to contact our team.
