Non-Habitual Resident during the transitional period: why an “out-of-time” application may still be valid for the remaining years

The Non-Habitual Resident (NHR) regime has recently gone through a transitional period that closely resembles what happened with the Nationality Law: extensive legal wording, multiple formal deadlines… and real lives in the middle of it all.

The good news is that, even where an application is submitted after the statutory deadline, there is room for the Portuguese Tax Authority to recognise the right to the benefit for the remaining period, provided that the taxpayer already met the substantive requirements at the time when the application should have been filed.

What the NHR status actually is

The Non-Habitual Resident status was created in 2009 to attract qualified professionals and pensioners with income sourced abroad to Portugal, by offering a more favourable tax regime for a limited period.

In practice, it is a “special tax regime” that may be applied for 10 consecutive years to individuals who become tax residents in Portugal and who were not tax residents in the previous five years, allowing for lighter taxation of certain categories of income.

What are the substantive requirements

The starting point is Article 16 of the Personal Income Tax Code (CIRS): a non-habitual resident is anyone who becomes a tax resident in Portugal and who was not resident in Portuguese territory in any of the five preceding years.

In other words, the right to the status arises from two objective elements — becoming a tax resident and not having been one in the previous five years — and not, primarily, from the administrative act of registration itself.

The deadline issue and the concrete case

The law imposes a deadline to apply for registration as an NHR (by 31 March of the year following the start of tax residence), a deadline that many individuals failed to meet for reasons as human as they were bureaucratic: complex immigration processes, relocation to another country, professional adaptation, and, more recently, the instability and suspension of deadlines caused by the pandemic.

The main reason was that, in order to be considered a tax resident in Portugal — a necessary requirement to apply for NHR status — the taxpayer needed to hold a residence permit, creating a procedural loop.

Why a delay should not extinguish the right altogether

The core argument is simple yet powerful: the application deadline is declaratory, not punitive.
Registration as an NHR does not “create” the right; it merely administratively recognises a situation that already results from compliance with the legal requirements (tax residence in Portugal and non-residence in the previous five years).

Following the structure of the legal argument:

• The NHR regime is granted for 10 consecutive years, and the taxpayer may decide, year by year, whether or not to benefit from it.
• If, within those 10 years, the individual ceases to be a resident in a given year, they only lose the benefit for that year, not the possibility of benefiting again in other years within the overall period.

From this arises a key idea for the transitional period: if the application is submitted late, there is no reason to extinguish the right entirely; what makes sense is to recognise the regime for the remaining portion of the original 10-year period.

Out-of-time application with temporal effect

• Recognising that a late application does not eliminate the right to NHR status, provided that the taxpayer:
  
  • Has met the non-residence requirement in the five years preceding the start of tax residence;
    
  • Has remained resident in Portugal, demonstrating a stable connection consistent with the objective of the regime;
    
• Is granted the benefit only for the period still available within the 10-year window, applying it in a “time-deferred” manner.
  

Legal grounds supporting this interpretation

• Proportionality: it is manifestly excessive to turn a declaratory delay into the definitive loss of a regime that, in theory, covers 10 years.
• Equality and protection of legitimate expectations: taxpayers who meet all substantive requirements and who organised their lives in Portugal in reliance on the purpose of the regime should not be treated as if they never had a right to the benefit due to a mere procedural formality.
• Teleological interpretation of the law: the reading of Article 16 of the CIRS should serve the legislator’s objective — attracting and retaining qualified individuals and investment in Portugal — rather than frustrate it through an overly formalistic view of the deadline.

Denying the regime in its entirety to someone who has always met the requirements, merely because they did not submit the application in time, creates a disproportionate sanction that is misaligned with the very rationale of the NHR regime.

What this means for those in the transitional period

For a non-specialist audience, the essential message is this:

• Even if the NHR application was submitted outside the “classic” deadline, it may be legally defensible to seek recognition of the status for the remaining years of the 10-year period.
• Such a request should be supported by clear ancillary reasoning, explaining:
  
  • That the substantive requirements were always met;
    
  • That the delay was motivated by understandable circumstances (migration reorganisation, pandemic, professional instability);
    
  • That the benefit is being requested only for the years still remaining within the 10-year window.
    

It is precisely this reinforcement — the request for a time-deferred application limited to the remaining period — that makes the claim more balanced and legally acceptable to the Tax Authority.

If you are in this situation, seek an individualised legal assessment to pursue recognition of the status for the remaining period to which you may be entitled.