Portugal NHR Replacement 2026 -- IFICI Tax Regime Explained

Last reviewed: 26 April 2026

Portugal NHR replacement in 2026 means IFICI -- the Incentivo Fiscal a Investigacao Cientifica e Inovacao (Tax Incentive for Scientific Research and Innovation). For UK citizens who moved to Portugal or plan to move in 2024 or later, IFICI is the only available special tax regime. The original NHR provided a 20% flat rate on most Portuguese-source income and an exemption or 10% flat rate on most foreign-source income for 10 years; IFICI narrows the scope to specific qualifying professional categories but retains the core 20% flat rate for Portuguese-source employment and a 10% rate on foreign income. The full details of IFICI are published in Law 82/2023 (Orcamento do Estado para 2024 -- the Portuguese 2024 State Budget) and in AT guidance published at the Portal das Financas in January 2024. For the broader context of relocating to Portugal as a UK citizen, see our guide on moving to Portugal from the UK, which covers visas, healthcare, property, and cost of living.

The introduction of IFICI as the Portugal NHR replacement coincided with a period of political debate in Portugal about the distributional effects of the NHR, which critics argued benefited primarily high-income foreign residents at the expense of the broader tax base. IFICI retains preferential treatment for strategically targeted sectors -- research, technology, start-ups, and qualified professionals -- while removing the benefit for high-earning retirees and passive income earners who dominated NHR applications from the UK and northern Europe. For UK expats whose income is primarily from UK investments or pension, IFICI may offer limited benefit compared to the old NHR. For more on managing UK investment income as a Portuguese resident, see our UK expat investments guide.

What is IFICI and how does it differ from NHR?

The old NHR (Regime Fiscal do Residente Nao Habitual) applied a 20% flat IRS rate to most categories of Portuguese-source employment and professional income, and exempted most categories of foreign-source income entirely (or taxed them at 10% for pensions from 2020 onwards). Any tax resident who had not been Portuguese-resident in the prior five years could apply; no specific professional category was required. This made NHR extremely accessible for UK retirees, passive income earners, and remote workers. IFICI, by contrast, requires the applicant to fall within one of the following qualifying categories: tax resident researchers carrying out scientific research activities at recognised institutions; employees or self-employed individuals in highly qualified activities in technology and innovation sectors (specifically IT, data science, AI, and engineering fields listed in the Portaria 352/2023 annex); founders or investors in certified start-up companies (certified under the Portuguese Start-up Lei); employees of entities registered as eligible for RFAI (Regime Fiscal de Apoio ao Investimento); and a broader category of highly qualified professionals in STEM and related fields who meet a salary threshold.

The salary threshold for the general STEM professional category under IFICI was set by Portaria 352/2023 at EUR 175,000 gross annual employment income in the year of first registration or the prior year. This threshold was significantly higher than the old NHR (which had no salary threshold) and immediately excluded most mid-income UK expats from the general IFICI benefit. However, researchers at recognised Portuguese scientific institutions and certified start-up employees are not subject to the EUR 175,000 threshold. The AT published a list of qualifying activities at Portaria 352/2023, updated in the Diario da Republica Eletronico, which is the definitive source for occupation eligibility.

IFICI tax rates: what income qualifies for what rate

For qualifying IFICI applicants, the regime works as follows. Portuguese-source employment income (categoria A) and professional self-employment income (categoria B) from qualifying activities is taxed at a flat 20% IRS rate, regardless of the standard progressive scale (which reaches 48% above EUR 81,199). Foreign-source employment income -- for example, salary or remote work income received from a UK employer -- is taxed at a flat 10% rate in Portugal. For categories of foreign income not related to employment (dividends, interest, rental income, capital gains), no specific IFICI exemption applies; these are taxed at standard Portuguese rates or under the standard DTC provisions. This is a material difference from the old NHR, which provided broader exemptions on passive foreign-source income.

The 10-year duration of the IFICI benefit starts from the first year of Portuguese tax residence under the IFICI registration, provided the applicant meets the qualifying category criteria in each year of the benefit period. The IFICI benefit is not automatic if your circumstances change -- if you leave qualifying employment and move into non-qualifying income, you may lose the IFICI benefit for that year. AT has not published detailed guidance on mid-benefit cessation rules as of April 2026; the practical interpretation is that individuals should ensure they maintain qualifying activity status annually and flag any change of circumstances to their Portuguese tax adviser. The IFICI registration is filed on the IRS return (Declaracao de IRS -- Modelo 3) for the first year of qualification; no separate application is required at AIMA or any other government body.

Who qualifies for IFICI: qualifying categories in detail

Law 82/2023 Article 58-A defines the IFICI qualifying categories. Category A: researchers who carry out activities in companies, universities, or other recognised scientific institutions registered with the Fundacao para a Ciencia e a Tecnologia (FCT). Category B: highly qualified professionals in activities listed in Portaria 352/2023 -- this includes software developers, data engineers, AI specialists, systems architects, cybersecurity professionals, and a defined list of engineering occupations. To qualify in Category B via the general high-salary pathway, the individual must earn EUR 175,000 or more from qualifying activities; this threshold does not apply if the individual is employed by a certified start-up or a RFAI-registered entity. Category C: founders and investors in certified start-up companies (certificadas ao abrigo do regime das start-ups), with the investment meeting the minimum thresholds under the Start-up Lei. Category D: individuals working for entities registered under RFAI (the investment tax benefit regime), typically manufacturing and technology companies with approved investment projects.

UK nationals who work remotely for a UK employer -- coding, engineering, data analysis, cybersecurity -- may qualify for IFICI Category B if their income from the UK employer exceeds EUR 175,000 and their occupation is on the Portaria 352/2023 list, even if their employer has no Portuguese presence. Remote workers below the EUR 175,000 threshold who are employed by a certified start-up (one certified by IAPMEI or by the Portuguese authorities under the Start-up Act) may also qualify without meeting the salary threshold. This has created a specific IFICI pathway for UK tech professionals employed by qualifying start-ups who wish to live in Portugal on a D7 or D8 visa. For the full D7 visa eligibility and income requirements, see our Portugal D7 and residency guide.

IFICI application process and timeline

The IFICI registration is filed through the Portal das Financas (the AT online portal) as part of the annual IRS return. For the first year of claiming IFICI status, the applicant files Modelo 3 (the standard IRS return) and selects the IFICI regime option in the relevant field. The AT has indicated that IFICI registrations filed by 30 June of the tax year will be validated by 31 December of the same year; those filed after 30 June may be validated in the following year. The AT may request additional documentation: proof of qualifying activity (employment contract, STEM professional certificate, FCT researcher registration, or start-up certification); proof of prior-year income meeting the threshold; and confirmation of non-prior-residency in Portugal in the preceding five years.

The non-residency requirement for IFICI mirrors the old NHR: the applicant must not have been a Portuguese tax resident in any of the five years preceding the first year of IFICI registration. For UK nationals who moved to Portugal after 31 December 2023, this means they must not have been Portuguese-resident between 2019 and 2023. UK nationals who were NHR holders before 31 December 2023 may continue their NHR until the 10-year NHR period expires -- they cannot switch to IFICI mid-period. Only individuals whose NHR 10-year period has expired and who have spent at least five years outside Portugal may re-qualify for IFICI. This transitional rule was confirmed in AT circular notes issued in February 2024.

IFICI vs NHR: what UK expats lose and gain

For UK retirees or passive-income expats, the shift from NHR to IFICI represents a significant disadvantage. Under NHR, UK pension income was taxed at a flat 10% in Portugal (after Portugal changed the NHR pension rule in 2020). Under IFICI, pension income has no special rate -- it is taxed under the standard progressive IRS scale (starting at 13.25% and rising to 48% above EUR 81,199). A UK retiree with EUR 40,000 in annual UK pension income who moves to Portugal in 2024 under IFICI would pay approximately EUR 8,700 in Portuguese IRS on that income (based on the 2026 IRS scale published by AT), compared to EUR 4,000 under the old NHR pension rate. The UK-Portugal DTC assigns taxing rights on UK State Pension to Portugal (as the country of residence), so this income is fully within Portuguese IRS scope.

For UK technology professionals with qualifying occupations and income above EUR 175,000, or for UK researchers at Portuguese institutions, IFICI offers a meaningful benefit: a 20% flat rate on Portuguese-source employment income against a 48% top marginal rate, and a 10% rate on UK-source remote employment income rather than standard Portuguese IRS rates. A qualifying UK software engineer earning EUR 200,000 from a UK employer while residing in Portugal would pay EUR 20,000 in Portuguese IRS on that income under IFICI, against EUR 71,000+ under the standard progressive scale. The benefit over a 10-year period could exceed EUR 500,000 at this income level, making IFICI highly valuable for qualifying high-income professionals.

UK-Portugal Double Taxation Convention and IFICI interaction

The UK-Portugal Double Taxation Convention (signed 1969, amending protocol 2019) assigns taxing rights on various income categories. Under Article 15, employment income is generally taxable in the country where the work is performed; for remote workers performing services from Portugal for a UK employer, Portugal has the primary taxing right. Under IFICI, that income is taxed at 10% in Portugal. Under the DTC, the UK would not separately tax the same income (credit or exemption applies). Article 17 assigns pension income taxing rights to the country of residence -- Portugal -- for most private pensions. UK State Pension is classified as government service pension under Article 18, taxable only in the UK, which creates an anomaly for UK State Pension recipients who move to Portugal: their State Pension remains UK-taxable and does not form part of Portuguese taxable income, potentially making the loss of NHR pension treatment less material than it first appears.

For investment income -- dividends (Article 10), interest (Article 11), and royalties (Article 12) -- the DTC applies reduced withholding rates: UK dividends paid to a Portuguese resident are subject to a maximum 15% UK withholding (10% if the Portuguese company holds more than 25% of the UK company). Under the old NHR, this withholding was typically exempt in Portugal under the exemption method; under IFICI, the same dividends are taxable in Portugal at standard IRS rates (28% on dividends and interest for non-IFICI income, or in some cases 35% for income from blacklisted jurisdictions). This is a material change for UK expats with significant UK investment portfolios who relied on NHR exemptions on foreign dividends and interest. For structuring UK investment income as a Portuguese tax resident, see our UK expat investments guide.

What if you missed NHR -- are there other Portugal tax options?

UK nationals who missed the NHR registration window (31 December 2023) and do not qualify for IFICI face standard Portuguese IRS on worldwide income. The progressive IRS scale for 2026 starts at 13.25% on income up to EUR 7,703 and rises to 48% above EUR 81,199, according to AT’s published 2026 tax tables. The standard withholding rate on foreign dividends and interest for Portuguese residents is 28%. Married couples may benefit from joint assessment (tributacao conjunta) which can reduce the average marginal rate on combined income. Portuguese residents may deduct health expenses (up to EUR 1,000), education expenses, and mortgage interest on a primary residence from taxable income under the standard IRS rules.

The Azores autonomous region of Portugal applies reduced IRS rates of 15% below the equivalent mainland rates; individuals who are tax resident in the Azores (Terceira, Sao Miguel, Faial, or other Azorean islands) benefit from these reductions automatically. The Madeira autonomous region also applies a reduced corporate tax rate (5%) for companies operating in the Madeira Free Trade Zone (MIBC), but this does not reduce personal IRS for individual residents. Portugal also allows the Regime Simplificado (simplified tax regime) for self-employed individuals with annual income below EUR 200,000, applying a coefficient of 0.75 to professional income (effectively taxing 75% of gross income) rather than requiring full expense accounting.

This article is for general information only and does not constitute tax, legal, financial or immigration advice. Rules and rates change; verify with the primary sources cited or consult a qualified adviser before acting.

FAQ

Can UK citizens still get NHR status in Portugal in 2026?

No. The NHR regime closed to new applicants on 31 December 2023. Individuals who registered for NHR before that date and are within their 10-year benefit period continue to receive NHR benefits until their period expires. New arrivals from the UK from January 2024 onwards must apply for IFICI if they meet the qualifying categories, or pay standard Portuguese IRS rates. There is no transitional NHR-lite or extended deadline.

What is the IFICI income threshold in 2026?

For the general highly qualified professional category under IFICI, the income threshold set by Portaria 352/2023 is EUR 175,000 gross annual employment income from qualifying activities. This threshold does not apply to researchers at FCT-registered scientific institutions, employees of certified start-up companies, or workers at RFAI-registered entities. Check the Portaria 352/2023 annex (updated via the Diario da Republica Eletronico) for the current list of qualifying occupations.

What rate does IFICI apply to UK pension income in Portugal?

IFICI provides no special rate on pension income; Portuguese pension income falls within the standard IRS progressive scale (13.25% to 48%). However, the UK-Portugal Double Taxation Convention assigns UK State Pension (classified as government service pension) as taxable only in the UK under Article 18 -- meaning it does not enter Portuguese IRS at all. UK private pension income (occupational, SIPP, annuity) is generally taxable in Portugal as the country of residence at standard IRS rates under Article 17 of the DTC.

How do I apply for IFICI in Portugal?

IFICI is applied for through the Portal das Financas as part of the annual IRS return (Modelo 3). You select the IFICI option in the relevant section of your return and submit supporting documents proving your qualifying activity (employment contract, FCT researcher registration, start-up certification, or professional credentials). Applications filed by 30 June of the relevant tax year are typically validated by AT by 31 December. A Portuguese tax adviser or gestor is strongly recommended for the first IFICI filing.

How does IFICI compare to the old NHR for UK technology professionals?

For UK technology professionals earning above EUR 175,000 and working in qualifying STEM occupations listed in Portaria 352/2023, IFICI offers the same 20% flat rate on Portuguese employment income as the old NHR. Foreign-source employment income (from a UK employer, remote) is taxed at 10% under IFICI, the same rate as under NHR. The key disadvantage vs NHR is that passive foreign income (UK dividends, UK interest, UK rental income) has no special IFICI rate and is taxed at standard Portuguese IRS rates, unlike under NHR where many categories were exempt.

If I was on NHR and my 10 years expire, can I switch to IFICI?

Not immediately. To qualify for IFICI after an NHR period, you must not have been a Portuguese tax resident in the five years preceding the first IFICI registration year. If your NHR expires in 2026, you would need to spend five years as a non-Portuguese-resident (2027-2031) before potentially qualifying for IFICI from 2032. During the five-year gap, standard IRS rates apply if you remain in Portugal. Most former NHR holders who wish to maintain a preferential tax position would need to leave Portugal for those five years, per AT circular notes from February 2024.

Sources

1. Diario da Republica -- Lei 82/2023 (2024 State Budget, IFICI provisions) (verified 26 April 2026)
2. Portal das Financas (AT) -- IFICI regime and IRS guidance (verified 26 April 2026)
3. Diario da Republica -- Portaria 352/2023 (qualifying activities list) (verified 26 April 2026)
4. HMRC -- UK-Portugal Double Taxation Convention technical guidance (verified 26 April 2026)
5. GOV.UK -- Foreign travel advice: Portugal (verified 26 April 2026)
6. OECD -- Taxation Policy: Portugal (verified 26 April 2026)