Portugal has long been an attractive destination for expatriates and digital nomads due to its pleasant climate, vibrant culture, and favorable tax benefits. Recently, the Non-Habitual Resident (NHR) regime closed to those who did not have residency prior to 2024. In response to public pressure, Portugal has introduced a new substitute scheme called the Tax Incentive Scheme for Scientific Research and Innovation (TISRI).
Continuities and Changes in the Tax Scheme
Some things remain the same:
20% tax on qualified active incomes.
Cannot have been a resident in the last 5 years to qualify.
Benefits last for 10 years.
Improvements in the New Scheme
The new scheme brings significant improvements:
Foreign-sourced passive incomes are generally exempt.
Previously, the NHR only exempted foreign-sourced passive incomes that had the possibility of being taxed abroad.
This now includes new possibilities of exemption, for example, with disregarded US LLCs.
Negative Changes
However, there are some negative changes:
Foreign-sourced pension income is no longer exempt.
Restricted Qualification Criteria
The most significant change is the restriction in qualification criteria. Now, only the following can apply:
Qualified professions like research workers with a PhD, senior financial roles, university professors.
Residents of Madeira and the Azores.
Practical Implications
For the typical digital entrepreneur, the new program is better tax-wise but will only apply to those who move to Madeira or the Azores.
Madeira: The Biggest Beneficiary
Personally, I see Madeira benefiting the most. It already has:
A solid nomad community.
A strong crypto community.
The largest population out of all the islands.
The most flights to Europe out of all the islands.
An International Business Center with a 5% corporate tax.
Residency Requirements
To benefit from these incentives, you only need to obtain any valid residency in Portugal to live in Madeira. However, to qualify as a resident of Madeira (at least for IBC purposes), one must live there for 6 months a year.
Conclusion
Portugal’s new Tax Incentive Scheme for Scientific Research and Innovation (TISRI) offers enhanced tax benefits for those who qualify, especially for residents of Madeira. With its well-established infrastructure for digital nomads and entrepreneurs, along with attractive tax benefits, Madeira positions itself as the ideal place to settle and maximize new tax opportunities in Portugal.
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