Portugal Taxes

1. Expanded Age Limit

The program now applies to individuals up to 35 years old, including both Portuguese and foreign residents, provided they are not classified as dependents.

2. Eligible Income

The tax exemption applies to income earned from:

• Employment (Category A)
• Self-employment (Category B)

3. Longer Exemption Period

Beneficiaries can enjoy exemptions for up to 10 years, allowing more extended financial relief for young workers.

4. Exemption Rates Over Time

The program offers the following rates of exemption on eligible income:

• 100% in the first year.
• 75% for years 2 to 4.
• 50% for years 5 to 7.
• 25% for years 8 to 10.

5. Income Cap

The annual tax exemption is limited to 55 times the IAS (Indexante dos Apoios Sociais), which is set to be updated for 2025.

6. No Educational Requirements

Unlike earlier versions, the program does not require participants to hold higher education degrees, making it more inclusive for a broader audience.

7. Flexibility in Participation

If beneficiaries experience breaks in income, they can pause and resume the exemption within the 10-year limit, provided they continue meeting eligibility criteria.

8. Ineligible Cases

Certain individuals are excluded, such as those benefiting from other tax schemes, including:

• Non-Habitual Resident (NHR) regime
• Programa Regressar
• Scientific innovation incentives

9. Notification Requirement

Taxpayers must inform their income payers about their IRS Jovem status to ensure accurate withholding and application of the exemption.

10. Why It Matters

The expanded IRS Jovem program aims to attract and retain young talent in Portugal by reducing their tax burden, supporting career development, and encouraging entrepreneurship.

This initiative highlights Portugal’s commitment to fostering a supportive environment for young workers, contributing to both personal and national economic growth.

Need Help?

If you’re unsure whether you qualify or how to maximize your tax benefits, reach out to us for personalized guidance.

Would you like us to include a comparison with other tax benefits or an infographic summarizing the exemptions? Let us know!

Disclaimer: This post is for general information and guidance only. Always consult a tax specialist before making any decisions concerning your tax situation.

What is Programa Regressar?

Launched in 2019, Programa Regressar aims to encourage Portuguese citizens who have emigrated to return to Portugal, offering a range of incentives to ease their reintegration. These include job search assistance, financial support for relocation expenses, and importantly, tax benefits that make the move back home more economically viable.

The program is particularly aimed at those who have been living outside of Portugal for at least three years and who are now considering re-establishing their tax residency in the country. Alongside financial incentives to help with relocation costs, the tax regime under Programa Regressar offers significant reductions on employment income taxes for returning expatriates.

Tax Benefits Under Programa Regressar

The Programa Regressar offers a 50% reduction in income tax on employment and self-employment income for up to five years. This tax relief is designed to make returning to Portugal more attractive, especially for those with high earning potential, by cutting their tax burden in half for a substantial period.

Here’s a breakdown of the main tax benefits:

1. 50% Reduction in IRS (Personal Income Tax):
   • Returning residents benefit from a 50% reduction in the IRS (Imposto sobre o Rendimento das Pessoas Singulares) applicable to income earned through employment or self-employment. This can apply for a period of five consecutive years after re-establishing tax residency in Portugal.
   • This tax cut is particularly beneficial for those re-entering the Portuguese job market or starting their own business, as it significantly reduces their tax liability during the reintegration period.
2. No Wealth or Exit Tax:
   • Portugal does not impose a wealth tax, and there is no exit tax for those who are returning, meaning assets earned or accumulated abroad can be brought back without any additional tax burden.
3. No Double Taxation:
   • For Portuguese nationals returning from countries with which Portugal has a double taxation treaty, there are additional protections in place to avoid being taxed on the same income in both countries.

Choosing Between Programa Regressar and the NHR Regime

It’s important to understand that while both Programa Regressar and the Non-Habitual Resident (NHR) regime offer tax benefits, individuals returning to Portugal must choose between one or the other. You cannot benefit from both regimes simultaneously.

The NHR regime provides a 20% flat tax rate on income derived from high-value professions within Portugal and potential tax exemptions on foreign-sourced income, such as dividends, interest, and pensions. On the other hand, Programa Regressar offers a 50% reduction on employment and self-employment income taxes for a period of five years. Each program has its distinct advantages, and the choice between them depends on your personal financial situation and the type of income you earn.

If you plan to earn income primarily from Portuguese sources, especially through employment or self-employment, Programa Regressar may provide the more immediate benefit. However, if you have significant foreign-sourced income, the NHR regime could be a better fit.

Who Can Benefit from Programa Regressar?

To qualify for the tax benefits under Programa Regressar, individuals must meet the following criteria:

• They must have been non-residents of Portugal for tax purposes for at least three consecutive years.
• They must have become tax residents in Portugal from 2019 onwards.
• Their tax residency must be re-established by 2026 to benefit from the full program.
• They must have earned income from employment or self-employment after returning to Portugal.

How to Apply for Programa Regressar

Eligible individuals who wish to benefit from the Programa Regressar tax incentives must follow these steps:

1. Re-establish Tax Residency: The first step is to become a tax resident in Portugal by physically residing in the country for more than 183 days in a calendar year or having a permanent home in Portugal.
2. File the IRS Declaration: Once you are working or self-employed in Portugal, you must file your annual IRS declaration to take advantage of the 50% tax reduction.

Why Take Advantage of Programa Regressar?

Programa Regressar is designed to ease the transition for those returning to Portugal after years abroad, and the tax incentives are a critical part of this support. With the high cost of living and the complexities of re-establishing a life in a new country, having a 50% reduction in income tax offers returning expatriates a significant financial cushion during their reintegration. Additionally, the five-year period of tax relief provides an extended window to settle back into Portuguese life, start or grow a business, and re-enter the job market.

However, it is important to carefully consider whether Programa Regressar or the NHR regime is more suited to your situation, as you must choose between the two.

Conclusion

For Portuguese citizens considering a return home after several years abroad, Programa Regressar offers not only financial support but also substantial tax benefits that can make the move more affordable and financially rewarding. By cutting personal income taxes in half for five years, this program provides an important incentive for those looking to re-establish their roots in Portugal.

If you’re eligible, now is the time to take full advantage of Programa Regressar and plan your return to Portugal with a clear understanding of the tax savings and other support mechanisms available to you.

Disclaimer: This post is for general information and guidance only. Always consult a tax specialist before making any decisions concerning your tax situation.