The Tax Incentive Scheme for Scientific Research and Innovation (IFICI), in force since January 2024, represents the evolution of Portuguese tax policy to attract foreign talent and investment, succeeding the abolished Non-Habitual Resident (NHR) regime. This framework applies a special 20% rate to net category A and B income earned within the eligible activities, for 10 consecutive years counted from the year of registration as a resident in Portugal (article 58-A(2) of the EBF), with the option to aggregate. This article details the characteristics of IFICI, its differences from NHR, eligibility criteria, associated tax benefits, the application process, and important considerations for those contemplating a move to Portugal.

Want us to handle the application? HVR prepares and files your IFICI registration and your annual IRS return with Annex L — see our IFICI application service.

Context and Evolution: From NHR to IFICI

The Non-Habitual Resident (NHR) regime, implemented in 2009, played a significant role in attracting qualified professionals, retirees, and investors to Portugal. However, in response to internal and external pressures, and with the aim of reorienting tax incentives towards areas of higher added value and innovation, the Portuguese government decided to revoke the NHR for new registrations from 1 January 2024, subject to the transitional rule in article 236 of Law 82/2023, introducing IFICI as its successor.

While IFICI maintains the philosophy of attracting talent, it presents significant differences that make it more focused and aligned with Portugal's strategic priorities. The transition reflects a paradigm shift, favouring activities that directly contribute to the country's scientific, technological, and economic development.

Key Differences between NHR and IFICI

• Scope of Eligible Activities: One of the most striking distinctions lies in IFICI's focus on "high added value" and "scientific research and innovation" activities. While NHR had a broader list, IFICI is more restrictive: it covers scientific research and university teaching, qualified jobs in companies with contractual investment benefits, certified start-ups, and highly qualified professions in management, engineering, medicine and ICT — no longer artistic activities. This change aims to ensure that tax benefits are granted to individuals whose contribution to the Portuguese economy is more tangible and innovative.
• Foreign Pension Income: In its final version, NHR taxed net foreign pension income at 10% (former article 72(12) of the CIRS); earlier registrations benefited from a full exemption. IFICI does not provide any specific benefit for this type of income, which represents a significant change for retirees who considered Portugal. This exclusion reinforces IFICI's objective of attracting active workforce rather than just passive income.
• Foreign Source Income: Under IFICI, foreign-source income in categories A, B, E, F and G is exempt, being aggregated only to determine the rate applicable to the remaining income (article 81(4) of the CIRS). The exception is income paid by entities domiciled in blacklisted territories, taxed at 35% (article 81(5)). This particularity continues to be an attraction for individuals with diversified international assets and income.
• Duration of Benefits: Both NHR and IFICI offer a 10-year consecutive period of tax benefits, starting from the year of registration as a resident in Portugal (article 58-A(2) of the EBF).
• New Residency Requirement: To be eligible for IFICI, the individual must not have been a tax resident in Portugal in the 5 years preceding the year in which they intend to start the regime. This rule is identical to NHR, ensuring that the benefit is directed at new residents.

Eligibility Criteria for IFICI

To benefit from the IFICI regime, the taxpayer must meet a set of strict conditions, which aim to ensure that the tax incentive is directed at profiles that fit the country's development objectives. Eligibility is determined by combining tax residency requirements and the nature of the professional activity carried out.

Tax Residency Requirements

• New Tax Resident Status: The taxpayer must become a tax resident in Portugal in the year they intend to start the IFICI regime. This implies meeting one of the residency criteria provided for in Article 16 of the Personal Income Tax Code (CIRS):
  • Stay in Portugal for more than 183 days, consecutive or interpolated, in any 12-month period beginning or ending in the year in question; or
  • Having stayed for a shorter period, have a dwelling on any day of that period in conditions that suggest a current intention to maintain and occupy it as a habitual residence.
• Non-Resident in the Last 5 Years: The taxpayer cannot have been considered a tax resident in Portuguese territory in any of the 5 years preceding the year in which they become a resident for IFICI purposes. This condition is essential to ensure that the regime effectively benefits new talent and not previous residents.

Eligible Activity Categories

One of the pillars of IFICI is its focus on "scientific research and innovation" and "high added value" activities. Ministerial Order 352/2024/1, of 23 December, regulates the regime and approves the list of highly qualified professions in Annex I. It is crucial that the activity carried out by the taxpayer falls into one of these categories:

• a) University teaching and scientific research: including scientific employment in entities of the national science and technology system and in technology and innovation centres (Decree-Law 126-B/2021).
• b) Qualified jobs and members of corporate bodies within contractual tax benefits for productive investment (chapter ii of the Investment Tax Code).
• c) Highly qualified professions in Annex I to Ministerial Order 352/2024/1 (CPP codes 112, 12, 13 except 1349, 21 except 216, 2163.1, 221 — doctors, 231 and 25 — ICT), carried out in companies with RFAI in the year duties begin or in the five preceding years, or in companies with an Annex II CAE code exporting at least 50% of turnover.
• d) Other qualified jobs and members of corporate bodies in entities whose activity is recognised by AICEP or IAPMEI as relevant to the national economy.
• e) Research and development of staff whose costs are eligible for SIFIDE.
• f) Jobs and members of corporate bodies in entities certified as start-ups (Law 21/2023).
• g) Activities carried out in the Autonomous Regions, under regional legislative decree.
• Under limb c), EQF level 8 is required, or level 6 with three years of proven professional experience (article 7(2) of Ministerial Order 352/2024/1).

Eligibility is evidenced with the documents in article 4 of Ministerial Order 352/2024/1: the employment contract, an updated commercial certificate (for board members), the research grant contract, and proof of academic qualifications. Under limb c), it is the company where the activity is carried out that confirms the requirements — including the Annex II CAE code and the export test — in its reserved area of the Portal das Finanças, by 15 March. The interpretation and application of these categories can be complex, so professional assistance is advisable.

Tax Benefits of IFICI and Practical Examples

IFICI offers a set of tax benefits that make Portugal an attractive destination for qualified professionals and investors. The main advantage is the fixed income tax rate, but the regime's structure also includes tax exemption for certain foreign source income.

Fixed Rate of 20% on Portuguese Source Income

• Employment Income (Category A): Net category A income earned within eligible activities is taxed at the special 20% rate, with 20% withholding (article 99(8) of the CIRS), which is not a final tax. This rate contrasts significantly with the progressive IRS rates, which reach 48% above €86,634 of taxable income, plus the additional solidarity rate (article 68-A of the CIRS).
  Practical Example 1:
  Consider a software engineer who moves to Portugal in 2026 and obtains IFICI status. Their gross annual salary is €80,000.
  
  Calculation with IFICI:
  • Gross Annual Salary: €80,000
  • IRS Rate (IFICI): 20%
  • IRS Due: (€80,000 - €8,800 social security) * 20% = €14,240
  • Net Income (before Social Security contributions): €80,000 - €14,240 = €65,760
  
  Calculation without IFICI (general IRS rates for 2026, purely illustrative and approximate):
  For an income of €80,000, taxable income of €71,200 falls in the 44.6% bracket. Under the 2026 general table the tax due is about €23,064, an effective rate of 28.8% on gross income:
  • Gross Annual Salary: €80,000
  • Effective IRS Rate: 28.8%
  • IRS Due: approximately €23,064
  • Net Income (before Social Security contributions): €80,000 - €23,064 = €56,936
  
  Annual IFICI Benefit: €23,064 - €14,240 = €8,824 in annual tax savings.
• Self-Employment Income (Category B): Net category B income earned within eligible activities is likewise taxed at 20%, with 20% withholding (article 101(1)(d) of the CIRS). This income can be calculated under the simplified regime or organised accounting.
  Practical Example 2:
  An artificial intelligence consultant, with IFICI status, invoices €120,000 annually in Portugal. They operate under the simplified regime, with a coefficient of 0.75 for services.
  
  Calculation with IFICI:
  • Annual Billing Volume: €120,000
  • Taxable Income (€120,000 * 0.75): €90,000
  • IRS Rate (IFICI): 20%
  • IRS Due: €90,000 * 20% = €18,000
  
  Calculation without IFICI (simplified regime, general IRS rates for 2026, purely illustrative and approximate):
  Under the 2026 general table, taxable income of €90,000 gives tax of about €31,813, an effective rate of 35.3%:
  • Taxable Income: €90,000
  • Effective IRS Rate: 35.3%
  • IRS Due: approximately €31,813
  
  Annual IFICI Benefit: €31,813 - €18,000 = €13,813 in annual tax savings.

Tax Exemption on Most Foreign Source Income

A fundamental aspect of IFICI is the tax exemption on most categories of foreign source income, provided certain conditions are met. This exemption applies to:

• Capital Income (Category E): Interest, dividends.
• Rental Income (Category F): Income from renting properties located abroad.
• Capital Gains (Category G): Gains from the sale of properties or shares abroad.
• Employment and Self-Employment Income (Categories A and B): Including intellectual and industrial property income falling under category B. Pensions (category H) do not benefit from the regime.

The exemption follows directly from article 81(4) of the CIRS and does not depend on effective taxation abroad; the income is aggregated only to set the rate on the remaining income. The exception is income paid by entities in blacklisted territories, taxed at 35% (article 81(5)).

Duration: IFICI benefits are granted for a period of 10 consecutive years, from the year of registration as a resident in Portugal (article 58-A(2) of the EBF). After this period, the taxpayer will be taxed according to the general rules of Portuguese IRS.

It is important to note that, although the benefits are significant, Social Security contributions are due according to the general rules, for both employed and self-employed workers, and are not affected by the IFICI regime.

IFICI Application Process

Applying for the IFICI regime is a process that requires attention to detail and compliance with deadlines. Like NHR, IFICI requires a separate registration request: it must be filed by 15 January of the year following the year of becoming resident, through the Portal das Finanças (article 2(1) and article 4(4) of Ministerial Order 352/2024/1).

Essential Steps for Application

1. Acquisition of Tax Residency in Portugal: The first step is to become a tax resident in Portugal. This implies meeting one of the criteria established in Article 16 of the CIRS, such as staying in Portuguese territory for more than 183 days, consecutive or interpolated, in a 12-month period, or having a dwelling in Portugal under conditions that allow the intention to maintain it as a habitual residence to be presumed. This step is fundamental and must be formalised with the Tax and Customs Authority (AT).
2. Obtaining a NIF and Registering with Finanças: For any activity in Portugal, it is essential to obtain a Tax Identification Number (NIF). Registration in the AT database is the next step, where the tax address in Portugal is formalised. For non-EU citizens, a tax representative may be required.
3. Commencement of Eligible Activity: The taxpayer must commence the eligible professional activity in Portugal. Proof of this activity is crucial for the regime's eligibility. This can be through an employment contract with an entity covered by one of the limbs of article 58-A(1) of the EBF, self-employment within those limbs, or a role in an entity certified as a start-up.
4. IFICI Registration and Annual Return: The registration request is filed by 15 January of the year following the year of residence, on the Portal das Finanças, addressed to the body competent for the activity (FCT, AICEP, AT, IAPMEI, ANI, Startup Portugal or the Autonomous Regions). The AT publishes the status of the registration by 31 March. Once registration is granted, the covered income is reported in Annex L of the Modelo 3 return. The deadline for submitting the IRS declaration is, as a general rule, from 1 April to 30 June of the year following that of the income.
5. Proof of Eligibility: The AT may subsequently request the evidence of the activity and of the other legal conditions, which the taxpayer must keep and produce on request (article 10(3) of Ministerial Order 352/2024/1 and article 128 of the CIRS), including non-residence in the previous five years. It is vital to keep all supporting documentation organised.

The Role of a Certified Accountant

The complexity of Portuguese tax laws and the specific requirements of IFICI make the assistance of a Certified Accountant (CC) almost indispensable. A CC can:

• Ensure compliance with all tax residency requirements.
• Help with the correct classification of professional activity for IFICI purposes.
• Prepare the registration request and the IRS return, ensuring Annex L correctly reflects the covered income.
• Advise on tax optimisation and income planning.
• Represent the taxpayer before the Tax Authority in case of audits or requests for clarification.

Verification is split: the activity requirements are checked by the body receiving the registration request, and the remaining legal requirements by the AT (article 3(1) of Ministerial Order 352/2024/1). An incorrect declaration or lack of proof of eligibility can lead to the refusal of the regime and the application of general IRS rates, with potential fines and interest.

IFICI and Opening a Company in Portugal

For many expats, moving to Portugal involves not only a new job but also the opportunity to start a business. The IFICI regime is compatible with the creation and management of a company in Portugal, but the way income is generated and distributed is crucial for the application of tax benefits.

Business Structures and Taxation

When opening a company in Portugal, the most common options are a Private Limited Company (Lda.) or a Single-Member Private Limited Company (Unipessoal Lda.), which offer limited liability. In these cases, the company is a separate legal entity from the individual and is subject to Corporate Income Tax (IRC).

• Company Taxation (IRC): Company profits are taxed at the IRC rate, which varies between 15% (for the first €50,000 of taxable income for SMEs — art. 87(2) of the CIRC, as amended by Law 64/2025) and 19% (general rate for 2026 — art. 87(1) of the CIRC and art. 3(2) of Law 64/2025) on the mainland, with slightly different rates in the Autonomous Regions.
• Taxation of Partner/Manager (IRS - IFICI): If the managing partner receives remuneration for the management role, it is taxed at the special 20% rate provided the situation falls within one of the limbs of article 58-A(1) of the EBF — for example a certified start-up, an entity recognised by AICEP or IAPMEI, or a company with RFAI or with an Annex II CAE code exporting at least 50% of turnover — and provided registration has been granted.
  Practical Example 3:
  An artificial intelligence specialist with IFICI status opens a Single-Member Lda. in Portugal. The company generates a taxable profit of €150,000 and the managing partner decides to pay themselves a salary of €60,000 annually.
  
  Company Taxation (IRC - Mainland):
  • Taxable Profit: €150,000
  • IRC (€50,000 * 15% + €100,000 * 19%): €7,500 + €19,000 = €26,500
  
  Taxation of Managing Partner (IRS - IFICI):
  • Gross Salary: €60,000
  • IRS (IFICI): (€60,000 - €6,600 social security) * 20% = €10,680
  
  Total Taxation: €26,500 (IRC) + €10,680 (IRS) = €37,180
  
  If the managing partner did not have IFICI, the salary of €60,000 would be taxed at progressive IRS rates, resulting in a significantly higher tax.

Distribution of Profits (Dividends)

The distribution of company profits to partners (dividends) is a different matter. Dividends are subject to a 28% withholding tax in Portugal, which is a final tax for residents, unless they opt for aggregation, which is rarely advantageous. IFICI does not alter the taxation of Portuguese source dividends.

Tax Optimisation and Planning

The remuneration structure of a managing partner with IFICI status requires careful planning. It is essential to define an adequate salary that reflects their contribution to the company, balancing the company's tax burden (IRC) and the individual's (IRS). A Certified Accountant can assist in optimising this structure, considering factors such as:

• The impact of Social Security contributions on salary.
• The possibility of paying company expenses that indirectly benefit the partner (e.g., company car, representation expenses).
• The policy of profit distribution vs. reinvestment in the company.

The compatibility of IFICI with business management is a strong attraction for entrepreneurs and professionals who wish to establish their business in Portugal, benefiting from a competitive tax regime on their employment income.

Complete Guide: Opening a company in Portugal as a foreigner →

Common Mistakes to Avoid in IFICI Application and Maintenance

Adhering to the IFICI regime, although advantageous, is complex and requires strictness. Non-compliance with the rules can lead to the loss of tax benefits, with significant financial consequences. It is crucial to be aware of the most common mistakes to avoid them.

1. Failure to Prove Tax Residency in the Previous 5 Years: The condition of not having been a tax resident in Portugal in the previous 5 years is disqualifying. Some taxpayers may have had a tenuous connection to Portugal (e.g., NIF for inheritance, bank account) which, although not making them residents, may raise questions. It is essential to have unequivocal proof of non-tax residency (e.g., tax residency certificates from other countries).
2. Incorrect Classification of Professional Activity: This is perhaps the most frequent mistake. IFICI is restricted to the activities in article 58-A(1) of the EBF, the highly qualified professions being those in Annex I to Ministerial Order 352/2024/1. Activities that do not strictly fall into these categories will be rejected by the AT. A vague or generic description in the employment contract or in the declaration of commencement of activity is not sufficient. There must be a clear match between the role and a code in Annex I to Ministerial Order 352/2024/1, at the required qualification level, and between the company and the limb c) requirements (RFAI, or an Annex II CAE code with 50% exports).
3. Lack of Proof of Eligible Activity: The mere declaration of activity is not enough. The taxpayer must possess and maintain documentation that proves the nature of their activity, such as detailed employment contracts, job descriptions, diplomas, certifications or, in the case of self-employed workers, the description of the economic activity on the Finanças portal.
4. Failure to File the Registration Request within the Legal Deadline: The registration request must be filed by 15 January of the year following the year of becoming resident. If filed late, the 20% taxation only takes effect from the year of registration and only for the remaining part of the 10-year period (article 58-A(7) of the EBF).
5. Confusing Foreign Source Income: Although IFICI exempts many foreign source incomes, it is crucial to understand the conditions. The exemption does not depend on proof of taxation abroad (article 81(4) of the CIRS). Foreign pensions fall outside the regime and are taxed under the general rules.
6. Failure to Maintain Tax Resident Status: To benefit from IFICI for 10 years, the taxpayer must maintain their tax resident status in Portugal annually. If in a given year they cease to meet the tax residency criteria, they lose the regime for that year but may resume it in any of the remaining years of the 10-year period (article 58-A(5) of the EBF).
7. Neglecting Social Security Contributions: IFICI is an IRS regime and does not affect Social Security contribution rules. Both employed and self-employed workers must comply with their contributory obligations, which can be significant and should be considered in financial planning.

Preventing these errors requires rigorous tax planning and the assistance of a Certified Accountant with experience in international taxation and the IFICI regime. HVR Business Consulting offers this specialised support, ensuring that clients comply with all formalities and maximise tax benefits.

Frequently Asked Questions (FAQ)

What replaced NHR in Portugal?

The IFICI (Tax Incentive Scheme for Scientific Research and Innovation) regime replaced NHR from 1 January 2024. It maintains the special 20% rate on net category A and B income from the eligible activity, but with stricter criteria and no benefit at all for foreign pensions.

What is the IFICI tax rate in Portugal?

IFICI applies a special 20% rate to net employment and self-employment income earned within the activities in article 58-A(1) of the EBF. This contrasts with progressive IRS rates, which can go up to 48%.

Who qualifies for IFICI in Portugal?

New tax residents who were not resident in the previous five years and carry out one of the activities in article 58-A(1) of the EBF: scientific research and university teaching, qualified jobs and board positions in companies with contractual investment benefits or recognised by AICEP/IAPMEI, certified start-ups, or the highly qualified professions in Annex I (EQF level 8, or level 6 with three years' experience).

How long does IFICI last?

The benefits of the IFICI regime last for 10 consecutive years, from the year of registration as a resident in Portugal (article 58-A(2) of the EBF). After this period, the taxpayer will be taxed according to the general rules of Portuguese IRS.

Is it still possible to apply for NHR in 2026?

No. NHR closed to new applicants on 31 December 2023, save for the transitional rule in article 236 of Law 82/2023 for those who met the conditions on that date or became resident by 31 December 2024 holding one of the listed elements. New residents must, instead, apply for IFICI if they meet the requirements.

Is a Certified Accountant necessary to apply for IFICI?

Although not legally mandatory, it is highly recommended. Joining IFICI requires a registration request on the Portal das Finanças by 15 January of the year following the year of residence, after which the income is reported in Annex L of the Modelo 3 return. A Certified Accountant can ensure that the application is made correctly, that the activity is properly classified, and that all legal requirements are met, minimising the risk of refusal or future problems with the Tax Authority.

Does IFICI cover crypto-asset income?

The taxation of crypto-assets in Portugal is a complex and evolving topic. IFICI, by itself, does not grant special treatment to crypto-asset income. These will be taxed according to the general rules of the CIRS for crypto-assets, which may vary depending on the nature of the income (capital gains, capital income, employment income, etc.). It is always advisable to consult a tax specialist on this matter.

Sources and Legal References

• Personal Income Tax Code (CIRS):
  • Article 16 (Residents)
  • Article 18 (Location of Income)
  • Article 81 (Elimination of international juridical double taxation)
  • Articles 99(8) and 101(1)(d) (20% withholding)
• Ministerial Order No. 352/2024/1, of 23 December: Regulates IFICI and approves the list of highly qualified professions (Annex I) and of company CAE codes (Annex II).
• Tax Benefits Statute (EBF): Article 58-A — Tax incentive for scientific research and innovation.
• Corporate Income Tax Code (CIRC): For company taxation.
• Social Security Code: For contribution rules.
• Law No. 82/2023, of 29 December: Created IFICI and revoked the non-habitual resident regime, with the transitional rule in article 236.
• Tax and Customs Authority (AT): Information and tax guides available on the Finanças Portal.

It is important to note that tax legislation may be subject to change. It is always recommended to consult the latest versions of legal diplomas and seek advice from a qualified professional.