As the 10-year NHR tax benefit period draws to a close, holders face two choices: plan ahead to gain clarity and peace of mind regarding taxes on their foreign income and assets, or ignore the ticking time bomb and risk significant tax burdens once their NHR tax status expires.

Every year, this delay has a potential knock-on effect on what tax they will pay at the end of their NHR tax status. Talking to professional advisors early in their NHR tax status life can significantly mitigate future tax burdens.

Without proactive planning, once the 10-year period is over, NHR tax holders will be automatically moved into Portugal’s progressive tax system, where rates can soar up to 48%.

The difference between planning early and waiting could be significant in additional taxes, and often, this can be easily resolved.

Steve Philp, Director at Portugal Pathways, said: ‘’Many NHR tax holders underestimate the financial impact of allowing their NHR tax status to run down without restructuring their income and assets early on in their tax status life in Portugal.’’

“You’re really faced with two paths,” says Philp.

“You can either take action early, structure your finances with an expert, and enjoy peace of mind—or you can wait, be caught off guard, and face the harsh reality of Portugal’s high tax rates.”

One example of what can happen when NHR tax holders don't plan is a Swedish couple who recently faced a €180,000 tax bill after their NHR tax status expired because they left it far too late and did not take early advice in years 1 to 7.

Unfortunately, this couple isn’t alone. The recent ‘Wealthy Expats in Portugal 2024’ survey revealed that 73% of NHR tax holders are unaware of the potential tax burden they may face if they don’t restructure their finances early on under NHR tax status.

Many are lulled into a false sense of security by the temporary nature of the benefits, assuming they’ll continue indefinitely or believing they can handle the situation when the time comes.

The second choice NHR tax holders can make is to act early and structure their non-Portugal-derived income and assets in years 1 to 7. The earlier they start that planning, the more likely they are to drastically reduce any ongoing progressive taxes in Portugal when NHR expires.

Eileen Brennan, a UK expat and NHR tax holder, shared her experience: ‘’I didn’t think much about restructuring my income and investments until I found out my pension and income could be taxed between 28% and 48% once my NHR tax expired.

‘’That was a real wake-up call. I got professional advice following an initial call with Portugal Pathways. This was just in time, and while I’m in a much better position now, I wish I had started planning sooner as it still cost me more than if I had done it a couple of years earlier.”

Working with qualified tax professionals is essential to navigate these complexities.

The message is clear: NHR tax holders can easily resolve this and have peace of mind. Portugal Pathways is offering an initial no-obligation discovery call to ascertain their personal position before talking to or engaging a cross-border structuring expert for tax and wealth management. Ultimately, if they don’t act now, they will pay later.