Even now, some of clients still arrive in Portugal expecting the former Non-Habitual Resident regime to apply. Although that regime has ended, Portugal has not abandoned its strategy of attracting international talent. Instead, it has introduced a more selective and technically structured framework, the Tax Incentive for Scientific Research and Innovation, known as IFICI and sometimes informally referred to as “NHR 2.0” or “TSIRI”.

While narrower in scope than its predecessor, IFICI can offer significant advantages to those who qualify, particularly professionals relocating to Portugal to work in sectors considered strategically relevant to the national economy.

More than a simple replacement of NHR, the IFICI reflected a clear policy shift: Portugal is now focusing on attracting talent that directly contributes to innovation, productivity and international competitiveness.

A key benefit: exemption on foreign-source income

One of the most attractive features of IFICI is the exemption available for most categories of foreign-source income. This may include foreign employment income, self-employment income, dividends, interest, rental income and capital gains.

Unlike the former NHR regime, this exemption is structured under domestic rules and does not depend on the application of double taxation treaties. Although exempt income is not taxed in Portugal, it may still be taken into account when determining the marginal rate applicable to other taxable income.

For internationally mobile professionals with income streams or assets abroad, this feature can substantially reduce overall tax exposure in Portugal.

Importantly, the exemption may also extend to foreign-source capital gains, including gains arising from the sale of shareholdings or business interests held abroad.

As a result, entrepreneurs relocating to Portugal under IFICI may benefit from a favourable tax position when selling foreign companies or investments, provided the applicable conditions are met and the income is not sourced in a blacklisted jurisdiction.

Pension income, however, is expressly excluded and remains taxable under the general progressive rules. Income sourced in jurisdictions listed as having a clearly more favourable tax regime is also excluded from the exemption, and certain capital income and capital gains connected to blacklisted jurisdictions may be subject to aggravated taxation at a 35% rate.

Alongside this foreign-income exemption, qualifying Portuguese-source employment and self-employment income is taxed at a flat 20% rate. Both benefits apply for ten consecutive years, provided the applicable conditions continue to be met.

Who can benefit?

IFICI is available to individuals who become tax resident in Portugal and who have not been considered Portuguese tax residents in any of the previous five years. The regime is not accessible to those who previously benefited from the former NHR regime or from the “Programa Regressar”, and it may only be used once by a taxpayer.

Registration must generally be completed by 15 January of the year following the year in which tax residence is established, making timely planning essential.

Focused on innovation and strategic sectors

Unlike the previous NHR regime, IFICI is not a broad-based incentive. It is aligned with Portugal’s economic policy objectives and applies to activities carried out in sectors formally recognised as strategically relevant.

Eligible activities include higher education teaching, scientific research and research and development (R&D) roles linked to recognised incentive frameworks. The regime also extends to highly qualified positions in companies benefiting from investment tax incentives or with significant export activity, as well as certified startups and projects recognised as strategically relevant.

From a sectoral perspective, IFICI is particularly aimed at industries that contribute to productive investment and international competitiveness, including manufacturing, energy and utilities, information and communication technologies, financial and insurance activities, consulting and technical services, education and healthcare.

The list of eligible professions includes, among others, company directors and executives, engineers, ICT specialists, medical doctors, university professors, finance and accounting specialists, and certain technical and scientific professionals. In many cases, specific academic qualifications and professional experience are required.

To remain eligible throughout the ten-year period, taxpayers must continue to earn income from qualifying activities. The regime includes a continuity rule allowing a transition between qualifying roles, provided that the new activity begins within six months of the end of the previous one.

Impact on the labour market and key industries

The practical effects of IFICI are likely to be felt most strongly in Portugal’s technology, healthcare, engineering, and export-driven sectors. Companies competing internationally for highly skilled professionals may find the regime a valuable recruitment tool, particularly in innovation hubs such as Lisbon and Porto.

The potential exemption of foreign-source capital gains may also make Portugal more attractive to startup founders, scale-up executives and international investors considering relocation ahead of a future business exit.

At the same time, the exclusion of pension income and the stricter eligibility criteria signal a departure from the broader appeal of the former NHR regime. Portugal’s approach is now more targeted: rather than attracting relocation in general, the country is prioritising professionals whose work supports scientific advancement, industrial capacity and global competitiveness.

A strategic alternative for international talent

IFICI reflects Portugal’s shift towards a more selective, policy-driven approach to attracting foreign investment and highly qualified professionals. While it does not replicate the breadth of the former NHR regime, it provides a clear and competitive tax framework for those working in innovation, research, technology, healthcare, manufacturing and other strategic sectors.

For internationally mobile professionals seeking a European base with access to EU markets and a growing innovation ecosystem, Portugal remains an attractive destination, now under a regime specifically aligned with scientific development and long-term economic priorities.

Given the technical nature of the regime and the registration deadlines involved, professional advice is often key to ensuring eligibility and optimising the tax outcome.

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