What Replaced NHR in Portugal

Arielle Tucker (00:00.966)

NHR is gone, the citizenship clock just got a lot longer, and the visa Americans assumed would work with for them might not be the best fit anymore. If you're planning a move to Portugal or you've already lived there, the ground has shifted in the last 12 months and most people haven't caught up, which is exactly why I brought in today's guest. Ricardo Jesus is a financial advisor with Liberty Atlantic Advisors. He's based in the Algarve.

Where he specializes in cross-border financial planning for Americans moving to or living in Portugal and Spain. Ricardo was born and raised in Portugal, came to the US on a Division I tennis scholarship to Old Miss, and earned his MBA at the University of Tulsa, and eventually moved back to Europe. So he's transitioned on both sides of the Atlantic. Ricardo, thank you so much for joining us today.

Ricardo Jesus (00:51.656)

hi Ariel. Thanks for having me. It's a pleasure.

Arielle Tucker (00:54.322)

I love your story because it's so interesting that you actually grew up in Portugal and then you came to the US on a tennis scholarship and then eventually moved back to Europe. So you have kind of lived that cross-border life and experience like so many of our listeners, but in the reverse actually. I'm so curious how that has actually shaped the way that you serve clients today.

Ricardo Jesus (01:18.668)

So yeah, that's a a very, very good question. It it is it i it it's really helpful to have gone through this experience of living abroad, being part of a community in the US and and and the fact that I was in in the South in the US is also been able to live a different part of the culture. I got to travel through tennis, I got to travel all across the US from New York to California. So I got to had that experience to

meet different people, different cultural inside the US as well. So that has been extremely helpful as I assist my my existing clients and meet new people because I get to understand their experience a little bit better and and have a bit more empathy on the journey they're about to to onboard, right? Because I've gone through this exercise myself, kind of on the other way around. But funny enough, my experience was

not planned, let's say, because I for lots of years, a lot of Portuguese students have moved to the US mostly on tennis or football scholarships. Since I was fourteen I really didn't want to go. I was like, please I don't wanna go. Yeah, I was just I didn't I don't wanna go. I want to stay in Portugal. I'm very really strong, I'm really

Arielle Tucker (02:35.004)

Really?

Ricardo Jesus (02:44.632)

supportive of Portugal. I'm I really like my my hometown. I really like Portugal. so I never wanted to go. But kind of life changed. You know, I wanted to pursue a tennis career, go professional. However, this injury that I knew that going professional was gonna be hard. As I was a pretty good player, I got the opportunity to get a scholarship, receive a scholarship. I got a few different offers. I always wanted to stay

closer, like in a s big city. So my actually first choice was George Washington in DC. but somehow I end up in Olmiss. So really random, but it was a loved experience. As well, my for my masters I wanted to go to like a big school like Yale, but it was just very unfortunate that I could not just basically miss by one class. I had to finish that one class earlier that I couldn't. it's just a

difficult scheduling with playing competitive tennis NCAA Division one. So I've missed that chance and ended up going to Tulsa, which is again not on my plans. and then while when I was there, the plan was to stay in the US long term. It was to actually move to Boston. We had plans back then to move to Boston, start a career there. My idea was to stay in the US you know 10-15 years till I was fifty.

And then potentially kind of move back, slow down the pace of life, and move back to Portugal. but then COVID came. So in a matter of days, I was told look, school is closing, everything's gonna be be moved online. The last flight to Portugal is on Friday, and I was told this on a Wednesday morning. So it was a challenge to pack six years of my life in that t forty-eight hours, flew back to Portugal.

And and then things completely changed again. So I decided to stay, end up finding a career path here in Portugal, and just ended up staying here.

Arielle Tucker (04:50.449)

Wow. I I I like going back to twenty twenty, I think I just you can already f I can I can already f re feel feel and kind of immediately relive that that global panic that I think we were all feeling. And one of the things that I remember coming out of that was all of a sudden Americans were able to work

Remotely, right? This wasn't really I mean, it it was becoming a thing obviously in the 2010s, but like 2020 really catapulted working remotely. And I remember at the same time NHR was available in Portugal. And I was working and doing cross-border financial planning at that time. You were doing cross-border financial planning at that time, I think, as well. And the demand for Americans to move to Portugal was absolutely insane. Like

it was overwhelmingly insane. And so can you ta take us back to like a little bit about NHR and where NHR stands today?

Ricardo Jesus (05:51.183)

Yeah, absolutely. So NHR, it actually started lots of years ago. It started, I believe, twenty eleven and got official in twenty thirteen, something like that. And for a while, I mean the benefits were incredible, especially for retirees with pension income. Essentially they were exempt of any taxation. but like you said, for essentially like ten years or even like I said eight years, a lot of people were applying, but mostly people from Sweden

The UK, maybe the Netherlands, Germany. but it was only until twenty twenty when COVID hit and a lot of people were relocating to Portugal, mostly to again they wanted kinda being able to work overseas in a country that offered this big tax advantages, that they decided to then change the rules. So they first made a change to increase the

The pension income tax to 10% versus being completely exempt. And as more people started coming and applying, I think the the people applying doubled in a matter of a couple of years. they in 2023 they decided that it was too big of a benefit and it was becoming too imbalanced compared to just a normal Portuguese taxpayer. and the government decided to end the program. Or

And in that specific program and then changed created a new program a little bit more let's say competitive or fair to to pr to attract less retirees, let's say, with less benefits on the on the ta on the pa pension income tax.

Arielle Tucker (07:36.34)

Yeah, and it it like we've seen and I'll say this, especially southern European countries.

Do this. Like I've seen it for my whole career going going back to the global financial crisis, right? You see these programs come up, especially in southern European countries or or other developing countries, the benefits are so good, it's absolutely insane. And if you're talking about people like a lot of people who are moving there, we're not Americans, right? And so because of the fact that Americans have citizenship-based taxation versus everyone else who has residence-based taxation.

Can you imagine if you're in Sweden paying 45 or 50%? And then you just move down south to Portugal, and all of a sudden you pay 0% on your retirement income. That's absolutely insane. The benefits are they were too generous. I always wonder who in government is thinking about these plans and thinking that these people are going to be bringing enough money to make up for the fact that their own people are paying 45% taxation and then they're giving these tax deals of 0%. The math never has math to me. And I think this is why.

Ricardo Jesus (08:19.246)

Exactly.

Ricardo Jesus (08:24.27)

Mm-hmm.

Arielle Tucker (08:41.417)

these these programs in Southern Europe, in Portugal. I call them like whack-a-mole programs. Like they pop up, they're really good, and then they kind of like crack down on the program, they tighten it, they increase taxes, they change it. So talk to us about today in Portugal, what are the programs that are currently available, especially for Americans looking to move to Portugal?

Ricardo Jesus (08:46.498)

Yeah.

Ricardo Jesus (09:01.838)

Yeah, so I mean like you said, it was it was too good of a benefit and I'll just to people understand the how big of a benefit is, so in Portugal the tax rates, if you earn essentially

over 80,000. So when you get to 80,000 euros per year, you get to the highest margin rate of tax. So you're at the 48%. And imagine if somebody has Social Security or a pension income a hundred thousand. It's paying 10%. So it's really, really unfair and it's such a huge benefit. So right now there's not many tax regimes available. the the one available right now that is still

Attracts a lot of people is the if C. Some people call it the NHR 2.0. the biggest difference is it's the it's more restrictive on who can apply. So before anybody really could apply, now it's kind of reserved to people that have a a high value activity or a profession under certain categories related to more like scientific or academic fields. Okay

And the benefits are also more limited. So it they don't give benefit on pension income. So it kind of shifts the focus to people that are actually working and generating work in Portugal rather than retirees. Okay, so does not give any exemptions or any tax benefits on pension income. It does give on employment income. Okay, and also on

Essentially capital gains, dividends, and interest that is exempt as long as it's received or and tax has been paid overseas. It's not it's not driven from Portugal. So when people have taxable accounts or brokerage accounts and receive interests or dividends or even have capital gains, it gives that exemption from not paying the Portuguese capital gains, which is taxed at 28%. So it's still a good benefit. It's just the shift as a change to attract a different.

Arielle Tucker (11:01.074)

Okay.

Ricardo Jesus (11:07.886)

profile of of of people of of people coming to Portugal.

Arielle Tucker (11:13.639)

Okay. And are the so we've got NHR two point which like you said is more about attracting highly compensated, talented, you know, special skilled labor into the country, which makes a lot of sense. Are the what other programs are currently available? Can you speak to like the D seven or the D eight or even the the golden visa that's available right now?

Ricardo Jesus (11:25.378)

Yes.

Ricardo Jesus (11:35.597)

Yes, so a a a good an important distinguishment is understanding what is a tax regime and what is a visa path, right? So the tax regime is essentially once you become a tax resident, once you've gone through your visa path, when you enter Portugal, then you might be acceptable under this specific tax regime. But the first essentially thing to understand is what visa might be most appropriate to you.

And then there's essentially four big ones that most more probably interested interested that Americans are more interested in. Then there we have the golden visa, the D2, D eight, and D7. Okay. The D seven is usually the most popular. The D seven is for mostly retirees, people that have that can show passive income through pensions, Social Security, IRAs, or a rental income.

As long as they can show that they have passive income that meets the minimum Portuguese income, the s Portuguese salary, then they they can apply. That's kind of the the the conditions. And the the the minimum salary in Portugal is around 920 euros. That's is for the main applicant. If the spouse or second applicant, it's only half of that amount. So if somebody has passive income of really easy.

Arielle Tucker (12:59.081)

Wow, so

It's like less than fifteen hundred Euros and you're a a month and you're in for two people. That's crazy, yeah.

Ricardo Jesus (13:06.114)

Basically, yes. Of course there's a few other conditions but they're pretty easy to meet. But the main condition is that as long as you have passive income under that minimum, you can apply to the D seven. So it's one of the easiest paths to s to to immigration to Portugal in in when it comes to the visa. So that's the D seven, which is really

really popular among Americans, especially because most of the Americans when they're moving, they're kinda like pre-retirement, retirement already have passive income. So it fits most of this profile. Okay.

Arielle Tucker (13:41.459)

So you're saying essentially they would take the D seven, if they have the passive income, that's the most popular, and then they would match that with the NHR two point

Ricardo Jesus (13:51.385)

The now it becomes it's the those two don't match often because the a the D seven it's usually where you you have passive income, right? So you're kinda like retired st standard st status. the if C is more like you're actively working and have a profession and you're gonna be working. So they on they don't really match so well. Okay.

Arielle Tucker (14:15.667)

Okay.

Ricardo Jesus (14:16.898)

Then what usually what ends up matching really well with the EFC is either the D2 or the D eight. Okay? The D eight is essentially a digital nomad. So it's somebody that is gonna be working for like a company overseas, or usually like a company overseas, or it's either employed or self-employed. the condition really is that they need it's a higher minimum, so it's essentially three months of the

Portuguese minimum salary, so nine twenty times two. So they have to have that income. They need to show that income or that salary essentially to apply. Okay. and that could really match really well because again, the rules of the if C they could potentially match with the D eight in terms of depending on their work, depending on the the activity they're gonna have, if it's it could fall under one of the IFC conditions. Okay. So it wouldn't

essentially it could be a benefit if client is working and there's some taxable accounts in in in the US for example and receive dividends receive interest that would be tax exclusive in US not taxed by by Portugal with EFC okay so yeah it's always about like matching depending on the activity is looking at the conditions and making sure those can be can be matched

Arielle Tucker (15:27.295)

okay, great.

Arielle Tucker (15:36.424)

And can you tell me a little bit about when would you get involved? Because I think one of the things you're talking about before we hit record was we're talking a little bit about immigration stuff today. And you are not an immigration lawyer, you're not an immigration consultant, but it kind of like all ties together when you're doing cross-border financial planning. The fact that there are immigration concerns, there are the tax regime conc considerations, like it kind of all ties together, even though in most cases

Ricardo Jesus (15:48.322)

Yes.

Arielle Tucker (16:05.651)

You're gonna go and talk to your immigration consultant first. Would they talk to you first, or do they talk should they find an immigration support first? Who who who do they call first?

Ricardo Jesus (16:15.182)

it's it I mean, usually they we recommend having a conversation with us first, right? Because our job as cross-border financial advisors and myself specifically for for Portugal is about helping essentially match all of this. So if somebody comes and don't doesn't understand really if the golden visa is more suitable or the D seven or the D eight, essentially also looking at the path of immigration, when they should hit the clock on tax residency.

So all of this needs to be taken in consideration as well with their US tax status and about if they're gonna be work for they're gonna be working for more for two more years, three more years, if it makes sense to retire earlier. You know, all of this needs to be taken in consideration. And that's why, even though it's not my area of expertise, I need to have a broad knowledge around the immigration path and all the tax, the tax benefits available, essentially to create the most efficient, the most tax efficient path for the client.

Of course, then when the immigration lawyer usually comes in, or we recommend having these conversations is about like really going through the fine details. And in Portugal, unfortunately, there's a lot of gray areas. So the fi the the EFC, especially, it's kind of broad, it's not really detailed in terms of the specific rules. So that's where we then recommend: look, speak with an immigration lawyer, one of our partners, to understand.

what condition or if this could be there's something in there that you can benefit of, right? If there's specific conditions or creating if you're gonna be creating a company, or what are you gonna do throughout your path in Portugal to maybe benefit from from that tax benefit. which is again our my job is really to just underst give the client an understanding and trying to create the most tax efficient plan for the clients. Try to give them at that advice, create that path

But then the more speci the more specific elements, the application and all that is usually more within immigration form.

Arielle Tucker (18:18.825)

I think that's such a important point though to kind of set your role and kind of set the stage because

Oftentimes we're just starting out with someone who's saying, I want to move to Portugal. Okay, who are you? Are you coming and are you an entrepreneur? Are you a retired or financially independent? Are you someone who just wants to work remotely for a year? Like all of these things are going to kind of have a huge impact on what professional team you actually need. Because, like you were saying, you take the time to build the relationships on the ground in Portugal.

Ricardo Jesus (18:31.35)

Mm-hmm.

Arielle Tucker (18:54.625)

goal and that becomes a huge

plus for people who are kind of coming to you because as you and I both know there is going to be all different tiers of complexity and asset level and and risk that we need to take. And so the one immigration lawyer that you are thinking that you know you should talk to because you found them on Google, you might actually not they might not be a good fit for you. So trying to get to the right professionals oftentimes that becomes a huge challenge. And so having those relationships on the ground, knowing who to send who to where is a

Ricardo Jesus (19:17.714)

Exactly.

Ricardo Jesus (19:27.726)

Mm-hmm.

Arielle Tucker (19:28.193)

really huge value add in your work.

Ricardo Jesus (19:31.505)

absolutely. And that's what I've done for the most of my career is just develop these relationships, try finding people that suit our values. again Portugal also there's a lot of it's been marketed really well. but there is a lack of coordination between especially for Americans, a lack of coordination between

the tax rules in Portugal, but also the tax rules in the US. And that's usually the biggest piece of value that we add, that I add especially for Portugal. Is because you can't just look at the situation for a client on one side of the equation. You have to match the two to avoid the any potential issue one side versus the other. for example, a golden visa is a great example that I always use. It's it's marketed really well. Everybody knows about the the the Portuguese Golden Visa.

But it's a it's a it's a it's a big investment that somebody needs, especially they they got rid of the real estate opportunity. So it's usually like in a Portuguese investment funds or but it's a huge investment that another type of visa might be more adequate for the clients. The really big benefit of the Golden Visa if they do not want to stay in Portugal more than half of the year and become a tax resident. That's kind of the appeal of the Golden Visa. But

You know, there's been situations of clients that I've seen that apply for the golden visa and then they become a tax resident. And then most of the time, these Portuguese golden visas, they are not seen very well by the US because they are classified as PFIX, so a passive foreign investment company. And those are taxed at a punitive rate in the US. It brings a whole level of complexity that

Arielle Tucker (20:57.055)

Mm.

Ricardo Jesus (21:12.896)

Again, sometimes most of the people advising on the Golden Visa are not aware because of the lack of knowledge on the US side. So this is where I come in and try to close that gap and really we that's why we want to develop the the relationships with the clients and really

Set a relationship for long because things in Portugal are not static, unfortunately. Things change so often. and as probably some people can appreciate or understand this, it's just change without a notice. So one day things might be like this, the next day there'll just come an announcement and say, we're changing this. And people have to kind of adjust and kind of comply with the rules. And it can become pretty frustrating. And

Arielle Tucker (21:58.133)

Yeah.

Ricardo Jesus (21:58.233)

think every one of the things that my clients tell me is Portugal used a lot of maybes and not sure and it's unclear and it can get pretty frustrating. and part of you know moving to a new country and in there's a lot of gray areas and a lot of unknowns. It it's a stressful it's a stressful journey. And what we want to do and why I want to do is just kind of take away that that stress and take the their problems away.

to just can enjoy like the quality of life that Portugal can offer.

Arielle Tucker (22:29.565)

Yeah, and I think that's like such an important point because you are coming from this with a much deeper understanding and appreciation for your own culture. And having lived in the US, you know especially there can be a lot of culture clash between how the US operates, right? Super, super fast, go, go, go, like, you know, and versus Portugal.

Right, there is a huge difference culturally how these two countries operate. And I don't know if as Americans we always appreciate that until we're actually on the ground dealing with the bureaucracy. And I want to highlight a very good example from last year, right? there used to be a very fast and clear path to citizenship for people who were coming over on these visas, and that changed very quickly at the end of last year. Can you

talk to the change in the path to citizenship and where we stand right now.

Ricardo Jesus (23:25.652)

Absolutely. So that's a very good point. That's something I've I always mention in in the first few calls is just come with an open mind because you just need to adjust the the the pace of life to Portu as as a Portuguese and I use use my example that I always played around with 'cause I work at different firms but especially with my bosses, it's like look, just the the lunch hour. It's something that the Portuguese are really

They take really serious this. It's like religion. At one o'clock, you want to have the lunch hour. And you see this happening a lot in in in services in Portugal. Like in the US, you go and you're expecting that high level of quality of service. And it's it's fantastic. In Portugal, it's often for small businesses to close for lunch hours, the post office closed for lunch hours. They really it again, it's a different it's a different lifestyle. And that citizenship Exactly, exactly. Like

Arielle Tucker (24:16.329)

Wait, 'cause Portuguese don't live to work, right? They work to live. And that is like that that is the crucial difference culturally between the US and and Portugal.

Ricardo Jesus (24:21.026)

The work is just

Exactly. Yeah. Mm-hmm. Absolutely. It's just the because there's less opportunities, it's the the the path to promotion and getting to a really nice job is just not as easy as in the US. There's less opportunity, so people tend to kind of look if I can't get there, I'm gonna enjoy what I have, right? And it's more about what you do after work and having your hobbies and being with your friends and being with your family, and kind of your job is really just

more about getting a salary and getting enough money so then you enjoy everything else. It I guess it's just part of an adjustment to the lack of opportunities. when you don't really see an opening or a light at the end of the tunnel, you kind of just look around, okay, what do I make high I I need to make the most out of this. so so yeah, especially it could be some frustration with some of the public systems, even the hospital, even though there's fantastic care.

It might not be at the f the pace that you're used to in the US because it's just a whole different level. Right? And yeah, around the citizenship, yeah, things changed drastically. the path to immigration was five years. A lot of people based their move on applying to citizenship after five years. the five years is also, you know

It's it's never gonna take five years because then after five years the application process it was gonna take probably a year more year or two years, so in reality it's more six, seven years. however they decided to to change to ten years, more in line with most European countries. Portugal was one of the few that still has five years and it was creating a lot of controversy because you know, it's citizenship after five years. Do you really you know, the conversation was around

Ricardo Jesus (26:15.32)

King, do you really do you really are do you really become a Portuguese person? Do you really understand the values and the culture after five years? Is it really fair for somebody that just and sometimes most of these people don't live here full time. They were just here maybe seven months. And then and then it's also it's also when the the path to immigration started. So i it was a lot of controversy around this. So they decided pretty quickly to change to ten years, which affected a lot of people's plans.

Arielle Tucker (26:28.702)

Mm-hmm.

Ricardo Jesus (26:45.282)

There was some back was and force because some of the rulings so this went to Parliament, got approved, but then the president review it and understood that some of the particular rules around it were unconstitutional. So they had to yeah the the the law had to be voted again in Parliament and I think then they changed especially on the grandfathering regime, so people that have been here and have applied they can actually benefit from the five year rule.

But everything else is now ten years. so that's kind of the the the the the few changes that happened recently. but in my personal opinion, more as you know, kind of f representing let's say the Portuguese community, we believe it's it's it's more fair. It's a fair decision. You know, ten years it gives you enough time and as a lot of people mention here is in five years nobody can see e speak even Portuguese fluently. So you

Arielle Tucker (27:42.665)

Yeah. It's a hard language.

Ricardo Jesus (27:43.692)

Getting citizenship it's a really hard language. getting citizenship to a country that you don't even speak the language is just is it fair? So it's just it it's a question that's

Arielle Tucker (27:55.102)

Yeah. Well I it's so it's so

Great to hear your insights here, because again, you're seeing it on both sides, which again, I think it just creates like a really interesting lens to be able to have those conversations. Okay, last question for today. if there's an American thinking about considering Portugal and preparing to maybe explore Portugal, what would be one tip or one thing that they should do in as part of their preparation process to consider to move it to Portugal at this point?

Ricardo Jesus (28:00.387)

Mm-hmm. Yeah.

Ricardo Jesus (28:25.41)

Yeah, the the number one thing essentially that's like two they kind of come together. One is understanding when the path to s to to residency really clearly and the path to tax residency especially. Because becoming a tax resident in Portugal it's the essentially what's the biggest elements in in in financial planning for an American living in Portugal. Because the Portuguese taxes

are especially income taxes are much higher and they go up to a much higher rate much quicker than in the US. So for an American, even with just Social Security, not a lot of income, making that move can mean a much higher f effective tax rates in the first year of tax residency. So understanding when you become a tax resident and Portugal kind of operates on a split year. So if you become a tax resident, let's say in August

Can only start paying taxes from that day forwards. So it gives you a lot more planning opportunity. And around that planning opportunity is taking advantage of the US lower the lower US tax rates. So is planning in advance is one and understanding what you need to do while you're still a US tax resident and taking advantage of those US, the lower US tax rates. Okay. And essentially.

there's a lot of things you can you have to shift the essentially the tax planning strategies. because in the US you kinda want to essentially save for retirement, you want to put money in your pre-tax accounts, and then once once you stop working, you take money from your pre-tax accounts, just very basically. In Portugal, you kinda have to rethink and adapt those strategies because you want to we want to have more after tax.

money more money in after tax accounts when you get to Portugal. So you this shift needs to maybe happen maybe one tax year or even two tax years, depending on the wealth of the client and the complexity of the client. Right?

Arielle Tucker (30:32.873)

Ricardo, those are great points. Thank you so much for joining us today. I really appreciate you sharing all your insights on Portugal.

Ricardo Jesus (30:38.915)

Yeah, thanks Arielle. It's great, great coming and thanks for the invite.