Portugal continues to be a go-to spot for entrepreneurs, innovators, and global talent. It offers a great quality of life, a growing tech scene, and easy access to European markets. To boost this, the government has launched a new tax incentive: the IFICI (Incentive for Foreign Investment and Company Incorporation). Some people call, the NHR 2.0.
This guide is for entrepreneurs and startup founders worldwide thinking about moving to Portugal. We’ll show you how to use the IFICI by setting up a company and getting a startup certificate. Discover the benefits, the application process, and key things to consider.
Understanding the IFICI: a new era for tax incentives
The IFICI replaces the well-known Non-Habitual Resident (NHR) regime, offering a fresh way to attract skilled professionals and investment. It provides significant tax benefits for individuals who become tax residents in Portugal and work for qualifying entities.
At its core, the IFICI offers a special 20% flat tax rate on employed or self-employed income generated in Portugal for specific professions. This is a big cut from Portugal’s standard progressive income tax rates, which can go up to 48%. The goal is to boost high-value sectors like technology, research, and innovation.
The startup pathway to IFICI benefits
For ambitious entrepreneurs, the IFICI offers a direct and powerful incentive. By setting up a company in Portugal and having it certified as a “startup” you can look towards qualifying for the beneficial tax regime. This route is designed to foster innovation and attract businesses with high growth potential.
What is a certified startup in Portugal?
A certified startup is a company that meets specific criteria defined by the Portuguese government and is recognised by Startup Portugal. Generally, these criteria include:
- Being less than 10 years old
- Having fewer than 250 employees
- Having an annual turnover not exceeding €50 million
- Not being formed through the merger or division of a large company
- Having a business model focused on innovation, technology, or a scalable product/service
Obtaining this certification is a crucial first step. It validates your business as a contributor to Portugal’s innovation ecosystem and unlocks the door to the IFICI tax benefits for its employees and directors.
How to apply for IFICI with a startup
Navigating the application process requires careful planning. You’ll need to establish tax residency, incorporate your company in Portugal, obtain your startup certificate, and finally, register for the IFICI regime.
If you’d like to understand the process in more detail, visit the full article on RHJ Accountants for all the details.
Key considerations for entrepreneurs
While the IFICI program is very attractive, remember to focus on building a viable business first. There are also ongoing accountancy and legal obligations, and it’s important to understand the full scope of the tax benefit. The IFICI is a 10-year program designed for those serious about relocating and contributing long-term to Portugal.
How RHJ Accountants can help
The journey to establishing a business in a new country and navigating its tax incentives can be complex. Our team at RHJ Accountants, specialise in helping international entrepreneurs and startups thrive in Portugal. Our team provides expert guidance at every stage, including company incorporation, tax residency, IFICI applications, and ongoing accounting and compliance.
Frequently asked questions
What is the difference between the old NHR and the new IFICI?
The IFICI is more targeted than the previous NHR regime, focusing specifically on attracting high-value professionals and individuals involved in certified startups and specific investment projects.
Can I apply for the IFICI if I am already a resident in Portugal?
No, the IFICI is for new tax residents. You cannot have been a tax resident in Portugal in the five years prior to your application.
What happens after the 10-year IFICI period ends?
After 10 years, you will no longer be eligible for the special 20% tax rate. Your income will then be taxed according to the standard progressive tax rates applicable to all Portuguese residents.
