The Portuguese Tax and Customs Authority (AT) clarified its position on the eligibility of workers registered under the Non-Habitual Resident (NHR) tax regime for the IRS Jovem program. This clarification was issued in response to an inquiry from a company employing workers who are registered in the NHR regime.
The inquiry arose because, although these employees hold the NHR status, they have not benefited from the tax incentive, which is intended for workers up to 35 years old. According to the IRS Code, this incentive does not apply to individuals who benefit or have benefited from the NHR regime. The company, aware of the specifics of these workers’ cases, sought guidance from the AT.
In its response, the AT indicated that professionals could access the IRS Jovem program if they cancel their NHR registration. “It seems one can conclude that a taxpayer who has obtained the Non-Habitual Resident Status but has never benefited from it may request the cancellation of their registration as a Non-Habitual Resident,” explained the AT.
For the cancellation to take effect, simply not filling out Annex L of the IRS declaration is insufficient; a request to cancel the registration must be submitted to the Taxpayer Registration Services, cautioned the tax administration.
The AT further stated, “Not filling out Annex L of the Model 3 declaration cannot be interpreted as a waiver of the tax benefit under the non-habitual residents regime.”
“Once the cancellation request is approved, the taxpayer(s) would then be eligible to benefit from the IRS Jovem regime as outlined in Article 12.º-B of the IRS Code by selecting the corresponding option in the Model 3 declaration,” the AT elaborated.
The IRS Jovem rules were revised in the 2025 State Budget, extending coverage to workers up to 35 years old and offering reduced IRS for ten years, provided workers fall within this age bracket.
The tax benefit excludes a share of income from IRS, meaning part of the salary is not subject to tax, with the exclusion percentage varying by the year of the regime’s application.
In the first year, all income is exempt from taxation (100% IRS exemption). In the second to fourth years, the exemption is 75% (IRS applies to 25% of income). In the fifth to seventh years, the exemption is 50% (the tax applies to half of the income). In the eighth to tenth years, the exemption is 25% (IRS applies to 75% of income).
Additionally, the law ensures that higher income portions are not excluded from taxation. The exemption only applies to income up to 55 times the Social Support Index (IAS), equivalent to 28,737.5 euros.
The updated IRS Jovem program, applicable to workers up to 35 years old, will first apply to 2025 incomes, which will be declared between April and June 2026. The 2025 declared incomes, relating to the IRS of 2024, will follow the previous rules.
