Foreign Income Exemption

The foreign income exemption was a central feature of NHR Legacy. Under the regime, foreign-source income from employment, self-employment, investment (dividends, interest), rental, and capital gains was generally exempt from Portuguese IRS — provided the source country had the right to tax it under a double taxation treaty or the income was not considered to have a Portuguese source. This made NHR Legacy extremely attractive for internationally mobile individuals with non-Portuguese income sources. IFICI (NHR 2.0) does not replicate this exemption. Under IFICI, foreign-source income is taxed at standard Portuguese rates (28% for Cat. E/F, progressive brackets for Cat. A/B) — only Portuguese-source qualifying employment and self-employment income benefits from the 20% flat rate.