Portugal’s old Non-Habitual Resident regime made the country one of Europe’s best-known destinations for internationally mobile entrepreneurs and investors. That regime ended at the end of 2023, but it was followed almost immediately by a new framework: IFICI, often informally referred to as NHR 2.0.
IFICI is frequently presented as a regime for scientists, researchers and certain highly skilled professionals. That description misses an important part of the opportunity. Entrepreneurs can also qualify, provided their Portuguese business and wider circumstances meet the relevant requirements.
For the right international business owner, the result can be significant. With the correct structure, it can be possible to live in Portugal while keeping the effective tax burden on business income below 5%.
The key is understanding how qualification, Portuguese residence, the local company and foreign-source income fit together.
Who Can Qualify for IFICI as an Entrepreneur?
The entrepreneur route has several basic requirements.
- You cannot have been a Portuguese tax resident during the previous five years.
- You need at least the equivalent of a high school diploma from your home country.
- You need a Portuguese business that meets the relevant requirements.
- At least 50% of the clients or turnover of that business needs to come from outside Portugal.
- You cannot previously have benefited from the old NHR regime and then move directly onto IFICI for another 10-year period.
The 50% foreign-client or foreign-turnover requirement makes the regime particularly relevant to internationally focused service businesses. A consulting company, marketing agency, software business or similar operation serving clients outside Portugal may fit this model.
The underlying principle is that the Portuguese business should contribute economic activity to Portugal while generating a substantial part of its business internationally.
That distinction matters. Someone operating an international service business is in a different position from an individual simply trading their own capital. The latter is not selling services or necessarily conducting the type of business activity contemplated by this entrepreneur route.
Approval is not automatic
Meeting some of the headline criteria does not mean IFICI approval is guaranteed. The nature of the underlying business activity matters, and applications can be rejected where the activity does not satisfy the relevant contribution requirements. The business should therefore be assessed before relying on the regime.
Setting Up IFICI From Beginning to End
Once the eligibility position has been assessed, the next stage is establishing yourself and the business in Portugal.
1. Obtain a Portuguese NIF
The first requirement is a Portuguese tax identification number, known as a Número de Identificação Fiscal, or NIF.
This is needed before much of the remaining setup can be completed. Obtaining the NIF itself is relatively straightforward and typically takes around two weeks.
2. Open a Bank Account and Establish an Address
Once you have a NIF, you can use it to open a personal Portuguese bank account and establish accommodation in Portugal.
For someone renting, this normally means obtaining an apartment and rental contract. The Portuguese address needs to be registered with the Portuguese Tax Authority, the Finanças.
3. Establish Your Right of Residence
For EU citizens, the residence side is comparatively straightforward because EU citizens already have the right to live and work in Portugal.
An EU citizen can obtain a CRUE, the Certificado de Registo de Cidadão da União Europeia, from the local municipality. This serves as the EU citizen’s Portuguese residence certificate.
Once the NIF, Portuguese address and CRUE are in place, the individual is properly established as a resident and can move on to the business side of the structure.
4. Establish a Portuguese LDA
The next stage is incorporating a Portuguese company, typically a local LDA.
This company is central to the entrepreneur structure because it provides the Portuguese business activity through which the individual seeks to qualify for IFICI.
One approach is to retain a principal operating company outside Portugal and establish the Portuguese LDA as a subsidiary of that business.
For example, the principal business could operate through a US LLC. That company remains the main international operating entity, while the Portuguese LDA provides services locally and pays the entrepreneur a salary.
5. Apply for IFICI
With the NIF, residence and Portuguese company established, the IFICI application can be made.
The IFICI application itself can take around two to three weeks. Realistically, the complete process of establishing the necessary pieces can take around two to three months.
Example: Structuring a €15,000 per Month Consulting Business
To understand how the structure can work in practice, consider an international consulting business generating approximately €15,000 per month.
At the top of the structure is the principal operating company abroad. In this example, that company is a Wyoming US LLC.
The US LLC runs the international business, invoices clients around the world and receives approximately €15,000 per month in revenue.
Underneath it sits the Portuguese LDA.
The Portuguese company provides administrative and management services to the main operating company. In this example, the Portuguese LDA invoices the US company approximately €3,000 per month.
That leaves approximately €12,000 per month inside the US company.
Why approximately €3,000 goes to Portugal
The Portuguese company needs sufficient revenue to pay the mandatory salary, cover its operating expenses and retain some taxable profit in Portugal. The amount is therefore connected to the actual costs and activity of the Portuguese company rather than simply moving all business revenue into Portugal.
The Portuguese LDA Tax and Expense Position
Under this example, the entrepreneur pays themselves a mandatory salary of €1,018 per month. That salary is taxed at roughly 35%.
The Portuguese company also incurs normal operating expenses. These might include accounting, software and other costs associated with maintaining and operating the business. A working assumption of approximately €1,000 per month in business expenses is used here.
Whatever profit remains in the Portuguese company is then subject to a reduced corporate tax rate of 15%.
On a €1,018 salary, the example produces approximately €356 in tax. After business expenses, approximately another €1,000 remains as profit in the Portuguese company. At 15%, that creates approximately €150 of additional tax.
The resulting Portuguese tax bill is therefore approximately €500 per month.
Using Foreign Dividends Under IFICI
The other side of the structure is the income retained in the foreign operating company.
After approximately €3,000 has been paid to the Portuguese LDA, approximately €12,000 remains in the US LLC.
Under the IFICI treatment described here, those funds can subsequently be distributed to the Portuguese-resident owner as foreign dividends that are exempt from Portuguese tax.
In the client example, €11,000 is distributed as dividends, with some money intentionally retained inside the US LLC.
The structure therefore has two distinct sides. The Portuguese LDA receives service income, pays the entrepreneur’s salary, covers local business expenses and pays tax on its remaining profit. That Portuguese activity is also central to qualification through the entrepreneur route.
Meanwhile, the majority of the international business income remains in the foreign company and can ultimately be distributed personally as foreign dividends under the IFICI treatment described above.
For a business generating approximately €15,000 per month and paying approximately €500 per month in tax under this example, the resulting effective tax rate is just over 3%.
The attraction of this structure is not simply the headline tax rate. It is the combination of Portuguese residence, genuine local business activity and the treatment of qualifying foreign-source income. Each part of the structure needs to work together, and the underlying business activity needs to support the arrangement.
What Changes at Higher Revenue Levels?
The same structure is not necessarily appropriate for every entrepreneur.
For businesses generating €40,000, €80,000 or even €100,000 per month, the exact setup can look different. At those income levels, a Hong Kong structure may be considered instead of a US LLC.
The broader framework, however, remains similar: a Portuguese business supports the local activity and IFICI qualification, while a separate foreign operating structure handles the wider international business.
What Other Foreign Income Can Be Exempt?
Foreign dividends are not the only category of foreign-source income that can benefit under IFICI.
The regime can also exempt other types of foreign income, including:
- Interest
- Rental income
- Foreign capital gains
For example, an entrepreneur who owns shares in a foreign company and later sells the business may be able to receive the resulting foreign capital gain exempt from Portuguese tax under the regime.
However, the jurisdiction from which the income originates matters.
Blacklisted jurisdictions can lose the exemption
Portugal maintains a blacklist of jurisdictions, and income originating from those jurisdictions does not receive the foreign-income exemption described here. Examples include Jersey, the Cayman Islands and the UAE. Those jurisdictions therefore cannot simply be used as the foreign-company location for this purpose.
What About Non-EU Citizens?
The process described above is substantially easier for EU citizens because they already have the right to live and work in Portugal.
For someone from outside the EU, the IFICI process itself may be broadly similar, but there is an additional hurdle first: obtaining the legal right to reside in Portugal.
Potential routes can include the D8 Digital Nomad Visa, the D7 route for passive income or the Golden Visa.
This can materially change the economics and timeframe of the relocation.
In one recent case involving a couple from Australia, the residence process alone was expected to cost approximately €6,000 and take around six to nine months. Only after completing that stage could the IFICI process begin.
IFICI can therefore still be relevant to non-EU entrepreneurs, but obtaining Portuguese residence makes the overall process substantially more complicated.
How Much Does an IFICI Structure Cost to Establish?
A reasonable working budget for establishing the overall structure described here is approximately €5,000 to €6,000.
That includes obtaining the NIF, establishing the Portuguese LDA, applying for IFICI and putting the wider structure in place.
There are then ongoing costs associated with maintaining the Portuguese company, accounting, compliance and the foreign company. The source example puts these ongoing costs at approximately €2,000.
How Long Does IFICI Last?
IFICI is available for a maximum of 10 years. It is also a Portuguese tax-residence regime, meaning the individual needs to genuinely relocate and become a Portuguese tax resident rather than simply establish a company in the country.
For someone intending to establish a longer-term base in Portugal, residence may also provide a potential pathway towards Portuguese citizenship through naturalization.
Who is Portugal’s IFICI regime best suited to?
IFICI can be particularly relevant to internationally focused entrepreneurs who are prepared to become Portuguese tax residents and operate genuine business activity through Portugal while retaining a wider international company structure. For the right business, the combination of local corporate activity and qualifying foreign-income exemptions can produce a very low effective tax burden. The critical point is that eligibility, business activity and the foreign-income structure need to be assessed together rather than treating IFICI as a blanket tax exemption.
