Tax · 2025 regime
IFICI (NHR 2.0) for Madeira property buyers
The Incentivo Fiscal à Investigação Científica e Inovação - IFICI - replaced the classic Non-Habitual Resident regime on 1 January 2025. The spirit is similar (a preferential tax regime for new Portuguese tax residents), but the scope is narrower, the gates are tighter, and the exclusion list is longer. Most importantly for Madeira property buyers: foreign pensions are no longer covered.
What IFICI is
IFICI is a ten-year preferential tax regime for qualifying new Portuguese tax residents. The headline rate is a flat 20% on qualifying Portuguese-source income (typically employment or self-employment in specified CAE codes). Most foreign-source income is exempt from Portuguese tax, though the exemption is narrower than it was under the old NHR.
The three eligibility gates
- No prior Portuguese tax residency in the last 5 years. Absolute. If you have filed even one year of Portuguese IRS in the 5 calendar years preceding your registration year, you are locked out.
- Qualifying professional activity. The published CAE-code list covers: tech (62, 63), scientific R&D (72), education (85.4), healthcare (86.2), architecture (71.11), engineering (71.12), and a specific set of high-value services. The list is updated annually.
- EQF-6+ credentials. A recognised Bachelor's degree or higher, or equivalent professional experience formally recognised through Portuguese NARIC.
Who it does NOT cover - the pension trap
The single biggest difference from the old NHR regime: foreign retirement pensions are EXCLUDED from IFICI coverage. Under classic NHR, a UK, US, German or Dutch pension enjoyed a flat 10% Portuguese tax rate (reduced from 0% in 2020). Under IFICI, pensions are taxed at standard Portuguese IRS rates - which on a €60k pension income means roughly 30%+ effective tax once progressive bracketing applies.
Every quarter, the Expat.com Portugal forum surfaces a UK retiree who bought a Madeira property expecting a 10% pension tax and discovering the actual liability is several times higher. Avoid this by modeling your tax bill at standard rates BEFORE signing a property purchase.
What IFICI does cover (if you qualify)
- Qualifying Portuguese-source employment or self-employment at a flat 20%.
- Foreign dividends generally exempt (provided not from blacklisted jurisdictions).
- Foreign royalties and capital gains generally exempt (with exceptions).
- Foreign rental income generally exempt (but UK-source rental is still taxable in the UK under the UK-PT treaty - check jurisdiction).
How to register
- Establish Portuguese tax residency (requires physical presence > 183 days in the calendar year, or having your “habitual abode” in Portugal by end of year).
- Apply via Portal das Finanças within the deadline - typically 31 March of the year following the year you became a Portuguese tax resident.
- Submit evidence of qualifying activity (employment contract, CAE code confirmation) and credentials (EQF-6+).
- Registration lasts 10 years, non-renewable.
IFICI + Madeira-specific overlays
Madeira's regional tax regime (International Business Centre / CINM) can complement IFICI for entrepreneur buyers. A CINM-licensed holding or service company pays 5% corporate tax through to 2033 (licensing deadline 31 December 2026). Pair this with D2 entrepreneur residency, IFICI on personal income, and a Madeira primary residence and the total tax profile can be materially below mainland European jurisdictions - but the structure is fact-sensitive and should be designed by a CINM-experienced tax advisor, not a relocation consultant.