NHR 1.x Taxes on Non-PT Wages: The Definitive Expat Guide (2025)

Introduction: The NHR Tax Confusion That Cost Me Months of Research

Look, dealing with bureaucracy is tough enough without getting lost in a maze of conflicting tax advice. When I first moved to Portugal under the old NHR 1.x regime, I was drowning in contradictory information about how my UK salary would be taxed. Forum posts contradicted each other, tax advisors gave me different answers, and I couldn’t find a single clear guide that addressed my specific situation. After months of research, filing my actual tax returns, and speaking with tax professionals, I finally have the definitive answer.

Here’s what I discovered about NHR 1.x and non-Portuguese wages that will save you time, money, and sleepless nights.

Step-by-Step: Understanding Your NHR 1.x Tax Situation

Step 1: Determine Your Tax Residency Status First

Before anything else, you need to understand where you’re actually tax resident. This is the foundation of everything that follows.

Under Portuguese law, you’re considered tax resident if you:

• Spend more than 183 days in Portugal within any 12-month period, or
• Have a dwelling in Portugal under conditions suggesting permanent residence

Important: Your NHR status doesn’t change your tax residency requirements. You still need to meet these physical presence tests.

Step 2: Identify Where Your Income is Generated

The critical factor is WHERE you perform your work, not where your employer is based or where you’re paid.

For example:

• If you work remotely from Portugal for a UK company = Portugal tax residency applies
• If you work in an office in London for a UK company = UK tax residency applies
• If you split time between countries = More complex situation requiring careful tracking

Step 3: Apply the NHR 1.x Rules to Your Specific Situation

Here’s where the confusion usually starts. The old NHR 1.x regime (before 2024) had different rules than the current NHR 2.0.

For NHR 1.x holders with non-Portuguese wages:

1. If you’re tax resident in Portugal AND your work is performed in Portugal, different rules apply
2. If you’re tax resident in Portugal BUT your work is performed abroad, different rules apply
3. If you’re NOT tax resident in Portugal, different rules apply

The Clear Answer: NHR 1.x Non-PT Wages Are Tax-Exempt

After reviewing multiple sources and filing my own returns, here’s the definitive answer for NHR 1.x holders:

Your non-Portuguese employment income is completely exempt from Portuguese taxation if it’s already taxed at source in another country.

This applies regardless of whether you’re in a ‘high-value occupation’ or not. The high-value occupation criteria only matters for income you earn WHILE working in Portugal under NHR.

My Personal Experience Filing NHR 1.x Taxes

When I filed my Portuguese tax return this year, I showed all my worldwide income (as required), but only my Portuguese rental income was actually taxed. My UK salary, already taxed in the UK, was completely exempt.

The process was straightforward:

1. Logged into Portal das Finanças
2. Completed the Modelo 3 (IRS) form
3. Declared my UK income in the appropriate section
4. The system automatically applied the exemption
5. Only my Portuguese income was calculated for tax

Costs and Fees: What to Expect

Tax Preparation Costs

• DIY filing: €0 (using Portal das Finanças)
• Tax advisor assistance: €200-€500 depending on complexity
• Accountant for annual filing: €300-€800 for simple cases

Potential Penalties

• Late filing penalty: Up to 10% of tax due
• Inaccurate information: €75-€12,500 depending on severity
• Non-declaration: Up to €7,500

Requirements and Documentation

Essential Documents

• Tax residency certificate from your home country
• Proof of employment/source of income
• Tax statements from your employer or pay stubs
• Proof of address in Portugal (utility bills, rental contract)

Portal das Finanças Requirements

You’ll need:

• NIF (Número de Identificação Fiscal)
• Proof of address
• Passport or ID
• Social security number

Common Mistakes to Avoid

1. Assuming NHR Status Changes Tax Residency Requirements

Many people think that having NHR status automatically makes them tax resident in Portugal. This is incorrect. You still need to meet the physical presence requirements.

2. Confusing NHR 1.x with NHR 2.0 Rules

The new NHR 2.0 regime (2024 onwards) has completely different rules. If you’re on NHR 1.x, don’t let anyone confuse you with current regulations.

3. Not Understanding Where Income is Generated

Working remotely from Portugal for a foreign company is NOT the same as working in that foreign country. Location matters for tax purposes.

4. Failing to Declare Worldwide Income

Even though your foreign income might be exempt, you still must declare it. Failure to declare is a separate offense from tax evasion.

Special Considerations: Spanish Tax Authority Scrutiny

Recent developments show that Spanish tax authorities are increasing inspections of people who moved to Portugal under NHR, particularly those from 2021 onwards.

The key issue: Spanish authorities are challenging