The Truth About PT Taxes on Your Non-PT Wages with NHR: What They Don’t Tell You

Living the NHR Dream: My Reality Check

When I first moved to Portugal under the NHR regime, I thought I had it all figured out. The promise of tax benefits, the beautiful weather, the laid-back lifestyle – it seemed perfect. But when tax season rolled around and I started digging into the details of how my UK income would be treated, I hit a wall of conflicting information that left me more confused than when I started.

I spent weeks reading forum threads, talking to tax advisors, and trying to piece together what would actually happen when I filed my first Portuguese tax return. The conflicting advice was maddening – some people said I’d pay nothing extra, others claimed Portugal would tax me on the difference, and a few mentioned some mysterious “high-value occupation” criteria that only added to the confusion.

Step-by-Step: Understanding Your Tax Situation

Let me walk you through exactly what I learned about how Portugal treats non-Portuguese wages under the NHR regime. This is based on actual experience from people who’ve been through it, not just theoretical advice.

Step 1: Determine Your Tax Residency Status

This is the foundation of everything. Are you physically present in Portugal for more than 183 days in a calendar year? Do you have a permanent home here? These factors determine whether you’re considered a Portuguese tax resident.

I learned this the hard way when I initially set myself as tax resident in Portugal while still living in the UK. The Portuguese tax authorities wanted to see my worldwide income, but they only taxed my Portuguese rental income since I wasn’t actually living here more than half the year.

Step 2: Understand Where Your Work is Performed

This was a crucial distinction that many people miss. If your work is performed in the UK (or another country), that’s where the primary taxing rights lie. I work in an office in London, which means my employment income is considered UK-sourced, regardless of where my employer is based.

The location where you physically perform your work matters more than you might think. If you’re working remotely from Portugal for a UK company, that’s different from going into a UK office every day.

Step 3: Apply the NHR Rules Correctly

Here’s where the “high-value occupation” confusion comes in. Under the old NHR regime (1.x), this criterion applies to your PORTUGUESE-sourced income, not your foreign-sourced income. If you’re doing scientific, artistic, or technical work in Portugal, that might qualify for special treatment. But your UK wages? Completely separate consideration.

Mike from the forums (who actually filed his Portuguese tax declaration) clarified this perfectly: “Your non-PT employment income is exempt from PT taxation under NHR if it is already taxed at source. ‘High-value occupation’ criteria is for your PT-based income.”

Costs and Fees: What You’ll Actually Pay

Based on real experiences from people who’ve gone through this, here’s what you can expect to pay (or not pay) on your non-Portuguese wages:

• UK-sourced income taxed in UK: You’ll continue paying UK income tax as usual through PAYE or self-assessment
• Portuguese tax liability: Zero on your UK wages – they’re exempt under NHR
• Declaration requirement: You must declare your worldwide income on your Portuguese tax return, but only Portuguese-sourced income is actually taxed
• Double taxation: Not an issue here since the income is only taxed in one country

The key phrase is “already taxed at source.” If your UK employer is deducting tax through PAYE and you’re paying tax in the UK, Portugal won’t touch that same income under the NHR regime.

Common Mistakes and Misconceptions

Through my research and conversations, I discovered several dangerous misconceptions that could cost you money or create headaches:

Mistake #1: Assuming Physical Presence Doesn’t Matter

Some people claim that NHR status makes your physical location irrelevant. This is dangerously wrong. While NHR provides certain tax benefits regardless of how many days you spend in Portugal, your tax residency status (which affects how your worldwide income is treated) absolutely depends on your physical presence.

Mistake #2: Confusing “High-Value Occupation” Criteria

This applies to Portuguese-sourced income under the old NHR regime, not to foreign-sourced income. Don’t let advisors confuse you by bringing this up when discussing your UK wages.

Mistake #3: Thinking Portugal Will Tax the Difference

Some sources suggest Portugal will tax you on any difference between UK and Portuguese tax rates. This is incorrect under NHR for employment income already taxed at source. The foreign tax credit mechanism works differently and doesn’t apply in this scenario.

Real-World Experience: What Actually Happened

Mike’s experience was particularly enlightening. While showing as tax resident in Portugal, he had to declare his worldwide income (salary, interest, etc.) but only his rental income in Portugal was actually taxed, since he lived more than six months outside Portugal.

Another forum user confirmed: “As long as the work is performed in the UK there won’t be any tax at all in Portugal with NHR.” This aligns perfectly with the official NHR rules.

The Spanish Connection: Cross-Border Complications

Interestingly, I discovered that Spain is now increasing inspections of people who moved to Portugal under NHR. According to a May 2025 resolution from Spain’s Central Economic and Administrative Court (TEAC), taxpayers benefiting from NHR will continue to be considered Spanish residents if they don’t pay income tax in Portugal.

This particularly affects Spanish digital nomads and pensioners who moved to Portugal. The Spanish tax authorities are essentially saying you can’t be a “tax orphan” – if you’re not paying taxes in Portugal on income generated in Spain, they still consider you a Spanish tax resident.

However, this seems to apply specifically to income generated in Spain. If your income is generated in the UK and you’re paying UK tax, this Spanish scrutiny shouldn’t affect you.

Practical Tips for NHR Holders with Foreign Income

Based on everything I’ve learned, here are my practical recommendations:

1. Keep detailed records of where you perform your work and how many days you spend in each country
2. Maintain your UK tax payments – don’t let anything slip through the cracks
3. Declare everything on your Portuguese return but understand what’s actually taxable
4. Consider consulting a Portuguese tax advisor familiar with NHR cases, but verify their advice against official sources
5. Be prepared for potential Spanish scrutiny if you previously lived there, even though it shouldn’t affect your UK income

Conclusion: The Peace of Mind That Comes with Understanding

After all my research and confusion, I finally have clarity on my situation. My UK wages, already taxed at source through PAYE, are completely exempt from Portuguese taxation under NHR. I need to declare them on my Portuguese tax return, but I won’t pay any additional tax in Portugal on this income.

The “high-value occupation” criteria? That’s for my potential Portuguese income, not my UK salary. The difference in tax rates between the UK and Portugal? Irrelevant in this scenario. The conflicting forum advice? Mostly from people confusing different aspects of the tax code.

Understanding these distinctions has given me tremendous peace of mind. I can now plan my finances confidently, knowing exactly what to expect when tax season arrives. The NHR regime really does provide the benefits it promises – you just need to understand exactly how it applies to your specific situation.

Remember, tax laws can change, and everyone’s situation is unique. What worked for me and others in similar situations might not apply perfectly to you. When in doubt, consult with a qualified tax professional who specializes in international tax situations and NHR cases.