IFICI:
the regime that taxes your income at 20%.

All insights

If you are thinking of moving to Portugal, or to Madeira in particular, and you work in a qualified profession, there is a tax regime that can significantly reduce the IRS (personal income tax) you will pay.

It is called the IFICI, the Tax Incentive for Scientific Research and Innovation (Incentivo Fiscal à Investigação Científica e Inovação). It replaced the former Non-Habitual Resident (NHR) regime and has been in force since 2024.

But beware: contrary to what is often said, the IFICI is not for everyone. It has specific rules, and that is exactly what we will explain here, plainly.

What is it, in plain terms?

The IFICI allows those who become tax resident in Portugal to be taxed at a special rate of 20% on employment income (whether employed or self-employed) earned in Portugal, instead of the normal progressive IRS rates, which can reach 48%.

Income earned abroad is, as a rule, exempt from IRS in Portugal (with some nuances we explain below). The benefit lasts 10 years.

Who can benefit?

To access the IFICI, you must meet three basic conditions:

• Become tax resident in Portugal;
• Not have been tax resident in Portugal in any of the 5 previous years;
• Carry out one of the eligible activities set out in the law.

The third condition is the critical point, and where many people are mistaken.

The activities that give access to the IFICI

The regime does not cover every profession. It is reserved for profiles linked to qualification, science and innovation. Eligible activities include:

• Higher education teaching and scientific research;
• Highly qualified professions in relevant companies, including company managers and directors, doctors, university professors, information technology (IT) specialists, engineers and industrial product designers;
• Qualified posts in companies benefiting from contractual investment incentives or the RFAI;
• Research and development in eligible entities;
• Roles in startups certified under Portuguese law.

For highly qualified professions, a minimum qualification level is also required: level 8 of the European Qualifications Framework (a doctorate) or level 6 (a bachelor's degree) with at least 3 years of proven experience.

Who CANNOT benefit

Here it is important to be clear. You cannot access the IFICI if you:

• Have already benefited (or are benefiting) from the former Non-Habitual Resident (NHR) regime;
• Opted for the former residents' tax regime (the "Programa Regressar").

There is also an important incompatibility: those who benefit from the IFICI cannot combine it with the IRS Jovem (Young Person IRS) regime.

How the taxation works, in practice

It is worth understanding this point well:

• Portuguese-source income (categories A and B) linked to the eligible activity, taxed at the flat rate of 20%;
• Foreign-source income, as a rule exempt in Portugal (exemption with progression).

The 20% rate is flat, which means there is no family quotient or the usual deductions from tax due. For high incomes, this simplicity is precisely the advantage.

The deadlines you cannot miss

The IFICI requires mandatory registration, it is not automatic. And the deadlines are tight:

• Registration is made on the Tax Authority portal (Portal das Finanças), by 15 January of the year following the one in which you become tax resident;
• The company where you carry out the activity must prove the requirements by 15 March;
• The Tax Authority makes the registration status available by 31 March.

Missing the registration deadline can mean losing the benefit for that year, and the regime can only be used once in a lifetime.

Why Madeira is especially attractive for the IFICI

Madeira combines several factors that make the IFICI particularly attractive. The island has been attracting more and more digital nomads, qualified professionals and investors, profiles that often fit the eligible professions. The Madeira Free Trade Zone is home to technology and international companies that may qualify as eligible entities. And the quality of life makes relocation attractive precisely for the profiles the regime targets.

In other words: if you are considering moving to Madeira to work at a qualified company, start an activity in an eligible field or join a startup, the IFICI can completely change your tax equation.

The most common, and most expensive, mistake

The biggest mistake we see is someone assuming that "the IFICI is the new NHR and any foreigner is entitled to it".

That is not true. The IFICI requires an eligible activity and, in most cases, a specific qualification level and a company that meets the requirements. Registering without meeting the conditions leads to rejection, and, in that case, income is then taxed at the normal IRS rates.

So, before assuming you are entitled, an eligibility analysis by someone who knows the regime is essential.

How do you know if you are entitled to the IFICI?

The answer depends on several factors: your profession, your qualifications, the company where you will work (or the type of activity you will carry out) and your tax residence history.

At Arco Fiscal, we carry out a complete IFICI eligibility analysis, handle the registration process on the Portal das Finanças and follow the fulfilment of the requirements throughout the 10 years of the regime. If you are planning to move to Madeira and want to understand whether you can be taxed at 20%, talk to us before you register.