More and more emigrants are considering a return to Portugal. The Regressar Programme offers several measures to make this step easier, including a personal income tax (IRS) benefit for former residents. However, there are rules and limits that must be understood to avoid mistakes, especially since 2024. In this article, I explain how the tax benefit works, who can qualify, and how the €250,000 cap on exempt income applies, with practical examples and a note on the solidarity surcharge. Let’s dive in.
Note: the Regressar Programme also includes financial support and operational measures, but in this article we focus only on the tax aspect. For general information and applications to IEFP support, please consult the official documentation.
Who can benefit from the tax regime for former residents
To qualify under Article 12-A of the IRS Code, you must:
- Earn employment income or business/professional income.
- Not have been a tax resident in Portugal in the 5 years prior to your return.
- Become a tax resident again no later than 2026. 2026.
- Earn employment income or business/professional income.
The regime applies for 5 consecutive years: the year of return plus the following 4 years.
How the 50% exclusion works and what changed in 2024
The benefit consists of excluding 50% of employment and business/professional income of the returning taxpayer from taxation. Since the 2024 State Budget, a ceiling now applies to the exempt amount: the exempt income is capped at €250,000 per year. In practice, this means that even if your income is very high, the maximum exempt amount per year is €250,000.
From an operational point of view, the regime is automatic: it does not require prior approval, although it must be flagged in the Modelo 3 IRS return and, if relevant, communicated to the employer for correct withholding.
Practical examples with the correct cap (exempt up to €250,000)
- Annual income: 250.000€
- 50%: 125.000€
- Exempt: 125.000€
- Taxable: 125.000€
- Annual income: 500.000€
- 50% = 250.000€
- Exempt: 250.000€
- Taxable: 250.000€
- Annual income: 10.000.000€
- 50% = 5.000.000€
- Exempt: 250.000€
- Taxable: 9.750.000€
Since the 2024 State Budget, a ceiling on tax-exempt income has been introduced: the exempt amount is limited to €250,000 per year. In practice, this means that even if the income is much higher, the maximum exempt amount is €250,000 per year.
And what about high incomes?
High incomes also benefit from the regime, but remain subject to an extra tax: the Solidarity Surcharge.
It is important to note that this surcharge is not exclusive to the Regressar Programme – it applies to all taxpayers whose taxable income exceeds certain thresholds:
- 2,5% on the part of taxable income between 000€ e 250.000€
- 5% on the part of taxable income exceeding 250.000€
This surcharge continues to apply to returning residents, if their income, after the exclusion, exceeds these thresholds.
Practical steps to apply the regime.
- Employment: inform your employer that you fall under Article 12-A so that withholding is correctly applied.
- Self-employment: indicate the application of Article 12-A on invoices/receipts, as per guidance.
- IRS return: declare that you wish to benefit from the regime in the Modelo 3.
Conclusion
The Regressar Programme’s tax regime is a valuable tool to reduce the tax bill when returning to Portugal:
- 50% of employment and professional income excluded from tax,
- Duration of 5 years,,
- Annual exempt amount capped at €250,000 (change introduced in 2024).
For high incomes, the solidarity surcharge may still apply, since it is charged on taxable income after the exclusion.
Thinking about returning to Portugal? Contact me to:
No. The regime is automatic, although it must be flagged in the IRS return and, when relevant, communicated to the employer.
It applies to the exempt amount resulting from the 50% exclusion, not to total income.
No, the two regimes cannot be applied simultaneously. (Always check your specific circumstances in the year of return.)
You can qualify if you become a tax resident up to 2026, for 5 consecutive years.
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