Within the framework of tax policy measures aimed at encouraging the return of former residents to Portugal, the so-called Returning Programme is established under Article 12-A of the Personal Income Tax Code (CIRS), which provides for a special tax regime applicable to taxpayers who regain Portuguese tax residency.
Under the provision, a 50% exemption on taxation of employment income (Category A) and business and professional income (Category B) is foreseen for a period of five years, provided that the cumulative legal requirements are met.
Eligibility requirements
The application of the regime is subject to the fulfilment of the following requirements:
- Acquisition of Portuguese tax residency by 31 December 2026;
- No qualification as a Portuguese tax resident in any of the previous five years;
- Previous status as a Portuguese tax resident;
- Regularized tax status;
- No exercise of the option for the Non-Habitual Resident regime.
The granting of the tax benefit also requires the proper update of tax residency and the explicit claim of the benefit in the personal income tax return (Model 3), through the appropriate completion of the annexes corresponding to the nature of the income earned (Annex A or B).
Furthermore, the benefit is subject to the maintenance of supporting documentation evidencing compliance with the legal requirements.
Tax classification of managers’ remuneration
In line with the established interpretation of the Portuguese Tax Authority, remuneration earned by managers is classified, for Portuguese Personal Income Tax (IRS) purposes, as employment income (Category A), under the provisions of the Personal Income Tax Code.
This position was recently reaffirmed in Binding Ruling no. 30026, with decision of 23 April 2026, issued by the Head of Division of the DSIRS, under sub-delegation, which concludes that income earned in the exercise of managerial functions, even in the context of a company with non-resident shareholders, may be treated as Category A income and, as such, may fall within the scope of Article 12-A of the CIRS, provided that all other legal requirements are met.
Notwithstanding the above, it should be noted that the effective application of the regime depends on the cumulative fulfilment of all legal requirements at the relevant time of income recognition, and the mere classification of income is not decisive.
Belzuz Abogados, S.L.P. – Portuguese Branch remains available to provide specialized legal and tax advisory services, ensuring the correct qualification of specific situations and full compliance with applicable reporting obligations.