Key Takeaways
- Portugal’s NHR regime closed to new applicants on 1 January 2025.
- Its replacement, IFICI, only covers scientists, tech workers, startup founders and exporters.
- Andorra caps income tax at 10% for everyone — no profession test, plus 0% wealth and inheritance tax.
- Portugal keeps the edge on EU membership, airports and an established expat scene.
- Existing NHR holders keep their benefits for the rest of their 10-year term.
Portugal’s NHR regime closed to new entrants on 1 January 2025. Its replacement, IFICI, only covers scientists, tech workers, startup founders and exporters with a degree-level qualification — passive investors, retirees and most freelancers are excluded. For those people, Andorra is now the stronger option: a 10% income-tax ceiling, 0% on wealth, inheritance and capital gains, and a residency route that does not depend on your profession.
What changed in Portugal
For a decade, Portugal’s Non-Habitual Resident (NHR) regime gave new residents a flat 20% tax on Portuguese-source professional income and broad exemptions on foreign income for ten years. It attracted a wave of entrepreneurs, retirees and remote workers.
It ended. NHR closed to new applications on 1 January 2025, with a transition window to 31 March 2025 for people who were already mid-move. Anyone already registered keeps their benefits for the remainder of their ten-year term.
IFICI: the narrow replacement
The successor regime, IFICI (sometimes called “NHR 2.0”), keeps the 20% flat rate and the 10-year duration — but eligibility is tight. You need to work in a recognised high-skill field (research, technology, engineering, certain startup and export roles), hold at least a bachelor’s-level qualification, and not have been a Portuguese tax resident in the previous five years. Passive investors, pensioners and general freelancers do not qualify. Without IFICI, you are taxed on Portugal’s standard progressive scale, which reaches 48%.
Andorra vs Portugal, side by side
| Andorra (2026) | Portugal without IFICI | |
|---|---|---|
| Top personal income tax | 10% | Up to 48% |
| Special regime needed? | No — 10% applies to all residents | Yes — IFICI, and only if you qualify |
| Wealth tax | 0% | None nationally, but AIMI on high-value property |
| Inheritance tax | 0% | 10% stamp duty (spouse/children exempt) |
| Capital gains | 0% in most cases; 10% otherwise | 28% flat (or half-inclusion for long holds) |
| VAT | 4.5% | 23% |
| Residency basis | Investment or Andorran company | EU freedom of movement / D7 / golden-visa funds |
| Minimum presence for tax residency | 183 days (or centre of vital interests) | 183 days (or a home available on 31 Dec) |
| EU member | No | Yes |
Where Portugal still wins
- EU membership. Free movement, a Portuguese passport route after five years, and easier travel and banking across the bloc.
- Connectivity. Lisbon and Porto are major international airports; Andorra has none.
- Scale and climate. Bigger cities, a warm coast, an established international community.
- If you qualify for IFICI as a genuine tech founder or researcher, 20% on a broader base can still be attractive.
Where Andorra wins
- The rate applies to everyone. No profession test, no five-year clock, no risk of the regime being withdrawn from under you.
- The 0% taxes. No wealth tax, no inheritance or gift tax, and capital gains that are usually exempt — often worth more than the headline income rate for someone relocating a portfolio.
- Lower cost of living than Lisbon has become, and Europe’s lowest VAT.
- Stability. Andorra has spent a decade making its system more transparent, not less predictable.
Who should choose which
Choose Portugal if EU citizenship matters to you, you need frequent flights, or you genuinely qualify for IFICI. Choose Andorra if you are an investor, retiree, or business owner who was priced out of the new Portuguese rules, you value the 0% wealth and inheritance treatment, and you are willing to trade an airport for the Pyrenees.
Frequently asked questions
Is Portugal’s NHR still available in 2026?
No. NHR closed to new applicants on 1 January 2025. Existing holders keep their benefits for the rest of their ten-year period; new arrivals fall under the narrower IFICI regime or standard rates.
Does Andorra have a special tax regime like NHR?
No, and it does not need one. Andorra’s standard personal income tax already caps at 10% for all residents, with no wealth or inheritance tax.
Is Andorra or Portugal cheaper to live in?
Broadly similar now that Lisbon and the Algarve have risen sharply; Andorra has cheaper day-to-day costs and much lower VAT, while Portugal offers more affordable options outside its main cities.
Can I get an EU passport through Andorra?
No. Andorra is not in the EU, naturalisation takes around 20 years, and it does not allow dual citizenship. Portugal offers an EU passport route after five years of residence.
Last reviewed: 3 September 2026. General information, not legal or tax advice; rules in both countries change and this page may become out of date. Confirm your situation with advisors in the relevant jurisdictions. Speak to our team.
