Portugal and taxation: Busting the myths
8 Oct 15
A Portuguese tax resident can be taxed at a rate of 56.5%, but director at Blevins Franks Jason Porter unveils some of the exemptions and reliefs offered to UK expats who decide to make Portugal their home.
A life assurance contract, known in the UK as a single premium life assurance bond or policy, is not relievable under the non-habital residence (NHR) regime. But these policies do offer significant tax saving benefits in Portugal, particularly once the preferential 10-year period is over.
Whilst the contract usually offers only a small percentage of life assurance, the ‘life assurance wrapper’, much like in the UK, allows the investor to obtain significant tax benefits.
Mixture
Withdrawals are seen as a mixture of capital and income, with only the income element being taxable. This will be calculated by reference to the amount that the bond has grown since inception. If there has been no growth, there is no tax.
Where a withdrawal made after the bond has been in existence for five years, only 80% of the income element is liable to income tax. After eight years, this falls to only 40%. These significant tax savings are available throughout the life of the policy whilst the individual is a Portuguese resident.
