Understanding tax residency in Portugal
By International Adviser, 24 Mar 17
If you have recently moved or are moving to Portugal, you need to understand the tax implications of living there as a British national, says Jason Porter, director of European IFA firm Blevins Franks.
Residents of Portugal are liable for Portuguese tax on all worldwide income and capital gains. Clients could also pay taxes on property rental, the transfer of real estate, vehicle sales and stamp duty.
If they are not yet tax resident in Portugal, and have not been resident in any of the last five tax years, they could take advantage of the ‘Non-Habitual Resident’ (NHR) regime. This offers new residents special tax benefits for their first ten years in the country.
Besides offering a low 20% income tax rate if they are employed in a ‘high value-added’ profession, the NHR scheme allows you to receive foreign income – like pensions – tax-free. They could also pay no Portuguese tax on gains you make from UK property.
If clients do not qualify for NHR or their ten-year period has ended, Portugal can still be a tax-efficient place to live.
While income is taxable at the progressive Portuguese income tax rates up to 48%, under certain conditions it is possible to receive up to 85% of UK pension income tax-free.
Also, at a fixed rate of 10% and only applying to Portuguese assets passed on to non-family members, the local version of inheritance tax (‘stamp duty’) is a lot gentler than the UK’s. When it comes to capital investments, Portugal also offers opportunities to enjoy extremely favourable tax treatment.
Non-residents only pay tax on Portuguese income and certain capital gains on Portuguese assets, although they remain fully liable for taxation in their country of residence.
Tags: Blevins Franks | Portugal | Residency
