Expat taxation

Expat taxation

Non Habitual Resident Regime

The Portuguese Non Habitual Resident Regime (NHR) commenced September 23 2009 and was amended in 2012. It is designed to make Portugal more competitive and attract high net worth professionals.
To qualify you must not be registered as a tax resident in Portugal for the preceding five years. For those that qualify, a special tax rate of 20% applies for self-employment and employment income. This rate will apply for 10 years and then revert to normal rates. Pensioners are also included in this scheme.
Individuals will be exempt from paying tax on their non-Portugal income of all categories, including capital gains. This will apply if the income is taxed in the other country and is not derived in Portugal, or the country of source taxes the relevant income under the terms of a Portuguese Double Tax Treaty (DTT). Any income earned in the 81 territories on the Finance Department list of preferential tax regimes, the so-called blacklist, will not qualify for this regime.
The publication of Ministerial Order of January 7 2010 defined “high value added activities of a scientific, artistic or technical nature” for the purposes of qualification for the regime. Sportsmen were excluded due to the so-called Spanish Beckham Law.

Tax efficient investments

Portuguese residents are better off holding assets in EU compliant jurisdictions that are recognised by the Portuguese tax authorities. If not, a liability to taxation at the highest rate could be suffered in Portugal. Bank accounts are taxed at a flat rate of 28% in Portugal. However, interest is taxed at the higher rate of 35% if the account is held in a jurisdiction on Portugal’s blacklist of tax havens.
Many of the tax benefits associated with UK products such as PEPS and ISAs are only applicable whilst you are a UK resident. However products like these for a Portuguese resident can be a lot less tax efficient.

Inheritance Tax (IHT)

Stamp Duty in Portugal (known as Inheritance tax in the UK) is just 10% and only applies to assets held in Portugal. Gifts to spouses and children are exempt.

UK pensions whilst resident in Portugal

For UK domiciled individuals that have crystallised a UK pension, on subsequent death the pension fund will be subject to a 45% tax charge by HMRC regardless of where you are resident in the world, if the fund is passed on as a lump sum. A pension is crystallised when it enters drawdown, where capital, income or both is taken from the scheme.
It is therefore essential to seek professional advice with regard to Qualifying Recognised Overseas Pension Schemes (QROPS).
Blacktower Financial Management (International) Ltd is licensed by the Gibraltar Financial Services Commission. Licence No. 00805B. Blacktower Financial Management Ltd is authorised and regulated by the Financial Conduct Authority in the UK.
By Paul Beckwith
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Paul Beckwith is an International Financial Adviser working with Blacktower Financial Management (International) Limited
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