Portugal is an increasingly popular choice for South Africans who are looking to embrace the adventures and opportunities of expat life in the EU. Making the move can pay dividends as Portugal offers a favourable tax jurisdiction for financially prudent and high-net-worth expats.
For example, by investing at least €350,000 in the country, and meeting other criteria, South Africans can secure residency on fairly straightforward terms, while also utilising the tax benefits offered by Portugal’s non-habitual residency programme.
It is easy to see why so many South Africans are doing it; Portugal’s favourable investment and residency landscape has made it a thriving and innovative economic destination in the European Union. Couple this with one of the more enviable European climates, and you have a simple formula that makes Portugal one of the world’s leading expat retirement destinations.
However, despite the many attractions of Portuguese expat life, there are a number of cross-border bureaucratic and wealth management complexities that make careful financial planning essential for any South African who is considering the move. And with the South African Revenue Service (SARS) 183-day rule about to be shelved in favour of a new expat tax regime, South African expats in Portugal now have even more to think about.
The expat tax – a new consideration
South Africans living in Portugal will soon have a new factor to account for in their wealth management plans. As of March 2020, SARS is set to remove the 183-day rule, which currently allows many South Africans to pay no tax at all on their overseas income. It will be replaced with the one million Rand zero band allowance.
Under the 183-day rule, South Africans working abroad for more than 183 days, with 60 days being consecutive, receive their overseas income free of South African tax.
Under the proposed new regime, which is linked to the adoption of the Common Reporting Standards, South Africans who earn one million South African Rand (ZAR) or more will pay income tax at a rate of up to 45%, with only the first ZAR one million being tax-free. Inevitably, the imminent introduction of this new tax has resulted in droves of high-net-worth South Africans looking to emigrate.
Anecdotally, wealth managers and tax advisers have reported a dramatic rise in the numbers of South Africans looking to apply for Golden Visa status in Portugal, with others hoping to secure European Union residence in countries such as Cyprus, Greece and Malta.
Whatever the case, there is little point in taking a “wait and see” approach. South Africans should evaluate their options as soon as possible. Some working expats, for example, may decide to alter the way in which they are paid for their overseas work – for example, in some cases, it may be possible to rebalance income with pension payments or other employment benefits to have the effect of reducing tax liability.
For many retirees, financial emigration to Portugal may be the best option. However, this is a formal process and anyone looking to achieve this should notify the South African Reserve Bank (SARB) and should also apply to SARS for an emigration tax clearance certificate. Others may choose the more complex process of looking to place their assets in another offshore jurisdiction. Whatever the case, advice is essential, not only in order to best preserve wealth, but also to ensure compliance with the many laws affecting such cross-border financial structures.
Negotiating complexities is key
There are many cross-border wealth management questions for the South African expat to consider. As such, finding the right international financial adviser is critical to ensuring that South African expats are able to optimise their finances in a way that gives them the power to successfully negotiate the unique challenges and complexities they face.
At Blacktower Financial Management, we are in the perfect position to provide independent cross-border financial advice to South Africans who are living, working, retiring and investing in Portugal.
Whether you would like to discuss aligning your investments with your tax plans, planning your pensions future, planning for your legacy, or making the most of an efficient and transparent Discretionary Fund Management service, we can help you.
Our international financial advisers work from offices in Lisbon and the Algarve and can help you ensure that you have every consideration covered.
Disclaimer: Blacktower Financial Management is not a tax adviser and independent tax advice should be sought. The above does not constitute advice and Blacktower makes no recommendation as to the suitability of any products or transactions mentioned.
Manuela Robinson is the Joint-Country Manager of Blacktower in Portugal. With offices in Quinta do Lago and Cascais.
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Blacktower Financial Management (International) Limited is licensed by the Gibraltar Financial Services Commission. Licence 00805B. Blacktower Financial Management Limited is authorised and regulated in the UK by the Financial Conduct Authority.