Regime change introduces positive tax benefits for expats investing and Living in Portugal.
In recent times significant changes have taken place with regards to tax planning opportunities available to persons who wish to take up residency in Portugal.
On January 28, 2013, the authorities introduced changes to the residency laws which made the prevailing regime more flexible.
These changes are designed to attract foreign investment to Portugal in the form of a specially created Residency Card for Non EU Nationals who wish to invest in Portugal. This new system is entitled the ‘Golden Visa’ and also permits the holder to travel within the Schengen area.
In order to qualify for the ‘Golden Visa’ the applicant should meet at least one of the following minimum requirements.
– Create at least 10 new permanent employment positions in Portugal.
– Transfer to Portugal the minimum of €1,000,000 of capital.
– Purchase a property to the value of at least €500,000.
Initially the ‘Golden Visa’ will be issued for a period of one year and may then be renewed for successive periods of two years, provided that the qualification conditions for issue of a ‘Golden Visa’ are maintained.
The ‘Golden Visa’ regime is further underpinned by a second scheme entitled the ‘Non Habitual Residents Regime’, which is aimed at attracting both new high net worth persons to Portugal and ultra high net worth individuals.
Persons qualifying under this regime would benefit from a reduced level of taxation of 20% on salaries, business and professional income generated from high added-value activities in Portugal.
In general the applicant has to fulfil two requirements. The first is to qualify as a resident tax payer, either by exceeding the 183 day test of physical presence or owning on December 31 a home that implies an intention of setting up permanent residence.
A further requirement is that the individual applying for the regime has not been taxed as a resident taxpayer in the five years before taking up tax residence in Portugal. Persons who qualify for this scheme benefit from the favourable tax treatment for a maximum period of 10 years.
Interestingly, it may be possible for third country nationals to link the ‘Golden Visa’ residency with actual residency and then the ‘Non Habitual Residents Regime’ could apply here also.
In addition to the generous savings to business and personal taxation, in general the above residence and tax planning regimes open up many attractive opportunities to significantly reduce the effective tax burden on life assurance savings schemes, pensions and investment capital.
Additional opportunities to benefit from may also exist, in the form of licensing a business to operate in the Madeira International Business Centre (MIBC) which is a fully regulated Portuguese International business jurisdiction.
Overall, with careful financial planning and by taking full advantage of the above, residents are able to accumulate their wealth within an EU tax-friendly environment that benefits from many tax exemptions that would not normally be applicable to Inheritance Tax Planning and Capital Gains Tax, whilst significantly boosting the ability to reduce income tax as applicable to pensions.
So, in general, the ‘Golden Visa’ scheme and the ‘Non Habitual Residency Scheme’ as applied to certain employment and self-employment source income, can provide interesting tax planning opportunities in relation to wealth, inheritance tax, personal income and pension income taxation.
The schemes also offer advantageous business tax planning opportunities in relation to Capital Gains, Dividend and Rental Income planning.
Blacktower Financial Management International Limited can provide a comprehensive Wealth Planning Advisory Service incorporating these advantageous planning opportunities.
By John Westwood
John Westwood is the Group Managing Director of Blacktower Financial Management (International) Limited. 289 355 685 | www.blacktowerfm.com
