When relocating, the key elements most people rightly focus on are the local way of life, healthcare, cost of living and ease of communication. But here in Portugal, the taxation regime is an added bonus. While the attractive Non-Habitual Residence regime is well publicised, there are other tax benefits to living in Portugal too.
Here’s a summary of the Portuguese taxation:
Income tax – Residents are taxed on worldwide employment earnings, pension, rental and most other income at scale rates ranging from 14.5% to 48%.
Investment income – Interest and income from shares, securities and bonds is taxed at a flat rate of 28% (35% if from a ‘tax haven’). Residents can opt to use the scale rates.
Capital gains tax – Gains made on the disposal of securities are taxed as investment income. When selling property, only half the gain is liable to tax, with inflation relief after two years. The main home can escape tax if you reinvest the proceeds in a new home within the EU/EEA or in a pension fund or insurance contract. In both cases, short-term capital gains are now taxed as income.
Tax-efficient investing – Highly tax-efficient investment options are available to Portugal residents. For example, many expatriates benefit from holding capital in a structure similar to an offshore life assurance policy or bond that acts as a wrapper to a conventional portfolio.
Non-Habitual Residence (NHR) regime – If you are new to Portugal (not resident in the last five years), applying for NHR status can give you 10 years of tax advantages. You can generally receive much of your foreign income, interest, dividends and certain capital gains tax-free, while foreign pension income is taxed at just 10%. Local employment income from ‘high added value’ professions is taxed at 20%.
Inheritance tax (‘stamp duty’) – Only assets located in Portugal are taxed, at just 10%. Spouses, descendants and ascendants are exempt.
Property wealth tax – Adicional Imposto Municipal Sobre Imóveis (AIMI) applies to high-value Portuguese properties, with a €600,000 tax-free allowance per person. Rates are 0.7% for individuals, 0.4% for companies (where eligible), 1% for properties over €1 million and 1.5% if over €2 million.
Tax planning for Portugal
The way you structure your assets can make a big difference to your tax bill, so take personalised cross-border advice to make the most of tax-efficient opportunities. Blevins Franks has decades of experience providing tax-efficient wealth management solutions to UK nationals moving to and living in Portugal. They have in-depth knowledge of the Portuguese taxation regime and how you can benefit from it, both inside and outside the NHR regime. Their advisers live locally in the Algarve and Lisbon area and provide strategic financial planning advice covering cross-border taxation, estate planning, investing and pensions.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.