Visiting Portugal is a great choice, particularly if you like all things maritime related, as Portugal stretches for 800 kilometers along the coast of the Atlantic Ocean. It is graced with Lisbon as its capital city which sits at the entrance of the majestic River Tagus.
Photo: Lisbon Portugal
Much of the country is a mix of rugged and scenic landscape coupled with rolling stretches of Mediterranean landscape. As it lies along the coast you will find some beautiful beaches here in addition to picturesque coves, quaint villages, and a thriving cultural scene in Lisbon.
Portugal also has a range of islands on its coast for you to enjoy such as Madeira which is known as the Garden Isle thanks to its lush vegetation, or the secluded and serene Azores archipelago. Wherever you choose to go, Portugal is bound not to disappoint and you will be amazed at how much you can pack in when you visit this small but exciting country.
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You may consider moving to Portugal for a lifestyle change or to soak up some sunshine in your retirement years. But Portugal also offers much wider appeal, as new residents have the opportunity to enjoy a decade of generous tax breaks through the special non-habitual residence (NHR) tax regime.
Photo: Mirpuri Foundation Annual Lisbon Regatta - Owners of Hifly Airlines Portugal
Tax-free foreign income:
Under NHR, most income from a foreign source is exempt from Portuguese taxation for ten consecutive years, as is income that is taxable in another country.
This means that British expatriates can potentially receive most UK rental income, capital gains on real estate, interest, dividends and non-Portuguese employment income tax-free.
This can apply even if the income is not actually taxed in the home country. For example, UK dividends (excluding gains on UK shares) escape Portuguese taxation under NHR because they are taxable in Britain under the UK/Portugal double Tax treaty.In practice, however, the UK’s ‘disregarded income’ rules can eliminate UK tax liability for non-residents. As a result, you could end up paying no tax – in either country – on UK dividend income.
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Tax on foreign pension income:
Until recently, NHR allowed for most foreign pension income to be taken tax-free in Portugal; however, the 2020 Portuguese Budget introduced a flat 10% tax.
The good news is that, if you already have NHR status or applied for Portuguese residence before the new regime took effect on 1 April 2020, you can still come under the previous rules. This means you will remain eligible for exemptions on foreign pension income for the remainder of your ten-year NHR period.
Even if you miss this window, 10% is a relatively low rate to pay on pensions, and significantly less than the usual Portuguese income tax rates of 14.5% to 48%.
Note that UK government service pensions – including local authority, army, police, teaching, fire service and some NHS pensions – are the exception. These pensions do not come under NHR rules as they remain taxable in the UK only.For the best results, take specialist, cross-border advice before making any major pension decisions.
Photo: Jacqueline Kennedy's preferred isolation place soon after the tragic assassination of JFK - Palace of Comenda 40 min South of Lisbon Currently Being Restored.
How can you access NHR benefits?
People of any nationality (including non-EU/EEA citizens) can potentially qualify for NHR if they have not been resident in Portugal within the previous five calendar years.
You need to meet Portuguese residency rules to be eligible, however, so it will be much easier to apply in 2020 as an EU citizen with full freedom of movement. Currently, you can acquire Portuguese residency by spending at least 182 days a year or having your main home here.
Although Brexit itself will not affect eligibility for UK nationals, domestic tax rules are always subject to change. Also, the UK government could potentially negotiate special exemptions to increase taxation of Portuguese-resident nationals once it sheds its EU obligations.
So if you have recently arrived in Portugal or thinking about moving here, register for residence and apply for NHR with the Portuguese tax authorities as soon as possible to lock-in today’s benefits.
Photo: Madonna's $8 Million USD Home a Palace Located 30 mins North of Lisbon
Other tax benefits in Portugal:
If you do not qualify for NHR or your NHR period has ended, Portugal can still be a highly tax-efficient home.
While income outside the NHR regime attracts the usual scale Portuguese income tax rates (14.5%-48%) and investments are subject to 28%, there are opportunities to enjoy extremely favourable tax treatment on capital investments. Those who qualify for NHR can further benefit from combining these structures with the regime rules. For example, you could potentially sell a UK property without capital gains charges and reinvest in a tax-efficient life insurance bond.
Portugal has a wealth tax of sorts, but rates are relatively low and it only affects those whose ownership of Portuguese property is worth more than €600,000 (€1.2 million for couples). Portuguese inheritance tax (stamp duty) is also limited; at just 10%, it only applies to Portuguese assets, and spouses and children are exempt.
Photo: Vilamoura South Portugal - Algarve
Golden Visa Portugal Through Property Investment:
The Portugal Golden Visa program has proven to be the most popular scheme in Europe with investors attracted to its flexibility and benefits. Launched in 2012 the investor visa program has been actively promoted internationally by the Portuguese government. An investment of €500,000 (or €350,000 reduced option) in real estate in Portugal will gain a residency permit for a family including dependent children. The golden visa can be renewed every two years providing the applicant spends two weeks in the country every two years.
For more information contact Adore Property Rep HERE