If you are considering ways to limit or reduce the amount of personal tax you are currently paying, then on your list of possibilities should be a move to Portugal.
Portugal offers several tax benefits to non-Portuguese residents which the country has named the Non-Habitual Resident (NHR) regime. The NHR regime allows for reduced rates of taxation on your income and capital gains and provides other benefits such as deductions for expenses related to moving abroad and being away from home.
What is the Non-Habitual Resident regime?
Non-Habitual Residents (NHRs) are non-Portuguese residents who have been living in Portugal for more than 183 days in a year, but not more than six consecutive years.
They must prove that their stay is not only temporary and that they will maintain their residence outside of Portugal for at least six months after leaving the country.
To become an NHR, you must:
- Be 18 years old or older.
- Have been living in Portugal for more than 183 days during the tax year; and have been registered with your local municipality before April 30th of each year
What benefits does it offer and how does it reduce my tax burden?
The NHR regime offers several advantages to those who qualify, including:
- a reduced income tax rate of 25 percent on income generated in Portugal and abroad;
- exemption from wealth tax;
- exemption from transfer taxes when selling real estate located in Portugal; and
- not being required to pay any withholding taxes on interest paid by financial institutions or dividends paid by companies listed on regulated stock exchanges.
Low taxes and no capital gains tax
The Portuguese tax system is one of the most attractive in Europe, if not the world. The income tax rate is only 20%, and there are no capital gains taxes, inheritance or wealth taxes and no value added taxes (VAT).
But the benefits for NHR are even more substantial.
The NHR regime allows for a reduced rate of taxation on your income and capital gains. The reduced rate of taxation is 10% for income, gifts and donations made to certain entities (e.g., charities). The reduced rate also applies to income from outside Portugal that is not considered as being received in the country under Portuguese law. For example, if you own several rental properties in the UK, the rate would be applied to this income.
If you are now in a position in your life where you wish to sell off assets that will be subject to high rates of Capital Gains Tax in the UK, by moving to Portugal and after a set qualifying period, you would no longer be liable for Capital Gains Tax on any assets sold in the UK, no matter how much they had gone up by!
Did we also mention the deductions you can make as an expatriate?
- Expatriates can deduct up to 100% of the cost of a home in Portugal
- Expatriates can deduct up to 100% of the cost of a car in Portugal
- Expatriates can deduct up to 100% of the cost of a boat in Portugal
For most of us living in the UK, inheritance tax is hated and dreaded in equal measure. It is a tax on money that has already been taxed. In Portugal, there is no inheritance tax. If you live there, up to 100% of your assets can be transferred with no additional tax to pay.
What stops the country being considered a tax haven, is that its corporate income tax rate is much higher than many other countries’ rates.
If you are looking for a new place to live, Portugal could be the perfect choice. Not only does it have amazing weather, but there are also many benefits for non-Portuguese residents. If you want to explore if Portugal could work for you, our experts are on hand to provide further details. For information on the best options for your situation, speak to a member of our trusted team today.