When applying for residency in Portugal you are
effectively declaring your intention to stay in Portugal for more than six
months. Staying in Portugal for more than 183 days a year will trigger tax
residency and financial reporting obligations; you cannot simply continue
paying taxes in the UK.
Brits must also be mindful of the UK statutory
residence test because this could inadvertently entangle you in the UK tax net
if too much time is spent back in the UK, even if you are declaring yourself as
a Portuguese tax resident and spending more than 183 days in Portugal. This is
not something you want to be caught up in, especially if you intend to take
advantage of Portugal's Non-Habitual Residency (NHR) scheme. You want your tax
residency status to be clearly in Portugal.
liabilities in Portugal
residents of Portugal must declare their worldwide income and gains in
those with assets in several countries, you might also have tax and reporting
obligations in the jurisdictions where you hold your assets. For example, UK
rental income always remains taxable in the UK and is also reportable and
taxable in Portugal. Conversely, UK tax is not due on UK pension income
(unless it is a government scheme), but it is fully reportable and taxable in
you will pay tax twice depends on the Double Taxation Treaty between the two
countries, but there are usually rules in place to avoid this happening.
the most of it
residents of Portugal can apply for NHR which gives generous tax breaks on
foreign-sourced income and in some cases, Portuguese arising employment income,
for a period of 10 years. However, the right planning and preparation is
needed, and you may need to restructure your affairs to take full advantage of
the scheme. Once the NHR period ends, normal Portuguese tax rates apply.
certainly provides generous tax breaks but what many do not realise is that it
is also a ‘window of opportunity’ where you can plan for a tax-efficient future
after NHR. For example, it is much more tax advantageous to dispose of overseas
property during the NHR period when gains are exempt in Portugal, rather than post-NHR
when 50% of the gain is subject to scale rates of tax.
for those without NHR, there are compliant structures that can reduce or
eliminate income and gains tax for significant long-term tax savings. Ideally,
such structures are funded during the NHR phase, so it is never too early to
have complicated affairs: tying up loose ends in their home country, navigating
the legalities and processes in Portugal, keeping track of what taxes are due
where, and ongoing compliance with changing tax rules in various jurisdictions.
With so many moving parts it is important that planning is not done in
isolation, it is reviewed regularly and undertaken with experienced and
Broadfield and Mark Quinn are Chartered Financial Planners (level 6 CII) and
Tax Advisers (ATT) with nearly 20 years of combined experience advising
expatriates in Portugal on cross-border tax and financial issues. Find out more
at www.spectrum-ifa.com or contact us
at +351 289 355 316 or firstname.lastname@example.org.