Moving to Portugal? Five questions that could save you money
If you are thinking about relocating to Portugal, or have a home there already that you are planning to retire to, you have made an excellent choice. Not only is it a beautiful place to live, Portugal can actually offer many financial advantages.
Make the most of tax-efficient opportunities and avoid costly mistakes by exploring these five key questions, ideally before moving.
1. Where will you be taxed?
You need to establish when you will become resident in Portugal and liable to Portuguese taxation on your worldwide income and gains.
You usually become tax resident after spending 183 days in Portugal, but if you have a permanent home there, you could be considered resident from the day you arrive. Be wary also of UK rules – just 16 days’ back home could unintentionally trigger UK tax residency and bring you in line for British taxes.
With careful planning and some flexibility, it is possible to time your residency switch to minimise your tax liabilities – and maximise opportunities – in both countries.
2. How much tax will you pay?
New residents can enjoy significant tax benefits for their first ten years through Portugal’s ‘non-habitual residency’ (NHR) regime. If you have not been Portuguese resident within the last five tax years, apply for NHR through the local tax office soon after arrival.
Besides offering a fixed 20% income tax rate to those employed in ‘high value-added’ professions, NHR potentially lets you receive most foreign income – including rental income, interest, pensions and non-Portuguese employment income – tax-free. You could also pay no Portuguese tax on gains from UK property.
Even outside of NHR, Portugal can be highly tax-efficient with the right planning.
3. How should you hold savings and investments?
Do not assume that what was tax-efficient back home is the same in Portugal. ISAs, for example, lose their tax-free status once you are no longer UK resident and become taxable in Portugal.
Portuguese residents can access opportunities to enjoy extremely favourable tax treatment on capital investments, so explore your options. Always make sure your wealth and assets are suitably diversified and structured appropriately for your circumstances.
4. What is the right currency mix for you?
Once in Portugal, your expenses will mostly be in Euros, so keeping savings and investments in Sterling exposes you to exchange rate fluctuations. Consider flexible structures that let you diversify by holding investments in multiple currencies.
5. What are your property options?
When is the best time to sell your UK property or buy a Portuguese home to limit capital gains tax and stamp duty in both countries? Will you have to pay Portuguese ‘wealth tax’? Getting it right here could save thousands, so take care to establish your best approach.
While answering these questions can provide peace of mind that your financial affairs are in order, cross-border taxation is complicated. Take personalised, expert guidance for the best results.
Blevins Franks are the leading international tax and wealth management advisers to UK nationals living in Europe. With offices in the UK and across France, Spain, Portugal, Cyprus and Malta, we have over forty years’ experience in providing cross-border tax, pensions, estate planning and investment advice to British expatriates throughout Europe.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Blevins Franks Financial Management Limited (BFFM) is authorised and regulated by the Financial Conduct Authority in the UK, reference number 179731. Where advice is provided outside the UK, via the Insurance Mediation Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of the UK. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts and companies. Blevins Franks Tax Limited provides taxation advice; its advisers are fully qualified tax specialists. This promotion has been approved and issued by BFFM.