The financial considerations of moving to and living in Portugal

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There are numerous benefits for being a resident of the Algarve The life style and the people, the food, the climate beautiful coastline and countryside The list goes on and on. It’s not just an incredible area to live in, Portugal offers many advantages from a fiscal point of standpoint.

In order to make the most of your move planning for financial and tax issues can prove beneficial. Even if in the area for a while it is important to regularly check your plans to ensure that they’re up-to-date.
Here are the most important aspects of wealth management you need understand and prepare for.

Residence tax

When you are a resident of Portugal and become a resident, you are subject to Portuguese taxation on all income worldwide and certain capital gains therefore you must be ready for this.

Taxpayers are generally considered resident after three months in Portugal however, it could occur earlier in the event that you decide to move to make this your new home. Be aware of the rules regarding residency in the country from which you originate. According to UK laws, as an instance you may accidentally trigger tax residency, and then be to pay British taxes in the next 16 days.

If you have a plan and have the flexibility to change your timing, your relocation can help reduce tax obligations and increase opportunities for both countries.

Portuguese fiscal system and NHR

New residents are eligible for substantial tax benefits during their first 10 years of residence under Portugal’s “non-habitual residency” (NHR) policy. To be eligible, you must have resided in Portugal within the past five tax years. You should make an application to the local tax office as soon following your arrival.

In addition to a fixed 20% tax rate for income for professions with a high value, NHR lets you receive certain foreign income tax-free or at a lower rate. It also allows you to pay none Portuguese tax on profits made from UK properties.

In addition to NHR, Portugal can be extremely efficient in taxation for foreigners. Although income is taxed with progressive tax rates that can reach 48 percent, there are usually methods to reduce taxes on the income from pensions and investments So, consider exploring your alternatives.

Your savings and investment

A costly error could be making the assumption that what is tax-efficient at home is tax-efficient in Portugal. UK ISAs are a good example are tax-deductible to Portuguese residents.

In addition, once you’re living in the country, you will gain the chance to take advantage of favorable tax benefits for capital investment.

If you are moving to a new location, taking a look at your financial picture ensures that you are diversifying, and that everything is designed in the most efficient method for the new situation. Consult a local adviser who is familiar with the Portuguese tax system and can provide tax-efficient solutions to your wealth and assets.

Are you looking in to how to move to Portugal? Check out the Expacity website.

Currency

If you live in Portugal and you are paying your bills in euros, storing the savings or investments in sterling can make your income susceptible to fluctuating exchange rates. Find structures that permit diversification by holding investments in a variety of currencies, and allow you to select the currency for your withdrawals.

Selling and buying property

If you’re still contemplating your move, another aspect to be considered prior to moving are the taxes that come with of purchasing and selling a property. When is the right moment to let go of your UK home and then purchase an Portuguese home in order to minimize taxes on capital gains? Are you required to pay Portuguese “wealth tax” for your new residence? How do you maximize the benefits of allowances and reliefs? Planning ahead can save you thousands of dollars in tax burdens.

UK pensions

Make sure you are aware of your options for pensions and the tax implications before you make choices.

People who qualify for non-habitual residence get an unbeatable 10% tax rate on pension earnings and withdrawals of 10 years or more however, make sure you are aware of the regulations.

A lot of British expatriates gain from moving UK pension funds to QROPS, which is a Qualifying Recognised Overseas Scheme (QROPS) or investing a lump sum into more tax-efficient plans to Portugal. There’s no universal formula for the best retirement security, which is why personalized, controlled pension advice is crucial.

Estate planning

According to Portuguese succession law in the event that you do not decide to take action, ‘forced heirship rules will automatically transfer some of your global inheritance to the immediate relatives members, regardless of what you intend to do. Spouses and ascendants/descendants are exempt from the Portuguese version of inheritance tax (‘stamp duty’), but other heirs could be liable for 10% when receiving Portuguese assets.

UK citizens are often able to remain in the UK even after having lived abroad for a long time, putting your estate at risk for 40 percent UK tax on inheritance. A well-planned estate plan can guarantee your estate goes to your chosen heirs , without paying more tax than is necessary.

With expert advice from a specialist in cross-border issues, and early, meticulous planning, you can dramatically lower your tax burden and enjoy the security to rest and enjoy the living in Portugal.

Tax rates, scope , and reliefs can be subject to change. The statements made about taxation are based on our knowledge of the current tax laws and practices that may changing. Tax information has been summarized but individuals should seek specific advice.