The following is a summary of the main provisions of qualification for NHR:
- You must be resident in Portugal for more than 183 days in any calendar year.
- You must own property which is considered as your main residence, available to you during any period within the 183-day provision.
- The non-habitual resident will be exempt from income tax on income from a non-Portuguese source, provided the income is subject to taxation within the country of origin, but subject to any provisions of any double tax treaties.
- Income derived in Portugal is generally subject to 20% PIT, presently a surcharge of 3.2% is applied, however this should be fully abolished within 2017.
The regime can prove beneficial for companies who wish to relocate to an alternative location and NHR can also prove attractive for individuals considering a life style change, pre-or post-retirement, owing to the beneficial taxation treatment of pension income.
Most types of pension income will be exempt from Personal Income Tax (PIT), subject to the provisions of any double tax treaty.
Most double tax treaties rights are granted to an individual’s country of residence, therefore in practice International Pension Income should not be liable to PIT. This system should enable Income to be sourced free from taxation, home state withholding taxes being applied.
A summary of the main Provision and Benefits of the NHR regime can be described as follows:
- Normal wealth taxes do not apply together with the additional benefit of free movement of capital
- Attractive financial planning opportunities exist utilising a combination of Investment Structures and Pension Planning.
- Inheritance tax does not apply to assets held outside of Portugal. Any Portuguese situs assets passed to a spouse, descendants or ascendants, benefit from exemption to taxation.
- A 10% fee may be payable in the form of a stamp duty on assets in Portugal passed to non-connected individuals.
- Considerable taxation advantages can apply to NHR qualifying couples locating to Portugal in relation to Dividend Income and Capital Gains.
In summary if you are considering a lifestyle change then a move to Portugal can offer considerable benefits and financial planning opportunities that most other European locations do not.
To maximise the benefits available professional guidance should always be sought at a very early stage in the planning cycle.
At Blacktower, we have been assisting clients in Portugal for over 30 years, based from offices located in Quinta do Lago and Cascais.
As one of Europe’s largest expatriate taxation and wealth management advisers, we are able to offer a comprehensive service assisting with all financial matters both here in Portugal and Globally.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
To help tax authorities in various countries hunt out those individuals and companies trying to hide assets, the UK has recently signed a disclosure of asset agreement with Spain, Germany, France and Italy. What does this mean? It means that the UK, in partnership with France, Germany, Spain and Italy, have passed regulations that will lead to the automatic sharing of information about the true owners of companies, complex shell companies and overseas trusts.
What are your options as an expat in Europe with a UK pension? Do you leave it in place and hope for the best or do you investigate your options and see if there is a product that is perhaps a better fit for your goals and circumstances?