Contact

News & Insights

Tax Compliant Solutions for the Portuguese Tax Resident by Antonio Rosa, Regional Manager Lisbon

The Portuguese Taxman’s Cockerel is loud and clear. 

“Get your acts together before the Taxman cometh knocking on your door early in the morning”, so said a local Tax inspector out loud, one morning in a salubrious Café over breakfast in Cascais, Lisbon. 

As is often the issue with misplaced preconceived perceptions they are generically based on historical and exaggerated data. This assumption will come home to roost and it won’t be a sweet pill to swallow once you’re on the taxman’s radar, especially if he wishes to track back 10 years. 

For the investor, who is in need to drawdown from their international funds on a regular basis, do be aware of the new banking laws, meaning that your friendly bank on the corner is beholden to transmit transactions automatically. At the behest of the Taxman, all banks are in breach should they not conform to this norm, so don’t blame the messenger. 

Repetition is the mother of memory 

My colleague, Robert Mancera, recently wrote an articulate piece on the same subject in the Algarve Residents waiving a panacea to all our woes. The Solution is “A Tax Compliant Bond – A Private Wealth Portfolio Policy. 

To reiterate, so that one can’t say “I wasn’t informed”, outlined below is an extract from the noted article. 

“A Private Wealth Portfolio is a single-premium life insurance policy specifically designed for Portuguese residents.

Tax Benefits – Gross roll-up tax regime

It falls under the definition of an ICAE (instrumento de captacao de aforro estruturado” or “structured instrument for attracting savings”) as established in Article 206.1 of the Portuguese Law. This is a key advantage in Portugal compared to direct investments either held locally or abroad.

Tax on Withdrawals

No Tax is payable if no withdrawals are made from the bond and even when a withdrawal is taken, Tax is only payable on the ‘proportionate’ “profit” at a rate of 28% during the first five years; this then reduces to 22.4% between years 5-8; and after 8 years you will be liable to 11.2%”. 

For example let’s assume a withdrawal of €22,000 from the bond with an original investment €200,000 and 12 months later the value of the investment grew to €220,000. Therefore the proportionate profit taxable element of only €2,000 will be subject to income tax at 28%, giving you a tax liability of €560. If the €200,000 had been held outside of the bond and held in your personal name, the taxable element would be €20,000 and at 28% you would have incurred a tax charge of 5,600. 

If as stated above, the investor in a “Tax Compliant Bond – A Private wealth Portfolio Policy”, held the investment for 5 plus years you will receive a further 40% saving.

Do the maths and one must ask the question “is it worth the risk”?

Written by Antonio Rosa, Regional Manager Lisbon

Other News

TOP TIPS – How to Avoid Scams

DetectiveThe Financial Conduct Authority’s (FCA) limitations in relation to scams and mis-sold products have been brought into the spotlight in recent months, with a number of high-profile scandals.

For example, last year nearly 12,000 London Capital & Finance (LCF) investors lost approximately £237m (€277.8m) as a result of investing in mis-sold speculative mini-bonds.* This is because they weren’t aware of how to spot a scam.

A clearly frustrated LCF bondholder told press that it should be an imperative for HM Treasury and the government to take steps to clarify and strengthen the law in relation to liability. The LCF bondholder also called on government ministers to ensure better regulation of online ads, to make avoiding scams easier for victims.

Read More

UK Property – Still a Good Investment?

Door painted with Union FlagBack in 2018, for the first time in a decade, rents across the UK fell, which was good news for many. However, it prompted landlords to consider whether the notion of ‘easy money’ was coming to an end. So, what is a good investment property?

Read More

Select your country

Please select your country of residence so we can provide you with the most relevant information:

You are currently viewing the Blacktower Financial Management EU website.

You may be looking for the Blacktower United States website.

Blacktower United States > X Stay on this site

Or choose your country.