The Portugal Golden Visa program has proven to be the most popular scheme in Europe with investors attracted to its flexibility and benefits. Launched in 2012 the investor visa program has been actively promoted internationally by the Portuguese government. An investment of €500,000 (or €350,000 reduced option) in real estate in Portugal will gain a residency permit for a family including dependent children. The golden visa can be renewed every two years providing the applicant spends two weeks in the country every two years.
What is non-habitual residency?
Introduced in 2009 by the Portuguese government to attract ‘high value’ residents, NHR offers reduced tax rates and some exemptions for your first ten years in the country.
If employed in Portugal, non-habitual residents can benefit from a flat 20% income tax rate instead of the usual scale rates reaching up to 48%. You must work in one of the pre-defined scientific, artistic or technical professions to qualify.
By offering the opportunity to receive foreign income completely free of further Portuguese tax, NHR can also significantly reduce the tax bill for retirees and others who are not employed in Portugal.
Under NHR, most income from a foreign source is exempt from Portuguese taxation for ten consecutive years, as is income that is taxable in another country.
This means that British expatriates can potentially receive most UK rental income, capital gains on real estate, interest, dividends and non-Portuguese employment income tax-free.
This can apply even if the income is not actually taxed in the home country. For example, UK dividends (excluding gains on UK shares) escape Portuguese taxation under NHR because they are taxable in Britain under the UK/Portugal double tax treaty. In practice, however, the UK’s ‘disregarded income’ rules can eliminate UK tax liability for non-residents. As a result, you could end up paying no tax – in either country – on UK dividend income.
Until recently, NHR allowed for most foreign pension income to be taken tax-free in Portugal; however, the 2020 Portuguese budget introduced a flat 10% tax.
The good news is that, if you already have NHR status or applied for Portuguese residence before the new regime took effect on 1 April 2020, you can still come under the previous rules. This means you will remain eligible for exemptions on foreign pension income for the remainder of your ten-year NHR period.
Even if you miss this window, 10% is a relatively low rate to pay on pensions, and significantly less than the usual Portuguese income tax rates of 14.5% to 48%.
Note that UK government service pensions – including local authority, army, police, teaching, fire service and some NHS pensions – are the exception. These pensions do not come under NHR rules as they remain taxable in the UK only.For the best results, take specialist, cross-border advice before making any major pension decisions.
People of any nationality (including non-EU/EEA citizens) can potentially qualify for NHR if they have not been resident in Portugal within the previous five calendar years.
Before Brexit, moving to another EU country from the UK was seen as almost a right. However, this "right" no longer exists, meaning that UK citizens will be treated the same as any other citizen from a 3rd or non-EU country (such as those from the USA, India, Brazil, Australia, etc). This however doesn’t mean that you can’t move to Portugal anymore: it just means that now you will need to apply for a visa, attend an interview with SEF, and obtain permission to live in Portugal. There are a range of different visas available depending on your situation, such as the golden visa for investment, the D7 visa (also known as the “retirement visa”), D2 (or entrepreneur visa) or finally the Non-Habitual Residency (NHR) scheme for those moving to Portugal from outside the EU.
If you are considering buying a property overseas, or already own one, it is important to understand how to manage your currency risk when transferring funds overseas and how to maximise any transfers you make. A small movement in the exchange rate can suddenly mean the budget you set aside is no longer sufficient.
Thankfully, there are ways to minimise your currency risk and we recommend our currency specialists at GC Partners to help.
Not only do they outperform the high street banks, but they also guide you through the money transfer process. They offer various options to help you stay within budget and maximise your transfers such as buy-now-pay-later forward contracts and an option to buy your money when your desired rate is achievable.
Click HERE to find out how they can take care of all your currency needs.
Rachel is our specialist in foreign exchange and part of the GC Partners Portugal team. With a thorough understanding of the property buying process, coupled with her knowledge of the currency markets, exchange rates and volatility, Rachel along with her colleague Joe Cooke, will help you to understand when to move your money and provide a variety of currency options designed and tailored to suit your exact requirements.