TAXATION

As professional investment managers, we don't offer specific advice on legal and taxation matters. So, we've teamed up with Teresa Patrício & Associados, a trusted firm of highly experienced Portuguese lawyers.

Taxation

Britain has a 'double tax treaty' with Portugal, which means you’re liable for tax in one jurisdiction or the other, not both.

If you have a company pension or self-invested personal pension (SIPP), you can choose to pay tax in either country.

Many expats are choosing to take advantage of Portugal’s non-habitual residents’ regime, which came into effect in 2009. If you become a tax resident in Portugal under this regime, subject to certain conditions, you can take all your overseas income – including pensions – completely tax-free for the first 10 years.

In addition any salaries paid to you in Portugal subject to certain restrictions is subject to a 20% flat rate. Any other Portuguese sourced income is subject to the general tax rates.

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The scheme is available to anyone who hasn’t been resident in Portugal for tax purposes for the previous five years.

You need to register as a non-habitual resident with the Portuguese tax authorities, and remember that when your 10 years are up, you’ll be taxed at the prevailing marginal rate like everyone else.

More importantly, you also need to be genuinely resident in Portugal to ‘break’ your UK tax status, which means managing your visits home carefully. You can spend no more than 92 days in Britain each year, otherwise you will be deemed a UK resident for tax purposes.

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Taxation

If you’re unable to benefit from the non-habitual resident regime, your tax position regarding investments is as follows:

Investment income and capital gains are taxed at a flat rate of 28%. You can opt to add these items to your taxable income if this is beneficial.

There are special rules regarding the taxation of insurance policies. If these are held for between five and eight years, only four-fifths of any gain is taxable; if they are held for over eight years, only two-fifths of any gain is taxable.

This is, of course, only a brief overview of the Portuguese tax regime.

If you need more information or advice, please use the link below

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