Tax planning after your purchase

There are a number of costs and taxes that you will need to consider when you have purchased property in Portugal – whether as your new permanent home or just as a second home owner.

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The best piece of advice that the Portugal Buying Guide can offer you after your purchase in Portugal is to speak to both a qualified tax lawyer and a good accountant – especially one that understands all taxation issues that affect expats or second homeowners in Portugal.
 

In theory, income tax rules in Portugal are very simple: if you spend more than 183 days in Portugal you are, legally speaking, fiscally resident in the country, and liable to pay income tax on your worldwide income in the country. In some situations, you may still pay tax in the UK on certain income streams, but dual taxation legislation protects you from having to pay this twice. All income, however, must be declared on your Portuguese tax return. You won’t pay tax twice, but if you are fiscally resident in Portugal, and liable for a higher rate there on some aspects, you will have to pay the difference.

Portuguese tax return dates will depend on your types of income and whether you file on paper or online. Assuming you are using an accountant who files online, the deadline is April 30 for those earning only salary or pension income and May 31 for those with other types of income. Paper filing dates are a month earlier. The Portuguese tax year follows the calendar year (Jan to Dec) which, as you can imagine, can make things very complicated for British expats due to the UK’s April 6 to April 5 system.

If you own a second home in Portugal, and don’t stay in the country long enough to require residency, you probably do not need to complete a tax return – but it’s important to check this with an accountant. If you rent your property, you must declare this and pay tax on your rental income – and unfortunately, this tax rate has been drastically increased since Portugal’s EU bailout.

Deadlines for the payment of income tax are usually several months after filing but sometimes change from year to year. Punitive fines can be levied for failure to submit a return or to pay the tax on-time.

Another minefield for permanent residents is social security. Unless you are over 65 and in possession of an S1 document from the UK, you do not qualify for healthcare and benefits in Portugal unless you are paying into the social security system. How you make these payments depends on your employment status. This is a very complex issue, and it is important to note that social security contributions for the self-employed are far higher than you may have become used to in the UK.

Of course, tax doesn’t end with income tax and social security. IMI property tax applies to some homeowners (although many are currently exempted), and you may be liable for capital gains tax if you sell a property in Portugal.

Throughout this, the most important piece of advice we can offer is to speak to a good, trusted accountant. Doing so could save you vast amounts of time, money and stress, leaving you to enjoy your time in Portugal to the full.

If you would like to be put in touch with a Portuguese lawyer with extensive knowledge on tax planning, call the Portugal Buying Guide Resources Centre on 0207 898 0549 or email Portugal@overseasguidescompany.com.

 

Non-habitual resident tax benefits
 

What you may not be aware of is the huge tax benefits associated with living in Portugal. In short, if you have a UK pension and you spend more than 183 days a year in Portugal (thus becoming “resident”), you are entitled to receive your pension tax free for 10 years.

This non-habitual residents (NHR) tax is a major step forward in making Portugal a tax-free jurisdiction for those receiving UK pensions. The regime was introduced back in 2009 with the aim of attracting new people and making it beneficial from a tax perspective to become resident in Portugal. Once they have this status, Portuguese non-habitual residents can then enjoy the following benefits:

  • Tax exemptions
  • To grow their wealth in a white-listed jurisdiction
  • To dispose of their assets
  • To pass on their wealth without inheritance or gift taxes
  • To enjoy their retirement without tax on their pensions

Sound attractive? That’s because it is. Plus, it is very easy to work out whether you are eligible. It’s a really good idea to go through your paperwork with a lawyer, and they will be able to assess this for you.

If you would like to be put in touch with someone who can help you to determine your eligiblity, call the Resource Centre now on 0207 898 0549.


Further reading for Living In Portugal

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Finding work in Portugal

There are a number of ways that UK expats can fund their lifestyle in Portugal.
Read more...

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Social life in Portugal

The best way to get settled in Portugal is to find out as much as you can about your new community.
Read more...

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Heathcare

One of the first things you need to do once you arrive in Portugal is find out where your nearest hospital is.
Read more...

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Education in Portugal

Are you emigrating to Portugal with school-age children?
 

Read more...