A unique webinar into Portugal's NHR tax regime and it's deadline. Expert panellists offered planning advice for before and after NHR ends and discussed the new findings from the 'Wealthy Expats in Portugal Survey Report 2023'.
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This webinar discussed the upcoming deadline on the 31st of December 2023 for new entrants to NHR tax regime. It also discussed how current NHR tax holders need to plan early to optimise their tax and wealth management for the long term well before their NHR tax benefits end (in years 1-7 under NHR).
The Portuguese governments announcement on the 3rd of October 2023 about NHR tax regimes end to new entrants is not expected to diminish the allure of Portugal as a favoured international place to reside and live as a affluent expat.
The webinar delved into the independent findings of the "Wealthy Expats in Portugal Survey Report 2023" which were published on October 24th 2023. Attendees learned what over 1,000 wealthy expat interviewees had to say in this independent research from WDF research.
The expert panel included the Chairman of the Federation of European Independent Financial Advisors (FEIFA), David Vacani, who spoke about the Non-Habitual Residency (NHR) tax scheme.
The expert panel also included Chris Marson who leads RTi family office from the UK who shared his perspective on what makes Portugal such an attractive destination for investment and lifestyle for high-net-worth families.
The panel also included Ricardo Chaves at AFM who is the founder and CEO of one of Portugal's specialist tax experts and NHR tax regime. He gave his perspective on the end of NHR to new entrants.
By getting a sneak preview of these findings, attendees gained new insights into what international expats value about a life in Portugal, their likes and dislikes, and what makes this such an attractive proposition for people relocating.
Some of the key findings in the 'Wealthy Expats in Portugal Survey Report 2023' was that only 27% of current NHR tax holders had prepared and structured their tax status in years 1-7 of their 10 year plan under NHR, to mitigate Portuguese progressive tax of between 28% and 48% through a structured long term plan that delivers an optimised tax position for up to 20 years, not just the first 10 years of being in Portugal.
It was discussed that delaying this tax and wealth planning is potentially creating a significant unnecessary tax burden for many wealthy expats who have not sought this specialist advice. Portugal Pathways team are able to connect current NHR tax holders with the relevant professional advice to plan and mitigate this major issue for up to 53,263 existing affluent NHR tax holders in Portugal.
The webinar was an ideal opportunity to learn what drives people to Portugal such as lifestyle, culture, 300+ days of sunshine, tax savings, healthcare provision and low level of crime as well as a vibrant real estate market.
Disclaimer: The guidance below and Q&As should not be fully relied upon and does not constitute formal instructed professional advice. In relation to tax advice in Portugal, please engage and instruct a regulated professional for all tax advice and structured financial planning. Please contact Portugal Pathways if you would like an introduction to one of our professional advisors.
The Portuguese governments draft bill suggested that the NHR is likely to be replaced by the Incentivised Tax Scheme (ITS). It will potentially offer a more limited range of tax benefits to qualifying people and professionals.
This includes a flat 20% tax rate and a 50% tax exemption on professional income, up to a cap of €250,000, for five years. It is also envisaged that pensions outside of Portugal will not be charged at 10% tax but 50% of progressive tax rates apply to your drawdown.
Portugal offers a number of international schools, here is one of our articles with more information on this:
Top international schools in Portugal for expats
The Portuguese government has recently announced that the NHR tax regime will officially end to new entrants on December 31st 2023 and all applications must be completed by March 31st 2024. We currently have no other announcements from the government that dictate otherwise.
If you are a tax resident in Portugal and have a full-time French working contract with your French employer, your employer will not be required to pay taxes in Portugal. However, they will need to register with the Portuguese social security authorities and make social security contributions on your behalf.
As a tax resident in Portugal, you will be liable to pay Portuguese taxes on your worldwide income, including your salary from your French employer. However, you may be able to claim a tax exemption on your foreign-sourced income under the Non-Habitual Residency (NHR) tax regime.
In most circumstances, the authorities look to see where your commercial contracts were signed and dated. For instance, if you are French contract was signed in France, it may be considered French income. If however, that contract ended and a new contract was made for future work and you can prove that it is legitimate contract derived from work you now do in Portugal then it may be deemed tax payable in Portugal.
Yes, it is true that if you claim NHR tax status, you cannot file your Portuguese taxes online with the tax authority. This is because the NHR tax regime is a special tax regime with specific rules and requirements, and the online tax filing system is not currently set up to handle these complexities. However, you can still file your taxes by paper or through a tax advisor.
Taxing foreign pensions at 10% or 20% is not double taxation because Portugal has double taxation agreements (DTAs) with many countries, including the United States, the United Kingdom, and Canada. These agreements prevent residents of one country from being taxed twice on the same income.
Under the terms of these agreements, Portugal has the right to tax foreign pensions received by Portuguese residents, but the tax rate is capped at 10% or 20%, depending on the country of origin of the pension. This means that you will not be taxed twice on your foreign pension income.
If you are living in Portugal without the NHR tax status, progressive tax rates on your dividends can be as high as 48%.
Yes, your Italian residency under Article 50 can potentially help you speed up the process of obtaining Non-Habitual Residency (NHR) tax status in Portugal. As a UK national with Italian residency, you are considered an EU citizen, which grants you certain rights and privileges when moving to another EU country, including Portugal.
While your Italian residency doesn't directly grant you NHR tax status in Portugal, it does make the process smoother and potentially faster.
The current deadline for new entrants to apply for NHR tax status is December 31st, 2023, and the deadline to complete this application is March 31st, 2024. While it is possible to still apply in time for the NHR tax status before the deadline, it must be done quickly.
Please contact our expert team to further discuss how we can help you.
Yes, you can still apply for the Non-Habitual Residency (NHR) tax status in Portugal even if you do not have health insurance. However, you will need to obtain health insurance before you can start enjoying the benefits of the NHR regime.
The new NHR guidelines will not affect your Golden Visa application, as the Golden Visa program and the NHR tax regime are separate programs.
Yes, you can apply for NHR tax status if you return to Portugal after working abroad for the last 23 years. To be eligible, you must not have been a Portuguese tax resident in the five years preceding your application.
In general, you will not be subject to double taxation on your foreign income. This is because Portugal has double taxation agreements with most countries, which means that you will only be taxed on your income once.
Yes, a 6-month rental agreement registered at Finanças in Portugal is enough to meet the requirements of NHR. The Portuguese tax authorities do not specify a minimum rental contract duration for NHR eligibility. As long as you have a valid rental agreement and can demonstrate that you have a legal residence in Portugal, you should be able to apply for NHR status.
Yes, you can apply for NHR even if your house is not yet completed. You will need to provide proof that you are building a house in Portugal, such as a construction contract or a purchase agreement. You will also need to meet the other NHR eligibility requirements, such as not having been a tax resident of Portugal in the previous five years.
After the 10-year NHR tax period, you will be subject to progressive tax rates of between 28 – 48%. However, with expert planning, early enough in your NHR journey, you can optimise your tax position and reduce your tax burden for a further 10 years.
Contact our expert team to plan accordingly and prepare for the end of the 10-year NHR period.
No, you cannot directly transfer your Italian residency to Portugal. As a UK citizen, you are now considered a third-country national in both Italy and Portugal, and you will need to apply for a separate residence permit in Portugal.
Yes, your D7 visa needs to be finalized before you can secure a residency permit in Portugal. The D7 visa is a temporary residence visa that allows non-EU/EEA/Swiss citizens to live in Portugal for up to four months while they apply for a residency permit. Once you have your D7 visa, you can then apply for a residency permit at the Portuguese Immigration and Borders Service (SEF).
If you move to Portugal and get residency in December 2023, you will only be considered a tax resident of Portugal for the period you reside there, which is from December 2023 to the end of the year. This means that you will only be liable to pay Portuguese taxes on your worldwide income for that period.
Yes, there are good tax treaties between the US and Portugal to help you avoid double taxation. The US-Portugal tax treaty, along with specific provisions like the Foreign Earned Income Exclusion (FEIE), can significantly reduce or eliminate your US tax liability on income earned in Portugal.
Here's a breakdown of how to avoid double taxation as an EU national with a US Green Card considering NHR:
1. Utilize the US-Portugal Tax Treaty:
The US-Portugal tax treaty aims to prevent double taxation by allocating taxing rights between the two countries. It ensures that income is taxed only once, either in the US or Portugal, depending on the type of income and the residency status of the taxpayer.
2. Claim the Foreign Earned Income Exclusion (FEIE):
If you qualify as a US resident living abroad, you can utilize the FEIE to exclude a certain amount of your foreign earned income from US taxation. For the 2023 tax year, the FEIE exclusion amount is $112,000.
3. Consider the Non-Habitual Resident (NHR) Tax Regime:
Portugal's NHR program offers tax benefits to qualifying individuals who become tax residents of Portugal. Under NHR, certain types of foreign-sourced income, such as pensions, dividends, and interest, are exempt from Portuguese taxation.
4. Seek Professional Tax Advice:
Navigating the complexities of international taxation can be challenging. It's advisable to consult with one of Portugal Pathways tax advisor specializing in US expat taxation and Portuguese tax laws to ensure you're maximizing the available tax benefits and complying with both countries' tax regulations.
Remember:
• Even with tax treaties and provisions like FEIE, you'll still need to file an annual US tax return as a US Green Card holder.
• The NHR tax regime has specific eligibility criteria and application procedures. Consult a Portuguese tax advisor for guidance.
By carefully considering these strategies, you can effectively minimize or eliminate double taxation and enjoy the tax benefits of living in Portugal as an EU national with a US Green Card.
The new Incentivised Tax Status Scheme (ITS) may be more favourable to a remote worker than the NHR tax regime as it offers a flat 20% tax rate and a 50% tax exemption on professional income, up to a cap of €250,000, for five years.
According to recent Portuguese government announcements, the NHR will end to new entrants on December 31st 2023, and applications must be finalised by March 31st 2024. No other announcements have been made by the Portuguese government to indicate that the NHR deadline will be extended.
Yes, it is possible to apply for NHR tax status even if your house is not yet finished. To be eligible for NHR status, you must meet the following criteria:
• You must not have been a tax resident in Portugal for the previous five years.
• You must have a Portuguese tax number (NIF).
• You must have a legal residence in Portugal.
No, you cannot choose to be taxed under the new ITS tax regime if you are already in the NHR tax regime. The NHR tax regime is a 10-year program, and once you have been granted NHR tax status, you will continue to be taxed under the NHR tax regime for the full 10 years. You cannot switch to the ITS tax regime during this time and the benefits are for only 5 years.
Yes, it is possible to apply for NHR tax status retrospectively for the years 2019 to 2023. However, it is important to note that you will need to provide additional documentation to support your application, such as proof of your residency in Portugal during those years.
To be eligible for NHR tax status, you must meet the following criteria:
• You must not have been a tax resident in Portugal for the previous five years.
• You must have a Portuguese tax number (NIF).
• You must have a legal residence in Portugal.
If you meet these criteria, you can apply for NHR tax status and claim a tax exemption on your foreign-sourced income. However, it is important to note that the NHR tax regime is a complex program, and there are a number of factors that can affect your eligibility for the tax exemption.
It is advisable to consult with one of Portugal Pathways tax advisors in Portugal to assess your specific situation and determine whether you are eligible for the NHR tax regime or what replaces it in 2024 (Incentivised Tax Scheme also known as ITS).
The tax advisor will need to review your specific circumstances to determine whether you were a tax resident in Portugal during the years 2019 to 2023. They will consider factors such as the number of days you spent in Portugal each year, whether you had a permanent home in Portugal, and whether you had any other ties to Portugal during those years.
They may also want evidence that your work in Portugal for international clients was derived from work initiated while resident and tax domiciled in Portugal.
If you are considering applying for NHR tax status retrospectively, it is important to gather all of the relevant documentation and to consult with a tax advisor to ensure that you meet all of the eligibility requirements.
The Incentivised Tax Scheme (ITS) offers a 50% tax exemption on professional income, up to a cap of €250,000, for five years. It is also envisaged that pensions outside of Portugal will not be charged at 10% tax but discounted at 50% of progressive tax rates which start from 15% going up to 48%.
Yes, your parents can use your Portuguese address to apply for the NHR tax status, as long as they can provide proof of residency at that address. This could include a rental agreement, a deed of purchase, or a utility bill in their name. However, it is important to note that they will need to establish their own legal residency in Portugal to maintain their NHR tax status.
Yes, a US citizen who has applied for a D7 visa and is currently living in Portugal can apply for tax residency even if their D7 visa is still pending approval.
To apply for tax residency, they will need to go to an SEF office and present the following documents:
• A valid passport
• A copy of their D7 visa application
• Proof of residency in Portugal, such as a rental agreement or a utility bill
• Proof of financial means, such as bank statements or investment statements
NHR tax regime is about tax status, and visa residency is a separate process and unrelated. Residency, time scales are somewhat dependant on peoples individual situations.
Yes, a License to Use Agreement can be used as proof of residency for NHR purposes. However, it is important to note that the agreement must be for a period of at least 12 months and must be registered with the Portuguese tax authorities (Finanças).
Regarding your newly built house, you will not be able to use it as proof of residency until you have obtained a Habitation License (Licença de Habitação). This is because the house is not considered to be a legal residence until it has been granted a Habitation License.
However, you can still apply for NHR status using a different address, such as a rental property or a friend's or family member's address. Once you have obtained a Habitation License for your new house, you can update your address with the Portuguese authorities.
Join our next webinar on the Tuesday the 7th of November 2023 and visit our events page for more details.
Schedule a free consultation with one of our expert team to understand how you can maximise your future financial and tax position as a wealthy international expat in Portugal.
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Disclaimer: The information on the Portugal Pathways website and in email communications is for general informational purposes only and should not be construed as legal, tax, or financial advice. You should consult and check with a qualified professional advisor before relying on any information provided on this website or in email communications.